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Bookkeeping is an essential function of any business. Practicing good bookkeeping is the only way for business owners to ensure they have an accurate understanding of the financial position of their business. Bookkeeping is crucial for budgeting, making investment decisions, and ensuring that cash flow remains positive.
For real estate investors, bookkeeping is especially important. Real estate is a complex business, and if you own several properties, you’ll know how many transactions have to be recorded. Accurately tracking the accounts for each of your properties is crucial to your success. Everything from your tax strategy to the terms of your financing relies on your accounts being organized and accurate. Without effective bookkeeping, it’s easy for things to quickly devolve into a disorganized mess.
In the wake of the passage of the Inflation Reduction Act, maintaining accurate financial records is more important than ever for real estate investors. Accurate bookkeeping ensures you have the financial documentation to back up your tax positions in the event of an audit.
Bookkeeping is clearly important, but it’s a time-intensive, mundane task that many real estate investors don’t want to spend their time on. Instead, many investors are turning to outsourced accounting services.
But what exactly is outsourced bookkeeping, and how does it differ from a traditional approach to bookkeeping? In this article, we’ll answer those questions and share how you can easily outsource your real estate bookkeeping needs.
Outsourced Bookkeeping: A Definition
A bookkeeper is tasked with keeping track of the financial records of a business. This includes tasks such as:
- Recording transactions
- Bank account reconciliations
- Producing monthly financial reports
- Managing accounts receivable and accounts payable
- Running payroll
Many businesses have in-house bookkeepers who are employed either on a full-time or part-time basis. This is a relatively low-paid position; the average full-time bookkeeper makes just under $42,000/yr in the United States
Many businesses and real estate investors are now embracing outsourced bookkeeping. When you work with an outsourced bookkeeper, you essentially hand off every element of your bookkeeping to an external partner to manage on your behalf. Your new partner will ensure you have a well-organized accounting system and will then handle all regular bookkeeping tasks on a monthly basis.
In recent years, technology has made outsourced bookkeeping more efficient than ever before. As a result, more and more entrepreneurs are embracing outsourced bookkeeping services. It’s a particularly attractive service for real estate investors, many of whom need bookkeeping help but don’t have the time or money to hire an in-house bookkeeper.
In-House Bookkeeping vs. Outsourced Bookkeeping
If you’ve decided that you need a bookkeeper to help you manage your real estate portfolio, you need to decide whether you want to use an outsourced bookkeeping service or hire someone to work for you in-house. There are various considerations here, and both options have pros and cons that you should weigh up.
Let’s take a closer look at how each of these bookkeeping options works and explore the benefits and drawbacks you should consider before making your decision.
In-House Bookkeeping: Key Considerations
As your portfolio starts to grow beyond a few individual properties, it’s likely that you’ll consider hiring a bookkeeper to help you manage your finances. By this stage, it’s likely you operate multiple LLCs, bank accounts, and more, and keeping your books up to date can start to feel like a full-time job.
Hiring a bookkeeper to work for you, either part-time or full-time, can help take some of this work off your plate. In theory, they’ll take over the day-to-day financial element of managing your portfolio and leave you to focus on more important tasks.
However, in reality, the process isn’t that straightforward. If you decide to hire a bookkeeper, you’re responsible for finding, onboarding, and managing that person. You’ll need to give them the tools they need to succeed, like accounting software and training, and be available to coach them as they get up to speed with your business.
All of this takes a lot of time and expense. You’ll need to understand bookkeeping enough to train your new employee and answer their questions, which (unless you’re an accountant) probably aren’t skills you have. Besides, unless you have a huge portfolio, it’s unlikely there’s enough work to keep your bookkeeper busy. If you find yourself in this situation, it’s likely that an outsourced bookkeeper may be a better fit.
Outsourced Bookkeeping: Key Considerations
When you outsource your bookkeeping needs to a real estate accounting firm, you unlock several benefits that can help you manage your portfolio more effectively.
An outsourced bookkeeping service will take an organized, systematic approach to managing your accounting environment that leverages best practices. They’ll use a digital-first approach that gives you a real-time overview of your financial position, enabling you to quickly understand how your portfolio is performing.
It’s often the case that outsourced accounting firms offer a more cost-effective option than hiring an in-house bookkeeper. At Hall CPA, our monthly full-cycle bookkeeping program starts from $250/month, far less than the cost of hiring an employee.
There’s also the question of your time. When you outsource your bookkeeping, you don’t have to hire, train, or manage any employees. Instead, you know your bookkeeping is already being handled by highly-trained professionals.
How to Get Started With Outsourced Bookkeeping
If you’re considering outsourcing your bookkeeping needs to a real estate accounting firm, you’ve come to the right place. Here at Hall CPA, we offer a variety of outsourced accounting and bookkeeping services.
We typically begin our outsourced accounting engagements by setting up a fully-functional accounting system that’s tailored to the needs of your business. You’ll get your own Quickbooks Online account that ensures your business is built on solid financial foundations. After that, we offer three different options for ongoing management:
- DIY: we hand your new accounting system back to you and your team to manage on an ongoing basis.
- Ongoing Outsourced Bookkeeping: our team manages all of your bookkeeping needs on an ongoing basis.
- Bookkeeping Coaching: we turn the books back to you and provide ongoing support and training through periodic check-in calls. Alternatively, you can sign up for our QuickBooks Online Bookkeeping Bootcamp to learn everything you need to know.
When you partner with us, you get access to a team of dedicated real estate accounting professionals with deep expertise serving clients just like you. In addition to outsourced accounting services, our firm also provides advisory and tax preparation services that enable real estate investors to save tens of thousands of dollars on their taxes each year.
Interested in working with us? Schedule an initial consultation today.