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27 Jan, 2023
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Significance of Outsourcing Accounting In The Real Estate

Real estate is one of the fastest-growing industries in any economy, and proper accounting of real estate transactions is of utmost importance. Outsourcing of real estate accounting enables adequate recording of real estate transactions. It helps to control the cash flows appropriately, maximize the organization’s profitability and comply with all legal regulations. Real estate accounting is complicated, and if the transactions are not correctly recorded can create legal problems. Outsourcing real estate accounting can result in automated, seamless, and efficient accounting for larger businesses holding multiple properties.

 Significance of outsourcing real estate accounting

  • Helps to inflate revenues and keep expenses under control: Profits can be optimized, and we can keep tight control over costs. If the organization has a portfolio of multiple properties, we must record several transactions and simultaneously avoid human errors. Outsourcing accounting helps in the automation of accounts and accurate and reliable reporting. We can obtain timely, system-generated reports, which can help us to track our rental income and keep tight control of expenses.
  • Provides better focus on the work done by existing employees: Choosing real estate accounting services will allow our employees to remain engaged in other important tasks related to managing a real estate portfolio. This frees up their time from the repetitive and time-consuming recording of accounting transactions and prioritizes the core business functions
  • Helps formulate new portfolio strategies: Apart from financial statements and tax accounts, outsourced real estate accounting generates ratio analysis and historical comparison of a single property or multiple properties in our portfolio. This enables us to compare the financial performance of a property over time. We can also compare the performance of different properties, weed out the non-performing properties and retain the properties with superior financial performance in our portfolio.
  • Enables proper tax planning and avoids any negative consequences: As our tax accounts are also compiled with the financial statements, we can manage our tax obligations. Outsourcing also helps to provide constructive suggestions as to how we can use various tax planning measures to reduce our total tax burden. The taxes payable by the individual property and on a comprehensive portfolio basis are provided to us in the form of a ready-made report. 
  • Reduces overall leverage and indebtedness of our company: Outsourced bookkeeping services optimize the portfolio’s cash flows. It also ensures timely interest payments on outstanding loans and prevents penalty interest. Timely accounting reports also help monitor market interest rates and allow us to switch to loans charging lower interest rates. This helps to reduce our total outstanding loans and total leverage gradually.
  • Flexibility and optimization of accounting expenses: Instead of hiring multiple people to record the accounting transactions, outsourcing can help to bring more flexibility in terms of the number of people we hire. During accounts finalization and tax planning, we need more accountants. Outsourcing to a low-cost, skilled workforce can be a cost-effective solution
  • Availability of expertise: As already mentioned, outsourcing provides access to multiple advantages, including financial analysis, adherence to regulation, tax planning, and market information. All this skilled expertise is available at one place where we have outsourced our accounting.
  • Group consolidations and group financials: We should outsource group consolidations and group accounting of multiple properties and subsidiary companies with the parent company accounts. Automated technology with a convenient, online software-based method of accessing accounting files is a popular option as it streamlines processes, saves manual effort, and is used for real-time entries and updates. We receive updated records for review immediately.
  • Seeking the right fit and not compromising quality for cost: We share sensitive organizational data with a third party. So we need to screen all the candidates for such an outsourcing firm, emphasizing their relevant experience and quality of work. We should remember that the cheapest firm may not always be the best
  • Data security: We should check data security and the reliability of the selected firm in this regard. They should keep confidential information secure and protect the integrity of data.
  • Experience and credibility: We should choose our outsourcing partner based on our knowledge of accounting and tax laws and other legal regulations. They must also have similar experience in preparing financial statements for real estate firms. They must also be able to transcend language, culture, and other barriers.

Key Takeaways

Once we have decided to outsource, we must prepare a list of candidates who comply with the above requirements. We must then select the most suitable candidate based on ranking all the above factors. We can decide to start small and outsource a part of the accounting process. Once we are convinced about the process’s efficacy and the outsourcing partner’s suitability, we can outsource most of the real estate accounting.

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