What’s that saying, “fool me once, shame on you, fool me twice, shame on me?” How about applying that cliché to accounting mistakes? In a world where a wrong addition or subtraction sign translates to thousands or millions of dollars lost, accounting errors are more than a headache. They’re a fatal business blunder. Watch out for these real estate accounting mistakes that can spell disaster for your reputation and your business.
Separate tracking of commissions
“Let’s do twice the work and increase our chance for errors!” said no business person, ever. No one likes redundancy. When tracking commissions separate from accounting, this is exactly what you are doing. Keeping these tasks separate creates more work and increases the chances of human error. Today’s technology providers–like CommissionTrac–exist to make accounting work more accurate efficient, not harder!
Early disbursement of funds
You’d think this huge real estate gaffe wouldn’t happen in today’s world of oversight, but it does. Besides a headache for the accountant, early disbursement of funds makes a brokerage non-compliant with their overseeing bodies. Deals can go sour for any reason; don’t send funds until the keys are exchanged and documents signed.
No data back-ups
We’ve all had that moment when technology failed. We closed a document before saving, or the computer crashed mid-work, or a virus wiped the drive. Your heart just sinks into your chest. Now apply that scenario to the accounting division of your real estate business. Talk about catastrophic! Your software should be scheduled to automatically back up often. Better yet, use a cloud-based system!
Lack of training
Ever had a broker hire a close family friend who doesn’t know the first thing about expenses versus income, much less commission splits? Real estate firms need a trained person who understands brokerage technology, knows about tax regulations, deadlines, payroll maintenance and more! Without a background in real estate-specific accounting knowledge, even the most intuitive, automated accounting software can become a burden. After all, you’re trusting your accountant to program variable splits and understand concepts like Quickbook integration.
Mixing personal and business accounts
We hope most real estate professionals know to avoid this huge error, but for novices, it’s worth mentioning. Even for self-employed real estate agents, keep a separate business account for depositing commission checks. This simplifies record-keeping, especially for expenses and calculating taxes.
Simple data entry errors
No one wants to make an error, but as they say, to err is human. Accounting is not the place for errors. The smallest change to a decimal point or mistyped percentage can throw other calculations out of whack. Human data entry ups the chances for mistakes. Prevent human data entry errors by using automated software.
Inaccurate data classification
Make sure your real estate brokerage has a clear classification system. Regularly audit the accounts to ensure all the receivables and payables are documented accurately. Keep clear labels for income, debts, payments, etc. This keeps all your ledgers and reports as correct as possible.
There you have it: seven accounting errors that kill real estate firms. Today we have the right technology tools in place to avoid these deadly business mistakes. We created CommissionTrac with the mission to help brokerages avoid these type of errors. After all, an accurate and efficient accounting back office platform helps a brokerage successfully reach their goals.