Real estate agents are great at their job, but that doesn’t mean they are great at accounting. There’s nothing wrong with lacking professional accounting skills, unless you try and handle this important task alone. Here are some common mistakes real estate agents make with their accounting practices.
Not separating personal and business accounts
When you own or run any kind of business, you need to make sure you are keeping your business finances separate from your personal finances. This may not seem important during your daily life, but it will as soon as tax time rolls around. It can be extremely difficult to remember which of your expenses are personal and which are related to your business. To avoid this, make sure you separately maintain your business and personal accounts.
Tracking commissions separately
Simply put, your commissions should be tracked in the same place as your main booking. If you track them separately, you are increasing the chance of redundancy and human error because the data needs to be entered twice. That’s not a great business tactic. To avoid this issue, use an accounting system to take care of these bookkeeping functions for you.
Not waiting until the transaction closes to distribute funds
A house purchasing transaction is a complicated one. Even if the deal seems as secure as can be, you never know what could happen. It’s not uncommon for deals to fall through in escrow. You never want to distribute funds before the transaction officially closes. To avoid putting your books in the red, wait until the keys are exchanged to dish out the funds.
Hiring inexperienced tax accountants for the job
If you hire accountants that are not experienced in the world of real estate accounting, things can go south really fast. The accountant might make a mistake that costs you a lot of money. Not only that, but errors and mistakes can give a negative image to your real estate business. To avoid this, make sure you look into experienced, trained accountants to get the job done.
Roughly 45% of all tax dollars collected in NYC were from property taxes in the 2017 fiscal year. When you work with property and real estate, you want to make sure you are working with a professional that knows their stuff. Give us a call today so we can help you with all your accounting needs.