A Growth Oriented Mindset
“Creativity is great–but not in accounting.” – Charles Scott
As a real estate agent, managing the accounting side of the business can be…a drag. But, if you like growth, you need to address accounting.
Managing your finances and maintaining accurate accounting records is crucial for the success of your business. Proper accounting practices not only help you keep your income and expenses organized but also provide valuable insights into your overall financial performance. In this guide, we will walk you through the essential aspects of accounting that real estate agents should keep track of to ensure financial stability and growth.
Income & Expenses
Tracking your income and expenses is fundamental to understanding your financial position.
Record all sources of income, including commissions, referral fees, property management payments, rental income, and any other payments received for your services as a real estate agent. It’s important to track the amount, source, and date of each income transaction.
Keep a detailed record of your business expenses. This includes office rent, marketing costs, transportation expenses, association fees, licensing fees, professional development expenses, insurance premiums, office supplies, and any other costs incurred while conducting your real estate business. The more diligent you are in tracking expenses, the more accurate you can be in determining your net/taxable income–this is going to help you file your taxes and reduce your tax burden. Your future April 15th self is thanking you right now.
This information will be invaluable when filing taxes and creating budgets. If it feels overwhelming, here are some insider tips and tricks to tracking your income and expenses
- Record-Keeping: Maintain organized and secure records of all financial transactions, invoices, receipts, and other relevant documents. Consider using accounting software like QuickBooks, Wave, Zoho Books, Xero, FreshBooks or other online tools to streamline your record-keeping process and minimize the risk of data loss. Our firm is a QuickBooks Online Certified ProAdvisor firm, and we provide our clients who are just starting out with wholesale pricing on their QuickBooks Online software subscriptions.
- Bank and Credit Card Statements: Regularly reconcile your bank and credit card statements to ensure that all transactions are accurately recorded in your accounting system. This helps identify any discrepancies or errors and maintains the integrity of your financial records.
- Budgeting: Develop a budget to manage your finances effectively. Set financial goals, allocate funds for marketing and advertising, plan for business expenses, and regularly review your budget to ensure you’re staying on track.
- Cash Flow: By doing the above you’ll maintain a clear understanding of your cash flow. This will help you assess your financial health, plan for future expenses, and make informed business decisions.
Familiarize yourself with tax laws and identify eligible deductions for your real estate business. Common deductions that can significantly reduce your taxable income include mileage expenses, marketing and advertising costs, home office expenses, professional association fees, and continuing education expenses. Keep proper documentation to support these deductions. Consult with a tax professional to ensure you are taking full advantage of available deductions and staying compliant with tax laws.
Client Deposits and Escrow Accounts
When working with clients, you may handle deposits and escrow funds. It is crucial to maintain separate accounts for these funds and accurately record all transactions related to client deposits. Typically your broker will have strict guidelines for you to follow. If you are at the brokerage or firm level, you know that the state commission has procedures for handling trust funds. Regularly reconcile these accounts to ensure there are no discrepancies and that client funds are properly accounted for.
Real estate transactions involve multiple parties and financial components. Keep detailed records of all transactions, including purchase agreements, closing statements, rental agreements, and lease contracts. These records will not only help with accurate bookkeeping but also serve as evidence in case of any disputes or legal issues.
Payroll and Independent Contractors
If you have employees or work with independent contractors, managing payroll is essential. Keep track of wages, benefits, and any applicable taxes or contributions. Ensure that you comply with employment laws and accurately report payroll expenses to avoid any penalties or legal complications.
If you work with a brokerage or have any commission splits with other agents, maintain a clear record of these arrangements. This will help you accurately calculate your net income and determine any amounts owed to other parties.
Make It The First Thing–Not The Last
“Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.” – Warren Buffett
Remember, accurate and consistent accounting practices are crucial for the success of your real estate business. By staying organized and keeping track of your income, expenses, and other financial aspects, you’ll have a clearer understanding of your business’s financial performance and be better equipped to make informed decisions for growth and profitability.
At Ingenium, we understand the complexities of real estate accounting and are here to help. Our team of experienced professionals can provide comprehensive accounting services tailored to your specific needs. From bookkeeping to financial analysis and payroll management, we offer a range of services to support your business growth.
Schedule a consultation with us to learn more about how Ingenium can assist you in streamlining your accounting processes and maximizing your financial success as a real estate agent.
Let us handle your accounting needs while you focus on closing deals and growing your business.