Real Estate agency benefits from using an accountant
- Engaging an accountant resolved numerous financial process issues
- Bookkeeping and accounting has to be done correctly to minimise tax payments
- If accounting software is not used correctly it can lead to errors for GST or tax payments
- A financial audit can uncover accounting practice issues within a business
Every day we get asked if we can provide accounting services for a particular service, industry or business type. The simple answer is yes, we can help any type of business with their bookkeeping, accounting, tax returns or financial planning. Our team applies the correct accounting practices to any given situation irrespective of the type of service or product being sold.
In this example, we helped a local real estate agency in Gregory Hills to overhaul its accounting practices. It makes a lot of sense for a real estate agency to use a small business accountant and here are some of the main reasons for doing so;
Get expertise in small business accounting: Our small business accountants specialise in working with businesses of a similar size and structure. They understand the unique challenges and accounting requirements that small businesses, including real estate agencies, face. So we will always provide tailored advice and guidance specific to your industry that will ensure compliance to any required ATO laws while also minimising your tax liabilities.
Compliance with tax regulations: Real estate agencies have specific tax obligations, such as managing rental income, dealing with property expenses, and understanding capital gains tax implications. Our small business accountants are familiar with the real estate industry (and others) so they can help ensure that your agency remains compliant with relevant tax regulations to also maximises available deductions.
Bookkeeping and financial statements: Maintaining accurate financial records is crucial for any business, including real estate agencies. Getting help with bookkeeping will ensure that income and expenses are properly recorded. They can also prepare financial statements, such as profit and loss statements and balance sheets, which are essential for monitoring your agency’s financial health. It also means you can stay on top of bills payable especially to contractors who might be doing property maintenance for landlords.
Tax planning and optimisation: A small business accountant can help develop tax strategies to minimise your agency’s tax liability legally. They can identify deductions and tax credits that you may be eligible for, provide advice on structuring your business to ensure that you are meeting all your tax obligations in a timely manner. You can take things a step further and engage with our CPA to put strategies in place to grow your business, maybe even open multiple agencies.
Business advice and financial planning: Beyond tax matters, a small business accountant can provide valuable advice on various financial aspects of your real estate agency. They can assist with budgeting, cash flow management, forecasting, payroll and strategic planning. Their expertise can help you make informed financial decisions and set achievable goals for your business that make commercial sense.
Our accounting firm in Gregory Hills has very diverse experience helping so many different business types with their accounting. No doubt as you read the list above you can see the principles can easily apply to any type of business operator, what’s important is to choose an accountant that has the right experience, qualifications, and reputation. Look for someone with a solid understanding of small business accounting principles (knowledge of the real estate industry in this case) and a track record of providing reliable and proactive financial advice.
How did this real estate agency manage their accounting?
What we often discover is that businesses will use one of their own staff to try and manage the accounting systems. If that employee has had some form of accounting training at TAFE or University this might make it a little easier for them to manage such a complex area, but very often we find it is someone that doesn’t have a lot of experience or any qualifications.
For this real estate agency they had appointed an administrative team member to run their accounting software. Unfortunately this was done on a very ad hoc basis without much structure or routine. Their books were an absolute mess, so even though they were using software, the way financial transactions were being processed was simply not organised.
This created a situation where they were constantly having to address issues with suppliers who were not getting paid on time. The payables and receivables were often not up to date and even their ATO commitments had fallen behind while also getting larger by the month. So essentially you had a business that was operating but with very loose accounting practices & inexperienced staff managing their accounting software as well as daily record keeping. This is the ideal scenario for engaging either a bookkeeper or an accountant.
Whether using an accountant or hiring an admin person is better for your business depends on your specific needs and circumstances. Here are some factors to consider:
Scope of responsibilities: An admin person typically handles general administrative tasks such as answering phones, scheduling appointments, managing emails, and handling paperwork. If your business primarily requires support in these areas, hiring an admin person may be appropriate but could limit the time they have to spend on financial matters.
Accounting and financial expertise: If your business involves complex financial transactions, tax obligations, bookkeeping, financial reporting, or requires strategic financial planning, an accountant’s specialised knowledge and expertise can be invaluable. Accountants can provide insights and guidance on financial matters that go beyond the scope of an admin person’s responsibilities especially if they have not received any formal training in these areas or ongoing development.
