Understanding Real Estate Accounting
There is no doubt that Real Estate in the United Arab Emirates is one of the most booming sectors in the country. Even as inflation rises, Dubai’s real estate market continues to grow. With the UAE real estate sector booming, accounting for real estate has become important in order to comply with UAE regulations.
There has been a tremendous evolution in the real estate sector over the last few decades. There are a lot of transactions involved, as well as compliance with a lot of federal regulations. All of this being said, one important aspect of the industry that must be kept in mind at all times is accounting, which is a very integral and essential part of the process.
This blog can be helpful to those who struggle to grasp the accounting aspects of real estate in UAE. In this blog, we are going to understand how important accounting for real estate is and what challenges the UAE’s real estate sector faces. Finally, we will look at how outsourcing can help alleviate the challenges highlighted and add a value-adding service to the growth of the sector and the company.
Who Uses Real Estate Accounting?
Accounting for real estate involves logging and tracking these transactions. Keeping track of property management finances, which involve huge amounts of money, is the purpose of real estate accounting.
Why Is Real Estate Accounting Important?
It is important to understand how real estate accounting works. Your business will run more efficiently if you manage your books properly, and you will be able to monitor your progress. You can then determine if your properties are profitable and which ones are performing well.
Financial information management can be complex, which makes it easy to get lost in the details. Real estate professionals need to prioritize good accounting habits in order to maintain professionalism, even when it can be tempting to make excuses.
4 Challenges Faced By The Real Estate Industry
Sustaining a business in the real estate market can be tough at times if accounting records are not kept properly. The following are some of the issues that the accounting industry faces:
Misclassification of Costs
The process of property management is incredibly expensive, and one of the biggest mistakes we see is misclassifying the finances of the company. It is essential to maintain clear and detailed financial records for your business in order to keep it running smoothly.
Accounting records are the most challenging aspect of running a real estate business. Working on several projects requires segmenting your files accordingly. To determine the total value of the projects, it is necessary to estimate the cost and revenue of each project separately.
Upon incorporation of a company, it is imperative for the owners to understand the market value of the business entity. The process of calculating the exact amount requires a lot of math, which is difficult to execute in-house as it necessitates a lot of calculations. You can calculate the actual value of a company more easily if you have a guide on your side. Additionally, this can also be useful for either expanding or liquidating the business in the future
Closing Property Valuation
You cannot compare buying real estate with purchasing groceries or electronics. The price of a property isn’t fixed and neither is its value. Similar to stocks, their value fluctuates according to what buyers are willing to pay. To determine a stock’s final value, it is necessary to know the closing stock count every quarter or year.
6 Benefits Of Outsourcing Real Estate Accounting Services
Real estate companies in UAE need to comply with strict anti-money laundering laws. Real estate companies need to maintain KYC for all of their clients, and every financial transaction must be compliant. You can comply with these regulations in UAE if you have a team of experienced accountants that are approved by the Federal Tax Authority (FTA).
Cost-effectiveness has always been a hallmark of outsourcing accounting services. In the real estate industry, it helps optimize operations and reduce processes. In turn, this increases efficiency and returns on investment. With their understanding of accounting, they can, nevertheless, ensure that the business owner remains compliant while incurring as little cost as possible.
Prioritizing the core business
By outsourcing your accounting work to reputable real estate accounting outsourcing experts, you can concentrate on your main business activities. Taking care of your accounting responsibilities can allow you to focus on your business. It is always challenging to retain in-house accountants. Thus, outsourcing bookkeeping and accounting is becoming more popular in UAE instead of hiring in-house staff.
Use of technology
Outsourcing can allow you to access technology that would otherwise be too expensive for you. Accountants in Dubai usually use Tally, Zoho, Quickbooks, Xero, among others. All of these accounting software programs have FTA approval. You can get the best outcomes from these types of software if you decide to outsource your VAT and accounting services.
In an expanding business like real estate, there are more money transactions, requiring the recruitment of more dependable personnel to keep the records. Outsourcing real estate accounting reduces additional overhead costs because these services can scale with your organization. You won’t have to hire additional accountants as your company grows.
Keeping accounting records correct is essential. FTA penalties and bookkeeping errors can cost businesses thousands of dirhams. FTA imposes very high administrative penalties. Real estate companies are especially at risk of this. Due to this, tax agencies with approved tax filing services, such as ours in UAE, are responsible for providing accurate VAT filing services.
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