A well-managed accounting is vital for real estate business. Working in real estate, whatever genre it is, means dealing with large sums of money regularly. The genres may be ranging from running a real estate agency employing commissioned salespeople, to managing a commercial or residential real estate for clients, to handling the accounts of a housing association, to running a building construction firm.
In any of these roles, a well-managed real estate accounting service can make all the difference. Mistakes cost you or your clients a lot of money.
How does a Property Management Software can save time and ensure data is updated?
Understanding the issues
Real estate firms form a significant part of the global and UAE national economy. Accounting Regulations are designed to be useful for the following purposes.
- To make the most of real estate’s contribution to the country’s GDP.
- To encourage wealth creation and distribution through investment.
- To try and prevent repeated mistakes leading up to the global financial crisis of 2007.
Talk to an Accountant
With so many rules and regulations, it is advisable to seek assistance from an accounting professional if you are new to real estate business.
If possible, try finding accountant expertise in real estate accounting. An accountant helps you follow the rules to bear in mind while doing accounting works for your UAE-based real estate business. The additional assistance an accountant can provide you are listed below.
- Using online accounting software to share updates, forecasts, and reports for you.
- Give you guidance on how to avoid unnecessary expenses.
- Structure your business in the most tax-efficient way possible.
Every single transaction on the ledger must be backed up by some evidence. Make use of as much technology as possible, may it be using a portable scanner, mobile application or cloud-based accounting software for your real estate business.
Estimate your Real Estate’s Value
The stock has a clear and specific value in any other business types, but in real estates, transactions are less frequent. It may take years to decades to sell a single building or office block. Hence, it may be not so easy to find out the present value of that asset.
Most of the real estate valuations are based on estimates. The real value is unknown until the transaction finishes. So, estimate values are part of managing or selling real estate for clients. These are usually the recent sales of related real estate in the same or a similar area.
If you value the real estate you manage or sell inaccurately, you could be prosecuted as well. So, following the valuation regulations carefully, and keeping accurate records in your accounting software is essential.
Hold a regular Review Meeting
Reviewing your books of records on a regular or monthly basis allows you to examine statements and transactions, to make sure there are no errors or any outstanding payments either to be made or to be received. Accounting Software eases up this task by enabling you to download the analytics and reports to measure the progress made towards reaching the financial goals.
Understand how Debit and Credit works
Debit and credit are two of the most used terms in accounting. Even though it is confusing, debit is the entry that either increases an asset account or decreases the liability account. In contrast, credit is the opposite of debit. Understanding this concept and wisely using it in your real estate business accounting helps in handling the accounting situation of your company well.
Paying your Staff
Real estate firms usually hire staff based on commission or a percentage of the rental income they manage to fetch. Some also use a combination of a fixed salary plus commissions as incentives.
For real estate agencies, in particular, it makes sense to offer salespeople commission for completed sales. This acts as an incentive for them to work harder and fetch more business. However, commissions may make payroll complex, since the payments may fluctuate.
One can simplify it by using accounting software which has payroll features as a built-in feature. Successful transactions can be assigned to particular staff members, with commissions automatically calculated.
Open a New Bank Account
Business owners, without a doubt, must have bank and credit accounts separated from their accounts. They can also take this practice further by managing a separate account for each of the properties they manage. This makes it easier for you to trace back debits and credits on the books to a specific property.
It may look like a tempting opportunity to manage and handle your company’s real estate accounting for yourself to cut down on costs, but carefully consider outsourcing this resource. You may either hire an accountant or outsource a CPA firm that provides accounting services. Jaxa Chartered Accountants are one of the top accountant teams in the UAE region, providing accounting services, taxation, VAT, and other such financial and legal services. To have a word with our experts, contact us.