Compliance requirements: Depending on the nature of your business, you may have specific compliance requirements related to tax regulations, industry-specific regulations, or financial reporting standards. Accountants are trained to navigate these complexities and ensure your business remains compliant. They can also help you take advantage of available tax benefits and deductions.
Time and cost considerations: Hiring an admin person may be more cost-effective if you only need basic administrative support and have limited financial complexities. However, it’s important to consider the time and effort required to handle financial tasks accurately. If you or your staff lack accounting expertise, attempting to manage complex financial matters internally may lead to errors, inefficiencies, and missed opportunities (evidence of this you will read about shortly)
Scalability and growth: As your business grows, its financial needs become more intricate. An accountant can provide strategic financial advice, perform financial analysis, and help you plan for expansion. They can also assist with financial forecasting, budgeting, and identifying areas for cost savings or revenue growth.
Flexibility and specialisation: Accountants often have a broader skill set and can provide support in multiple areas, including taxation, financial analysis, and business advisory services. This versatility can be beneficial as your business evolves and faces new challenges.
Why did the real estate agency decide to use a bookkeeper?
Eventually the owners of the business realised they needed to get professional help to manage their accounting practices. They were not in a position to hire an extra staff member to do their bookkeeping or accounting. So it made sense for them to look for a bookkeeper they could use on a contracted basis.
The tipping point was the constant frustration of not being able to see or follow any clear process, suppliers constantly sending overdue statement reminders and in some cases, they were being cut off completely from using suppliers due to non payment. The biggest issue we uncovered was the directors were presented with a large loan account, they were told they owed the company a large amount of money which took them by surprise.
They tried to dispute it, but upon further investigation our financial audit discovered the record keeping had not been completed correctly and was grossly inaccurate. They had a massive liability sitting within their business that they weren’t even aware of which immediately placed them under financial strain.
When should a real estate agency use an accountant?
Sounds like a silly question but the reality is for a lot of business owners it makes sense to use a professional accountant (or at minimum a bookkeeper) to help manage the financial complexities required for running an operation efficiently. It means you get assistance for things like day to day bookkeeping but also things like preparing tax returns, handling ATO deferred payments and other financial matters.
These are the things our accountant discovered very quickly;
- We pointed out the loan account that existed.
- That the ATO compliance needed urgent attention.
- Highlighted several other mis coding’s in the clients records that meant they were missing deductible expenses.
- Identified they couldn’t rely on the figures that were being presented from their Xero Accounting file to make the right management decisions because the record keeping and processing was so poorly done.
- We also highlighted the lack of systems and processes internally in their accounting department.
- We presented them with a list of suggestions and how we could approach to managing their finances moving forward.
How can an accountant help implement changes?
After we presented all of our findings the business owners gave us the approvals to being working through each element step by step. So these are the actions we implemented to help change the situation;
- We assigned a highly skilled bookkeeper to the client.
- We implemented our proven systems and procedures to give the client transparency and satisfaction that all financial transactions were always up to date.
- We prepared a detailed audit of their financial files in Xero Accounting and correctly re classified their business expense accounts.
- We corrected the way GST was to be correctly claimed by the business on the transaction amounts.
- We committed to providing the business owner a true statement of their business position on a regular basis, one they could rely upon to make business decisions moving forward.
How did an accountant change this real estate business?
The changes that our accountants made put the directors at ease within days. With the new accounting processes that we implemented, nothing is being missed, every transaction is being recorded correctly using Xero’s online accounting software with shared access between their staff and ours. At the touch of a button they can access their financial figures to review them as regularly as they need to which means they are informed and well on top of their financial situation.
In the last 18 months this real estate business has grown substantially, we have even assisted them in several acquisitions they have made. This wouldn’t have been possible without the critically accurate financial data the directors needed to make sound business decisions.
Hiring a junior admin staff member might seem like a good way to reduce your costs, but in this situation the financial mess that it created nearly led them to closing the business. This is why it makes a lot of sense to hire an accountant if you are a business owner, for these directors they now have a thriving business.