Accounting Options for Property Agents

Real world bookkeeping and accounting systems designed specifically for agents and small brokerages

If you want to run the financials of a real estate practice, occasional spreadsheets and receipts stashed randomly into envelopes won’t cut it. Agents require an accounting method that is capable of dealing with commission splits, escrow or trust funds, rental receipts/outgoings and some basic financial reporting. If you’re looking for a real estate accounting solution that scaled down to meet the needs of a small operation or independent agent, this post provides common sense options and strategies for keeping finances neat, compliant and easily manageable.

Why agents require a custom approach

Generic-type accounting principles frequently overlook specific features particular to transactions in real property. Real estate professionals are challenged with sporadic cash flow, handling control of multiple client accounts, making disbursement to multi-parties per transaction and managing time sensitive commissions. A good real estate accounting software substitute should feature; accurate support for commission/trust accounting on deals, income recognition when closed, categorization of deductible expenses and clear visibility into your cash flow when you have erratic incomes.

Core features to prioritize

When comparing with other options, consider these features:

Commission Tracking: Record Gross Commissions; Split percentages; Broker Fees and Referral fees to calculate Net Payouts. Find a process to link commission entries with closed deals and can accommodate manual adjustments without smashing the audit trail.

Trust or escrow accounting: A separate trust ledger for client monies is vital. It also really needs to track the separation of client money from operational funds and support simple reconciliation for trust accounts.

Receipts and expense categorization: Snap photos of your receipts or import into FreshBooks using your iPhone camera—and these expenses will be automatically categorized.

— Project- or property-level accounting: Tagging transactions to a project, listing or client allows brokers toward calculate the profitability per deal and makes year-end reporting easier.

Easy invoicing and payment tracking: For rental management or service charges, simple invoicing & payment reconciliation is required.

Reporting and visibility into cash flow: Standard reports, such as profit and loss, cash flow, accounts receivables and commission summaries customized to real estate tasks.

Workflows that work for agents

Choose "middle-ware" type methodologies for workflows with an optimal balance between accuracy and simplicity:

Standardize tagging for transactions: Establish a short list of categories such as commissions, marketing, vehicle expenses, CE (continuing education), office supplies and client escrow activity. Consistent tagging reduces cleanup later.

Leverage property or deal tags: Tag relevant transactions and payments for each listing or referral. This offers a resuling property-level profit and loss; useful for the analysis of which kind of listings are most profitable.

Keep a separate ledger for client funds: Regardless of whether you’re using an actual trust product or not, have a separate bank account and a ledger that shows who gives and takes money related to practice clients, even if the numbers add up to zero. Reconcile weekly.

Take photos of receipts on the spot: A mobile first workflow will enable employees to take pictures of their receipts and attach them to transactions for not missing any deductions.

Reconcile commissions monthly with closed deals, approved commission entries, bank deposits to ensure we do not miss split/referral payments.

Create monthly cleanups: Make it a habit every month of reconciling accounts, going through uncategorized transactions and verifying any open invoices/paying them off.

Real-world, hands-on installation for solo operatives and small groups of agents

Independent agent

Maintain two bank accounts, one for operations and another for client funds. Record all sales, purchases and returns in the client ledger. Track splits and payment schedules using simple spreadsheet templates or a bookkeeping journal.

Structure a booking template for all closed deals that captures sale price, gross commission, splits, fees and disbursement dates. This is then the single source of truth for commission payments.

Small team or boutique brokerage

Leverage property-level ledgers for each agent or deal and tag wherever you can automate. Develop an uniform chart of accounts for use by the entire team.

Setup approvals to issue client funds and agent payments. Some great software for keeping records, so auditing becomes easy.

Tax and compliance considerations

Efficient expense classification and recording is key in tax preparation. Maintain clear records of marketing costs, office deductions, vehicle mileage or costs of ownership, continued education and professional fees. Document your deposits and withdrawals down to the penny for client money. Regular reconciliations also minimize the potential for funds to be applied incorrectly and make any regulatory reporting easier.

Integration and automation tips

Automation even without specific products allows to save hours each month. Utilize bank rules to auto-categorize repeat transactions, such as general contractors with regular payments, and create templates for common commission splits or automatically remind you on an invoice due date when tracking rental income or service revenue. If you can, set up easy importing and exporting between your bookkeeping spreadsheets (if used) and other financial tools you’re using— reducing manual entry makes human error less likely to happen.

Picking your complexity level

Not every agent has need of a full-service accounting workflow. If you close a deal or two in a month and have simple finances, lean bookkeeping with strict tagging and regular reconciliation might be all the system that you need. If you work with rentals, property management, or run a team invest the time to put in place property-level accounting and automated commission flows. The right accounting alternative for real estate grows with your business: beginning simple and adding sophistication as transaction volume increases.

Onboarding and ongoing management

Educate everyone who involves finances how always to use tags, trust rules, congruent meet-up practices. Write up step by step instructions to facilitate some common tasks; how to book a commission, reconcile the trust account, or process a payout but at least as important in my opinion – prepare monthly reporting. Following set procedures will minimize errors and simplify the task of turning over bookkeeping duties to a pro when it’s time.

Conclusion

A better way of managing real estate accounting is based on commission and trust accounting, property-level visibility, and disciplined bookkeeping processes. Whether you like light spreadsheets, or structured ledgers, focus on clarity, segregation of client funds and repeatable steps. With some sound classes and a good routine in place agents can keep clean books, reduce taxes and gain insight into bootstrapping a profitable organization.

Search phrases for this guide are: alternative real estate accounting, realtor bookkeeper software, commission & trust accounting. Take these ideas into consideration when assessing or developing an accounting system that works for your business.