Whether you work independently or work with an agency, keeping track of all your business costs and operational expenditure is tricky. Manually keeping track of every single expense is annoying, especially when dealing with many clients and traveling all over the place. Additionally, expense reporting becomes doubly important when it's tax season. Otherwise, you may end up with a huge financial mess.
The new advent in expense tracking and reporting has opened other ways for real estate agents. Expense management software has solved many of the issues faced by various individuals and businesses alike. However, TEMs are seen as solutions to only large companies and are not known by real estate agents or real estate businesses. In this article, we discuss how expense management software can help real estate agents.
Business expenses that real estate agents incur
Real estate agents and agencies need to carefully maintain accounts to achieve a good profit and loss ratio. But with the majority of expenses occurring outside the office, what are the general costs they incur?
Let's have a look below:
- Business transit: This includes cab, bus, train, airplane fares, as well as tolls and parking fees. It's an absolute pain keeping all the receipts from business trips. Especially for sole proprietors that travel a lot, it can quickly become overwhelming and ultimately get out of hand. That becomes a big problem because travel expenses for businesses are 100% tax-deductible (meals are 50%.) At the same time, keeping a record of all receipts and documents from business trips is extremely difficult, meaning you miss out on potential paybacks.
- Advertising costs: This includes print and online advertising, website design, and maintenance, mailing lists, brand designing, and promotional material. All of these expenses will result in numerous receipts and payments. Both agencies and sole proprietors can become tangled with dealing with various service providers and agencies, resulting in delays and inaccuracies in the expense reporting process.
- Insurance: This includes health insurance, business liability insurance, business equipment insurance, and errors and omissions insurance. Insurance is the security needed by every business. Various kinds of coverages require to pay a premium. People prefer not to pay these premiums as they feel its a waste (when they never file claims.) When avoided, this could prove detrimental to the health and growth of your business.
- Accounting costs: This includes legal fees, bookkeeping, and accounting fees. Manual accounting and reporting of all business-related activities is a daunting task. Outsourcing this work results in additional service charges. That's where everything starts to get clogged up. Unfortunately, many small businesses are stuck using some kind of manual expense reporting and accounting. Traditional processes of expense management are prone to a lot of issues, but those businesses are not aware of better alternatives.
- Professional costs: This includes realtor associations, real estate license renewal fees, investment in generating real estate leads, and service dues from multiple listings. Operating expenses and property management is yet another way to get receipts piled up. These are recurring expenses and always find their way into accounts. Predictions into these numbers can help for accurate budgeting. When not done right, it could account for critical financial leaks.
Other tax-deductible expenses
Stated below are some expenses that occur for sole proprietors. Note that they all have some way of being tax-deductible. When tax is concerned, you need to pay extra attention to all the IRS implications. If not taken care of, you may run into trouble with the IRS.
Let's have a look at some of the tax-deductible expenses:
- Home-office: The cost of any workspace that you use exclusively for your business, regardless of whether you rent or own it can be deducted as a home office expenses. And fortunately, working from home as a real estate agent can be easy and inexpensive if you know what you’re doing. Other expenses you can deduct for your home office include home depreciation, property taxes, utilities, business percentage of deductible mortgage interest, homeowners insurance, and home maintenance. It is one of the more complicated tax deductions and is heavily reliant on the proprietor to have all proper documents in case of IRS audits.
- Vehicle-use: When using your vehicle for business travel, expenses for those transits are tax-deductible. It can become a hassle when keeping all the records of the date, mileage, and purpose for each trip. The IRS provides 58 cents per mile as mileage rates in 2019.
How can technology help with expense management?
Cloud-based travel and expense management software aims to eliminate all the issues with manual processes. It enforces an efficient way of expense reporting and management that offers more significant insights into a realtor's income and expenses. It's an extremely versatile system that is accessible to all kinds of businesses and proprietors.
But that is only the beginning, take another step forward, and you will find an automated expense management software. Automated TEM Softwares utilize advanced AI and machine learning to automate every step of the expense management process truly.
Benefits of using automated TEM software for real estate agents:
- In-built receipt apps: TEM software come equipped with receipt scanners or receipt tracker apps. These apps install into mobile devices and allow users to keep a digital record of any receipt of any expense by taking a picture of them.
- Cloud receipt storage: The digital receipts are accessible at all times and are stored securely on the cloud. Records can be accessed directly with other accounting software or added to the general ledger.
- Credit card reconciliation: TEM software allow users to create advanced credit card programs. Some of the salient features include mapping every expense to each card, assigning specific conditions for card usage, direct integration with banks, and automated reminders.
- Mileage Tracking: By utilizing tools like Google Maps, automated TEMs allow users to map out and track every business trip they make easily. These detailed trip reports are stored on the system for easy access and when audits take place. Users no longer need to manually prepare mileage reports, trip expenses, and more for tax season.
- Integrated accounting software: Keeping the books updated is easy when your automated TEM software integrates directly with all the major accounting software for real estate agents. Additionally, tools like Netsuite and Quickbooks can merge with your TEM software with seamless integrations. This makes importing and exporting data quick and easy.
Fyle for real estate agents
So, being a real estate agent doesn't mean you can't benefit from expense management software. Modern expense management solutions offer features and benefits that align with the needs of realtors and realty agents. It helps provide a definitive answer to your expense reporting and expense management woes.