What are the challenges in real estate accounting?
Real estate is one of the hardest oceans to sail. It always has stormy weather, with the dips and rise in any of the sectors affecting it directly or indirectly. Sailing successfully in real estate is a task that necessitates great maneuverability and skills. You can now assume the complexities when it comes to real estate accounting. Only a credible agency that has experts from the field can handle the situation effectively. A systematic approach is essential to keep the calculations in check in real estate accounting. The accounting firms in Dubai observe a set of stipulated norms to maintain the real estate calculations perfectly.
We are listing out the challenges in real estate accounting in this article. Unpredictability is the predominant factor that rules the real estate business. Understanding this very fact, accounting services in Dubai observes constant vigil to sense the changes in wind, and the chaos that may affect the industry. And guide the clients accordingly to implement corrective actions.
Wrong Grouping of Employees
Every real estate firm will have employees functioning in different sectors. There will be real estate agents, HR employees, an in-house accounting team, property developers, engineers, and so on. Moreover, the pay revisions and present remunerations will depend on their length of service and performance. The grouping of the employees has to be done in the correct manner to prevent erroneous payment and incentive calculations and similar requirements. Relatively, the tax calculations also will differ. Only an experienced accounting professional can properly group them and get the calculation done correctly.
Erroneous Bookkeeping Techniques
The in-house team might be overloaded with several activities simultaneously. They will be complying with the existing bookkeeping and accounting methods, which might have been formulated years ago. Reluctance to change and the complexities in implementing new methodologies might have made them continue with the old and worn out techniques. This may cause erroneous calculations and avoidable mistakes. In a volatile industry like real estate, even a minor error can turn destructive.
Classification of Payables, Receivables, Profit, and Loss
The real estate sector will have different expenses including the money spent for land purchase, expenditure on property development, procurement of building material, and additional charges for approvals (if required). The correct segregation of the payables, receivables, profit and loss is a mandatory requirement to have a realistic view of the money held. It will aid the firm in pursuing new procurements and envisaging expansions.
Be Current Regarding the Rules and Regulations in the Real Estate Sector
Real estate is one of the business sectors that witnesses constant amendments in the rules and regulations. The environmental conditions, the necessity to protect water bodies, the norms to preserve the biosphere and other relevant aspects lead to the introduction of policies by governmental authorities. Consequently, there would be additional charges or levies depending on the type of construction project. Abiding by the regulation is mandatory for the real estate firm to function without any intervention from the government.
This would cause a challenging situation for the accounting team and professional accountants. As they are expected to be current regarding the introduction of the latest rules. Else, it can lead to a heavy fine or ban from the authorities.
Back up of Records
The documents of real estate accounting have to be held properly. Any mistakes that lead to loss of data can affect the firm adversely. With the busy schedule of real estate agents and developers, it may be a difficult task to keep a note of the accounts and undertake backup from time to time. The grave mistake can push you back to zero. Forcing you to commence the accounting from scratch. Firms normally don’t realize this aspect until something happens. They run frantically to collect the financial records and the related data from whatever source they could. Nonetheless, it will be an uphill task to compile the complete statistics once you lose them. As the data is being stored digitally nowadays, the loss can happen due to various issues including hacking, virus, technical issues with the computer, human error and so on.
Real estate accounting is a challenging field, with the tumultuous business arena across the globe posing complications frequently. Only a thorough professional or well-established accounting firm can perform brilliantly. By delivering the firm with exemplary service and keeping them abreast of the latest developments in the sector. It will be advisable to hire an experienced team to support your real estate business accounting. There are several accounting firms in Dubai, Abu Dhabi and other regions in the UAE. Choose a reputed professional agency to handle the financial records of your real estate firm. With exhaustive experience and expertise in the field, they would be your reliable support. However, we request you to pursue proper background checks, performance analysis and confirmation on accounting services offered before hiring the firm.