Real estate development is a complex and dynamic industry that requires specialized accounting solutions to meet its unique needs. Developers rely on software to manage various interconnected processes, consolidate data from diverse sources, and stay on top of crucial project milestones.
Let’s explore why real estate development accounting differs from traditional accounting. We’ll also examine how Acumatica Real Estate Development Accounting, a modern accounting solution, can address these distinctive requirements.
1. Project Management & Cost Tracking
Unlike traditional accounting, which often views financials through a period-end lens, real estate development accounting is intrinsically tied to project milestones and real-time cost tracking. Here’s what sets it apart:
· Continuous Oversight: Developers require a panoramic view of projects, tracking progress, status updates, and forthcoming milestones, with a keen eye on the financial implications.
· Dynamic Data: The financial health of each project is under constant scrutiny, with every nail, brick, and beam needing to be accounted for in real-time. This differs from the retrospective snapshot provided by conventional accounting methods.
· Budgeting Precision: It’s crucial to compare actual expenses with budgeted costs throughout a project. This contrasts with traditional month-end comparisons.
Traditional accounting systems like QuickBooks force you to use the “standard” methods even when you do business differently. On the other hand, Acumatica Real Estate Development Accounting works the way developers naturally think.
It provides real-time insights into ongoing projects. Its real-time project management and cost-tracking capabilities enable developers to make informed decisions by comparing actual costs to projections and reviewing historical data for cost comparisons. This is where Acumatica shines, delivering real-time cost assessments that enable project managers to adapt to changing conditions and keep projects on target.
2. Multi-Entity and Inter-Company Accounting
In real estate development, one does not simply manage financials for a single business entity. Developers often need to:
· Create Multiple LLCs: Each project is likely represented by a new business entity, requiring a sophisticated system that manages multiple entities effortlessly.
· Access All Entities in One Interface: Having a single sign-on for interacting with all business entities streamlines the workflow and eliminates the cumbersome cycle of signing out and back in again to work with a different entity.
Acumatica Real Estate Development Accounting lets you apply transactions across various entities simultaneously, simplifying inter-company accounting. This makes it easier for developers to allocate expenses, track revenue, and maintain financial transparency across various project entities.
3. Contract Management
Many of the principles of project management apply to real estate development accounting. Here are a couple of challenges that real estate developers face when using traditional accounting software.
· Cost Allocation Is Key: Each project’s costs are assigned to individual contracts, covering materials, labor, and indirect costs such as insurance and marketing. These features don’t exist in popular accounting software.
· External Workarounds: Because of the shortfall, many developers resort to using other tools to fashion a workaround. Spreadsheets can perform complex calculations efficiently but lack the necessary validations and locks to ensure data integrity – and sharing these documents can quickly result in versioning difficulties. There are external applications that can provide some of the needed functionality, but siloed data must be reconciled to report accurately.
Acumatica Real Estate Development Accounting has full contract management capabilities that ensure developers can accurately track and allocate project costs to contracts, improving financial accuracy and project profitability while maintaining data integrity and a single source of financial truth.
4. Long-Term Projects
In contrast to the transactional nature of typical business accounting, real estate projects are marathons, not sprints:
· Extended Timeframes: Development projects can span months or even years. Month-by-month closings can deliver a financial snapshot but lack the necessary depth to forecast outcomes and ensure the project stays on track.
· Adaptable Accounting: As a project advances, inevitably, there are changes to be made. This includes altering project costs, scope, and revenue over time. This keeps final profit or loss figures uncertain until project completion.
Acumatica’s cloud-based platform is well-suited for managing long-term development projects, providing developers with the flexibility to adjust accounting processes as projects evolve. Forecasting helps you compare projected and actual expenses every step of the journey and can help you ensure the final outcome stays within budget. Having a single system for the entire scope of the project and financial management ensures accurate reporting.
Embracing Acumatica for Real Estate Development
Acumatica Real Estate Development Accounting is the perfect cloud-based platform on which we’ve built our Real Estate Development Accounting solution. It is purpose-built to accommodate the special accounting needs that developers have, empowering them with:
· Granular Cost Analysis and Forecasting
· Multi-Entity Financial Management
· Contract and Long-Term Project Accounting
· Comprehensive Project Oversight
Equipped with these tools, real estate developers can significantly boost productivity and accuracy, ensuring that no detail, however minute, is overlooked.
To delve deeper into how our solution caters to the specialized needs of real estate development accounting – or to understand how it stands distinct from traditional accounting practices – reach out to us. Our expertise can help you navigate the complexities of real estate development accounting with ease and precision. Contact Anton Systems today for a partnership that helps you build financial success so your developments can reshape skylines.