I’ve got bad news for you: You’re an accounting company.
No matter what business you’re in.
For a long time my business partner Jason and I have been saying that whether you realize it or not, you’re in the marketing business. Even if your business is real estate, finance, or legal, you are in the business of marketing your company.
Gary Vaynerchuk took that a step further and says in his articles and podcasts that, like it or not, you are a media company, or at least you should be. You’re responsible for putting quality content from your company out to the world in order to attract new business.
On another note, like it or not, we’re all in the business of accounting. We are all accounting companies. It is my belief that if you can’t properly count the dollars in your business then you aren’t allowed to run the company. That’s going to sting some of those reading this, since many of you don’t have your company’s books 100% accurate down to the penny. I know it’s challenging. We’ve been there ourselves. But it really isn’t negotiable.
In our own businesses, we have gone from being a lending company (HMB) and also our online biz, REI360, to purchasing and owning a lot of real estate. Those are different animals in terms of accounting needs. Most companies are operating in the income/expense world, which is fairly simple to track. Deposits are tracked as income and expenses are paid out. Then you get a bottom line.
With real estate, you enter into the asset and liabilities world. When you purchase properties you are buying an asset and improving that asset, which is known as the cost basis of the property. If you are to resell or flip a property, your entire accounting will be in the balance sheet, in the world of assets and liabilities. If you have a property that you purchase, renovate, and decide to rent out, then you are, at the beginning of the transaction, in the asset and liabilities section. Later on that becomes income and expense as a rental property, which is a different animal entirely. In terms of accounting, they are shoved into one report. In essence, it’s like having a profit and loss statement and a balance sheet combined into one, which can really be confusing to anyone who isn’t a CPA.
When we started buying more and more properties I came across this challenge and have been working on the best methods to track the data and develop solutions. (QuickBooks definitely isn’t it.)
We’re a very well run and organized company. We have two full-time bookkeepers here in the office, plus a CPA who oversees the process. This was challenging even for us. I began to think about our HMB clients, the people we lend money to doing real estate transactions, and what their books look like when doing flips and rentals.
I hope their books are tight, but I know how challenging it can be. That is something that we will address more in our company training and in the future online content that we develop.
Remember— I know that accounting isn’t sexy. But counting your dollars is.