Real estate development, also known as property development, deals with purchasing raw land and selling of developed lands to the clients. The business also includes renovation and resale of existing buildings.
There are generally four types of real estate:
- Residential real estate includes new construction, renovation, and sales of homes to single families.
- Commercial real estate encompasses hotels, shopping malls, offices, educational institutions, etc.
- Industrial real estate deals with manufacturing properties, buildings, and warehouses used to produce, distribute, and research goods.
- Land includes mainly raw vacant land.
Accounting of Real Estate Company is unique, considering the complexities involved and arising out of the differences between industrial, residential, and commercial types. In addition to types, the accounting process of businesses and organizations managing real estate can also be equally complex due to the myriad transactions involved in sales and acquisitions and changing financial and taxation issues.
Accounting for residential apartments or commercial complexes is entirely different, and unless certain expenses for commercial real estate are not tracked properly, it can lead to serious issues at the end of accounting periods.
Real estate accountants are generally faced with lots of challenges while discharging their duties. A handful of bookkeeping and accounting challenges include:
The following are a few reasons posing challenges to accounting for Amazon Sellers in India
- Errors and mistakes made are the most common issues and can be caused by different reasons, e.g., incorrect classification of income and expense, issues in contractor payments and payrolls, faulty real estate accounting guide, mixing up of personal and business-related transactions, reconciliation of balance of accounts, improper Chart of Accounts, etc.
- Improper and insufficient knowledge of the latest rules and regulations that keep changing with time.
- Payroll compliance is also a frequent issue due to salaries and commissions of agents and contractors and improper employee grouping.
- The management system software also creates an issue as real estate businesses often get their jobs done through agents who use different software to track expenses and income.
- Poor recording of maintenance
The basic principles of real estate accounting require accountants to follow some principles while drawing up financial statements
- “Accounting information must be useful to the user of the information."
- “Accounting information must be comprehensible."
- “Financial statements are the primary means of communicating useful financial information."
Plenty of software modules are available in the market for meeting your real estate accounting needs, e.g., budgeting and forecasting, financial reporting, payroll management, billing and invoicing, inventory management, etc.
An online cloud-based software should be your preference as you will be able to run your business from anywhere and stay connected once you are out. It should come with a feature that can integrate it with third-party software. Lastly, it should be simple. In real estate, SMEs, Xero, Zoho, or QuickBooks can be a good choice.
Given the principles laid down for real estate accounting and the typical challenges, it is always prudent to outsource the services of IMC as your experienced accounting partner.
IMC is an Accounting services company with needed experience and expertise and which keeps up to date on all aspects of real estate accounting and can save money and time and provide peace of mind to you. IMC is managed by a group of highly qualified and seasoned accountants with long hands-on exposure in real estate accounting.
At IMC, we offer expert accounting services to our clients, including the preparation of financial statements and reports for a variety of real estate businesses, e.g., property sales, rentals, leases, etc. IMC will also lend customized services in determining operational costs and profits, developing revenue and expenditure cycle reports, lease abstracts, cash-based income statements, and budget-related items.
IMC also offers investment analysis and planning for real estate companies desirous of acquiring and developing the property. We can coordinate asset evaluation and capitalization activities also.