Most real estate agencies rely on their back offices for day-to-day accounting. The list of tasks covers a wide range of verticals, from vendor payments to employee reimbursements.
As a result, the back office requires considerable resources and hours to do its job efficiently.
However, most real estate’s back office accounting is in a mess. The department is riddled with inefficient processes and workflows that take a toll on productivity.
Therefore, you need to be aware of the top back office accounting mistakes that can haunt your agency. Below, you will find the most applicable mistakes that modern real estate back offices make.
Relying on Manual Data Entry
Back office accounting in any industry involves dealing with a lot of data. Unfortunately, real estate agencies are still using paper processes or spreadsheets for the process.
As a result, they have to deal with huge volumes of manual data entry that take a painstakingly long time.
In addition, manual data entry leads to errors. Research shows the probability of human error is 18% to 40% while recording data into a simple spreadsheet.
For complex data spreadsheets, the probability jumps to 100%.
It is not easy to rule out manual data entry so easily. However, brokers should make an effort to automate as much of the process as possible.
For example, integrating your existing tools can be an excellent way to automate data entry. You can capture invoices from your property management tool and have the data recorded in your accounting software automatically.
The process saves time and improves data accuracy. Additionally, you can look forward to a boost in productivity.
Not Giving Up Manual Accounting Processes
This is a continuation of the mistake we discussed above. 63% of businesses today still work with spreadsheets and manual accounting processes.
Needless to say, the consequences are more than the risk of human errors. The list of dangers includes wastage of time, money, and resources.
In addition, it increases the potential for fraud and invites financial risks. Moreover, you can expect your audits to get more complex and expensive.
Worst of all, you will experience a massive challenge to scale your manual accounting processes. As a result, it may even restrict your business growth.
The need of the hour is to digitize your accounting processes. Choose the right tools that align with your needs and help you achieve your business objectives.
Then you can enjoy a hands-off approach for back office accounting tasks like matching invoices or bank reconciliations.
Accounting at the End of the Month
Most real estate agencies will wait till the end of the month to complete accounting. Most probably your back office staff will spend the last day of the month reconciling expenses and matching books.
This approach may get the job done but is not ideal if you want to operate efficiently.
Waiting till the end of the month to do your back office accounting lowers your financial visibility. You cannot be sure of your cash flow or where your money is going.
Therefore, you cannot make accurate financial predictions and risk losing out to the competition.
As a result, you should aim for real-time accounting. Record your debits or credits as they happen so that you have complete visibility into your financial position.
You can also use a wide array of tools like a spend management solution to facilitate real-time accounting.
Not Analyzing your Financial Data
As noted earlier, real estate back office accounting manages a huge volume of financial data. The information may include vendor payments, SaaS expenses, wages, cost of services, and more.
However, most businesses don’t utilize or make the most of this data. They don’t use it for financial analyses to cut costs or maximize value from their procurement.
As a result, they miss out on wonderful opportunities to improve profitability or their bottom line.
Therefore, analyze your accounting data periodically to sport patterns and trends. You can then assimilate your findings to generate vital insights.
Many accounting or spend management tools come with advanced analytics. They provide readymade insights for you to leverage. You can also customize your solution to track specific data and make more informed financial decisions.
The returns are guaranteed, as data-driven businesses are 3-times more likely to experience improvements in decision-making.
Not Making Timely Payments
The real estate industry works with a wide range of stakeholders. Construction companies, security agencies, software vendors, material suppliers – the list is almost endless.
Undoubtedly, your stakeholders impact the performance of your business and productivity. For example, strained relationships with a supplier might affect your supply chain and delay your time to market.
In this regard, most real estate back offices struggle with payment processing. The staff often has too much to handle and not enough resources to work efficiently.
As a result, late payments are common in real estate. Most agencies fail to pay their suppliers or vendors on time, risking the business relationship.
Therefore, make an effort to make timely payments and aim for real-time payment processing. You can rely on a digital solution to automate the process and boost productivity.
Working with Poor Talent
Back office accounting comes as an afterthought to many brokers. As a result, they don’t hire the right talent for their daily bookkeeping.
They want to save costs and work with a skeleton staff to just get the job done.
Needless to say, such an approach means more risks for your business. You can never be sure of the accuracy of your financial records and reports.
In addition, you will miss out on the skills of an expert accountant that hampers your accounting processes.
Therefore, never compromise on skills and experience.
Final Thoughts
Back office accounting can be a challenging task to handle. It may be a better decision to outsource your accounting needs to a reliable partner like KriyaGo. We have the best team of bookkeepers and certified accountants to make a difference. Our team will take care of your day-to-day accounting and provide solid guidance to gain a competitive edge. Contact us today to know more.
