Generally, real estate agents and investors often have to navigate the complex market dynamics and financial matters. However, common bookkeeping mistakes can impact how real estate agents and investors operate.
Whether you’re a real estate agent or investor, you have to understand the relevance of bookkeeping. In fact, it is even more important for real estate investors to maintain financial health through up-to-date bookkeeping practices.
As a real estate agent or investor, there’s a good chance you have more than enough share of responsibilities on your hand. Still, despite all the real estate governing, marketing, or pricing matters, you have to designate some time for the bookkeeping.
Repetition may come across as dull and boring, but it still doesn’t change the fact that bookkeeping is one of the crucial aspects to run any business professionally. Without further ado, let’s take a look at the top five (5) bookkeeping mistakes that real estate agents and investors cannot afford to make:
Irregular Maintenance of Records
The majority of real estate agents and investors don’t have an ample amount of time on their hands to heed irregular bookkeeping records. In any case, it is arguably the most common bookkeeping mistake that real estate agents and investors face.
Realistically, you need plenty of time and effort to maintain thorough bookkeeping records. On the other hand, real estate agents and investors are also aware of slight inconsistencies in the bookkeeping that can lead to an audit. In any case, real estate agents and investors can hire third-party accountants and tax experts to maintain accurate bookkeeping records.
As a real estate agent or investor, you should, however, have some understanding of the bookkeeping practices. For instance, you should be knowledgeable about the categorization of income and expenses to ensure the authenticity of your financial records. In time, you’ll realize that standard bookkeeping methods essentially help you retain profitability.
No Separation of Personal and Business Bank Accounts
In the beginning, it may not come across as a major hurdle, but over time, the overlap of personal and business transactions can lead to mountainous problems. Therefore, specify your personal transactions for a personal bank account. You can take care of your personal expenses and accumulate savings through this account.
The last thing you want to do as a real estate agent or investor is to mix your personal and business accounts. It is a mistake that practically makes it impossible to trace business cash inflow activities. The separation of business and personal transactions is one of the most challenging tasks.
If you’re an inexperienced real estate agent or investor and running all operations from a single account, you have to change your strategy. Think of it as a long-term solution to make tax calculation easier for personal and business operations. With a single account, you will have scrambled data that can create a multitude of problems.
Disordered Employee Classification
Another common bookkeeping mistake real estate investors make is the oversight of employees’ classification. It is no secret that real estate investors need independent contractors and as well as employees to take care of business operations.
In retrospect, you have to classify your independent contractors and employees. The idea is to avoid paying more taxes and misfiling tax returns. The more you grow as a real estate investor, the more employees you will need, which means more orderly classification.
From administrators to market analysts, employee and independent contractors’ classification will help you understand your tax structure. Furthermore, it will help you adhere to official tax calculation practices.
Compromised or Poor Back-up
In the digital age, even real estate agents and investors have to depend on various tools to boost business operations. In fact, technological advancements work in favor of real estate agents and investors to improve financial structure.
However, more integration of technological solutions means more IT issues. The dread of IT problems is real and can eventually impact your valuable data. Therefore, make sure to back-up your financial and other valuable information to avoid losses.
Failure to adopt a back-up solution can result in loss of financial data and clients’ information. Fortunately, modern bookkeeping is digitalized and comes with back-up solutions. An efficient back-up solution can generate original data and maintain scanned receipts in the blink of an eye.
Just like every industry, real estate agents and investors have to embrace the power of digitalization and take advantage of its solutions. Besides, data back-up is a wise solution when you face an onslaught of unexpected cyber theft or failure of servers.
Overlap Categorization of Expenses
As a real estate agent and investor, you need full control over your tax exemptions on expenses. Unfortunately, many real estate agents and investors get caught in the cobweb of expenses that usually make no sense at all.
Without proper categorization of expenses, you won’t be able to itemize the correct items. In fact, it makes the entire classification of expenses process difficult. It is vital to remember that different expenses result in different taxes. Through proper categorization, you can save a lot of money. Not to mention categorization also paints a clear picture of your current financial position.
If you want to succeed as a real estate agent or investor, you will have to dedicate some time to bookkeeping. It is crucial to keep an eye on your cash inflow and cash outflow to make logical business decisions. Once you start to take care of your bookkeeping, you will come to understand your real estate finances better.
It is high time to save yourself from the curse of bookkeeping mistakes. You can, of course, always hire a professional bookkeeping company to manage complex bookkeeping tasks. It shouldn’t come as a surprise that most real estate agents and investors hand over their bookkeeping duties to accounting experts. It is a great way to nudge off the responsibility and focus on more important business tasks.