You became a Real Estate Agent because you have a gift for networking and a drive on hustle. You’re probably a little (or a lot) ambitious, outgoing, and into personal growth and development. And while numbers may even be your thing, bookkeeping might be an entirely new skills for you to master… whether you’re selling Sunset or cold calling FISBOS, I’ve got some solid fundamental words of entrepreneurship advice that will set you up for rockstar level success.
We’ll delve into the world of real estate agent bookkeeping and equip you with the knowledge, best practices, and tools to conquer your finances with the finesse of a financial wizard.
The Difference between Real Estate Agent Bookkeeping and Accounting:
Picture this: Bookkeeping and accounting dancing hand in hand, but with distinct moves. Bookkeeping takes the lead, focusing on recording transactions, reconciling accounts, and tracking income and expenses. Accounting, on the other hand, steps in with a flourish, offering financial reporting and tax preparation prowess. Together, they make a harmonious pair that makes your business shine.
But sometimes this graceful tango isn’t the tango at all. It’s more like a modern contemporary piece. Why are they rolling around on the ground like that?! They push. They pull. Did Bookkeeping just teach the entrepreneur something about understanding financial reports?!
I have two left feet and peaked with the Macarena, so this is where our dance analogy ends.
Analogy aside. If you are a Real Estate Agent, it is likely you are a born leader. And leaders know their numbers. Just like you might not be the person installing the sign at your Sellers’ Listing, you might not be the person putting together the financial reports – BUT you still know what a proper sign installation looks like and you should still know what your numbers are telling you.
The most common issue I see with Real Estate Agents is that they have highs and lows. They have months where they are absolutely on fire and months where the market is quieter than a mime convention. This creates cash flow issues.
Dealing with Cash Flow
The first step to dealing with your cash flow is to keep GREAT records. I’m talking assets, I’m talking liabilities, I’m talking equity, I’m talking income, and I’m talking expenses.
You’ll have what is called a Chart of Accounts – a naming system that keeps everything organized and tidy in categories the make sense not only to the IRS, but to you!
A good accounting software (like QuickBooks – which I can hook you up with a discount on); has ways to tag transactions with additional details so that you can see things like how much of your “Advertising and Promotional” budget went to buying those professional branded pens for your open houses and signings versus how much you paid on print marketing.
Time to Talk About Timing
Time is of the essence! All that neat data you gathered about your transactions isn’t going to mean a thing if it’s not ready when you need it. Don’t let your financial records gather dust while you’re out building your real estate empire.
Ideally, with proper foundational setup, you’ll be able to organize your transactions in as little as 5 to 10 minutes a day, and then take the time monthly for a deep dive into your financial statements – with the Real Estate Agents I work with, we also go over their margins on their buyer and seller listings and do breakdowns of any sub categories they find useful in guiding their decision making about how to spend their time and resources.
Again, cash flow comes into play here. Not keeping your books up to date is a surefire way to see a huge commission check come in one day and go out the next.
Speaking of That Commission Check
Your life as a Real Estate Agent might require you be quite glamorous – the bills can stack up fast. When that big check comes in, there are simple strategies for making sure you don’t get in trouble later on when the IRS demands payment.
Knowing your monthly expenses – and being able to confidently set enough money (not more and not less) aside – is a sure-fire way to safeguard yourself from the ebbs and flows of Realtor life.
I Hope You’ve Learned a Thing or Two
Hidden among all the knowledge I’ve shared about bookkeeping is a wealth of information about dated cultural references. I hope you learned something. Anything really.
If this article has caused you to have more questions about Bookkeeping for Real Estate Agents than you had before reading it, let’s chat! I would love to learn more about you and your business.
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