If you’ve decided it makes sense to outsource at least some portion of your accounting, it’s natural to wonder exactly what accounting services you’re able to outsource. The good news is that pretty much every element of accounting can be outsourced, from creating monthly reports to running payroll.
Let’s take a look at the accounting services that are most commonly outsourced by real estate investors.
Outsourced Accounting Infrastructure Management
The first step in many outsourced accounting engagements is often to set up a digital-first accounting infrastructure. Many real estate investors, particularly those with just a few properties, often lack any kind of system to manage the finances of their portfolio. The result of this is that they often have a limited understanding of what’s really going on with their properties.
A digital accounting system shines a light on this, linking bank accounts for each property, tracking rent payments and expenses, and storing receipts and invoices. An outsourced accounting firm will set all of this up for you in easy-to-use software like Quickbooks. After your new accounting system has been deployed, you can either have the outsourced accounting firm coach you on how to use it or request that they use it to manage your accounting needs on an ongoing basis.
A bookkeeper is often one of the first hires a real estate investor will make as their portfolio begins to grow. A bookkeeper is tasked with keeping your books organized, and their role includes recording transactions, performing bank reconciliations, and maintaining ledgers. If you’re honest with yourself, these are probably some of the last things you want to do––they might be necessary, but they’re time-consuming and monotonous.
But you can’t just hire a bookkeeper and then forget about them: they need training, technology, and ongoing supervision. If you’re a busy entrepreneur or professional that invests in real estate on the side, it’s unlikely you have either the time or the inclination to do that.
Instead of hiring a full-time or even part-time bookkeeper, outsource all bookkeeping tasks to an external partner. An accounting firm that offers outsourced bookkeeping services provides significantly more value than a single bookkeeping employee and often does so at less expense to you.
An accounting firm offering outsourced bookkeeping services will handle all regular bookkeeping tasks on your behalf and ensure all your financial records are up-to-date. Building and maintaining a clean, accurate record of your financial data serves as a vital foundation that enables you to make smarter investment decisions across your portfolio.
As your real estate portfolio grows, it’s likely you’ll start to hire employees to help you run your business. These could be contractors, property managers, cleaners, or more, depending on your portfolio strategy and size. At first, you may just have a few part-time employees but as you add more properties to your portfolio you’ll find it necessary to make full-time hires.
Running payroll for these employees isn’t a straightforward process. It’s not finding software and remembering to run payroll each month you have to consider, you’re an employer. You have to make tax filings, honor data security considerations, and more. If you operate in multiple states, things can get even more complicated.
Outsourcing payroll takes all this complexity off of your plate and shifts all the heavy lifting to an outsourced accounting partner. That frees up more time for you to focus on what matters––running your business.
Outsourced Financial Statements & Reports
Outside of tax filing season, many real estate investors have little insight into how their portfolio is performing. As long as there’s enough money in the bank and the market continues to trend upwards, there’s a sense that everything is going well.
But surprises can, and frequently do, occur. Perhaps you handed all your accounts over to your accountant to prepare your tax return and discovered you were on the hook for thousands of dollars in taxes you weren’t expecting to pay. Producing financial statements and reports throughout the year can help you avoid these nasty surprises and discover opportunities to optimize your portfolio.
Many outsourced accounting firms provide regular financial statements and reports to their clients. At Hall CPA, we provide our outsourced accounting clients with monthly financial statements that help them understand the performance of their portfolio and make smarter investment decisions.