All businesses must keep clear records of all their monetary transactions. That includes invoices, signed or canceled cheques, receipts, petty cash vouchers, and income. The same applies to all real estate companies, whether they list property sites like Hauzisha.co.ke, property developers, house moving companies, or property management agents. They can also keep physical records and make virtual entries of these transactions. Bookkeeping is especially vital in real estate, an industry that often involves multiple parties transacting simultaneously. So if you maintain bookkeeping in real estate it is much more beneficial to keep tracking all accounting data.
Tracking your finances
In the most basic way, accounting allows you to keep track of your corporate finances. Bookkeeping lets you know where you are spending money. By keeping good books, you get a clear picture of all your revenue sources, plus exact amounts from each place. You can also track how your business uses the money. Tracking expenses is at the core of managing your business effectively. You should always be aware of how money is leaving your accounts.
Align expenditure with the budget
Bookkeeping is a part of budgeting your business spending. When your financial year starts at the company, you need to create an annual plan for all the monetary transactions you expect throughout the year. Granted, this plan will only partially predict how your financial year will pan out. You will need to record all your income and expenses through bookkeeping. Once you know how your money is moving, you can compare it to your budget to see whether you are aligned with your financial goals for the year.
Evaluating financial ratios
Key performance ratios allow a company to track financial essentials that matter to them. An example of these ratios is the percentage of revenue from your core business. That is known as your core ratio. For instance, if property development is your primary business, you want to ensure that most of your profits come from this part of the business. You can set the percentage at 70 percent and ensure the firm sticks to this percentage at a minimum through your financial records. That way, you keep your core business at the heart of your operations.
Calculating your progressive growth
Using good records, you can track your growth throughout the year. Otherwise, you would primarily operate blindly without data to tell you whether you are making the right moves. Many companies evaluate their progress every month. Using their current accounts, they can look at how each department performs. You can also use these records to prepare quarterly reports for your business. These reports are presented to the governing board and any shareholders in case you are a publicly traded company.
In real estate, bookkeeping can help you determine the most profitable areas in your business. By looking at your income sources, you can tell where the most significant revenue is coming from and focus on that area. For instance, you might earn most of your profits from renting your high-end apartments. That will inform you to put more resources into maintaining these spaces and acquiring more tenants. Your books also show what areas are bringing in the least profit. You can modify those products or remove them from your portfolio altogether.
Support new partnerships
When merging or acquiring new companies, accounting is one of the key focus areas. Good financial records will paint you in the best light, making you attractive to other companies looking to merge with you. A company with good records will also be quickly evaluated when looking at your real estate business growth options. They illustrate how well a company is doing and how much revenue they bring in, and could even inform you about its projected future growth.
Maintain transparency and openness
Good books are also used to promote transparency within the company. You need to track how your money is moving and record every transaction. These records must also be verifiable. For example, each cheque your company signs should have a copy kept by the business. That way, you can track all your payments and see the amount of money debited from your account. You will also see exactly where the funds were paid. Other record-keeping forms include receipts offered after each purchase or payment for services. These are also verifiable records.
Timely filing of your taxes
Also closely related to transparency is filing your tax returns most accurately and punctually as possible. Many countries require any businesses registered within their laws to pay their taxes. Then, they need to file tax returns indicating all their operations and how much they paid in taxes for the year. Usually, this is where they show any CSR or donations they made, which could be tax-exempt. Failure to file your tax returns could cost you a fine. It will also put tax governance bodies on alert and lead to closer scrutiny of your company. You can avoid this negative attention by keeping accurate records and keeping tax deadlines.
Clear records for an external audit
Another essential part of keeping clear financial records is that you can provide all the relevant materials to an auditor when the year ends. As good practice, all companies conduct an external audit at the end of every financial year to ensure that their books are clean. External auditors look at all the financial books, ensuring that each coin is tracked. They provide a report at the end of the audit outlining how your business performed in the year. Your goal is a complete audit report free from fraud or embezzlement.
Aligning with legal requirements
Bookkeeping is also vital for legal reasons. Governments and financial regulators require businesses to account for the money they receive and what goes out of the company. That is important because it keeps the business owners accountable to any stakeholders in the company. It also means that any legal action brought by the company can be backed up by its records. For example, they may be suing to collect unpaid invoices. By indicating a history of their services, they can prove that the money is indeed owed to them.
Your real estate company should have an accountant who records precise financial transactions. They should back up all physical records with digital records to avoid losing important information. Your financial records will play a pivotal role in the company’s progression.