It’s important to understand the differences between real estate development accounting software and conventional accounting programs, such as Quickbooks. Let’s take a closer look at the four primary distinguishing characteristics.
- Developers are in it for the long haul
Because typical development projects are long-term, real estate development accounting differs from other types of accounting. Developers may work on a long-term building project for months or even years, as opposed to ordinary business operations that are concluded in a single day or a single transaction. Over the course of the contract, project costs, scope, and revenue may change. As a result, the exact profit or loss connected with a job is unknown until the project is completed.
- Multi-Entity and Inter-Company accounting
Most businesses are just that, a single business. Therefore, their accounting software only needs to keep track of one business entity. Real estate developers typically create an LLC (individual business) for each project which requires keeping track of many different entities all at once. Real estate development accounting software not only handles the many entities with a single sign-on to the software but allows users to apply transactions to just some or all of the entities contained in the system with a single entry (inter-Company accounting).
- Cost tracking is crucial
When it comes to real estate development budgeting, it’s important to compare actual project expenses to budgeted prices at any given point in time. This usually occurs near the end of the month, before the books of an account for that time have been closed. This procedure is not used in traditional accounting systems. A development accounting system should ideally provide a real-time snapshot of the actual task cost so that a project manager may compare actual costs to projections and make any modifications. Furthermore, project managers should have the ability to look at previous projects to compare costs and make decisions based on real data.
- Contract management is in focus
Real estate development accounting resembles project management accounting in that project costs are allocated to individual contracts. As costs are incurred, they are allotted to the projects. Materials and labor may be included, but indirect costs such as insurance, and, in certain situations, promotion and marketing may also be included.
With so many factors at play, good accounting software has been developed over time to accommodate the real estate development industry’s specialized needs.
To learn more about the distinctions between accounting for real estate developers and conventional accounting, contact Anton Systems today.