Importance of Records Keeping in Real Estate Agency

Accounts and associated books and register are used for recording each business transaction, and they are the base through which financial position of a company or organization is determined. Even these associate books and register not only provide details regarding financial position but also assist in providing non-financial data. In accordance with views of  McNeil, Frey and Embrechts, (2015), it is significant to establish a proper financial system with application of appropriate procedures in order to observe the financial growth of the business entity and ensuring that company is able to meet its tax obligations.

Inthe present era, real estate agencies are required to record transaction by making use of electronic as well as manual recording system for better management of financial record. By considering this fact following books and registers will be maintained forthe efficient financial system:

• Financial accounting program or a cash book: recording of payments of cash and receipts.
• Bank accounts: maintaining of cheque books, bank statements and deposit books
• Employment records: work hours, overtime, compensation or profits, leave, information of employees, contact and details regarding employment.
• Occupational training records –records for both business and employees to meet the terms of health, safeguard and work inclusive of evacuation and emergency guidance and training attending.
• Sales records- credit card documents, invoice and receipts books, receipt books, cash list, credit notes (Adrian, Covitz and Liang, 2015)
• Purchases proof –petty cash books for minor purchases, cheque butts for bulk purchases, invoices, receipts, credit card statements or any documents regarding any purchases and copies of agreements.
• (WHS)  work, health and safety records–incidents occurred in workplace management plan, risk register,  WHS people names like  WHS agent, Trained Safety Advisor, helper of first aid), records of workplace review.
• Reconciliation Statement ofthe bank as well loans statements so that in case any mismatch of figures is available can be sorted out inthe appropriate spam of time.
• Summary of financial statements at each quarter or for any other appropriate spam of time. As in case any fraud or error exists in the records or statement can be ascertained before finalising the financial statement of the organisation.

It is considerable to maintain personal and business records separate as it will lead to simplification and ease in reporting and returns ofthe business. For example, by making use of committed business debit and credit card for the expenses of business will result in easy separation in expenses of both personal and business.

At the end ofthe year specified financial records have to be maintained such as details relating to closing stock, capital gains, depreciation, employees and wages, debtors and creditors list, accounting records, cost records, unearned income, prepaid expenses or any other agreements.

These books of accounts will providecomplete recording of business information and also assists in reconciliation in order to ensure consistency and accuracy in accounting records. Further, it will also assist in developinga better measure of internal control for monitoring of financial transactions as well as actions ofa concerned person. The reason behind the same is as all the data will be appropriately recorded and rechecked at appropriate time period so that in case any issues arise while conducting business operations can be sorted out inan easy manner(Peppered and Ward, 2016).

In present era financial system of various organizations is shifting to an increasingly online environment for efficiency however this approach had provided exposure to cyber security risk. The company should implement these following strategies in order to minimise security risks to the financial system:

Company must be known about its employees

Fraud perpetrators always show behavioural qualities that display the purpose of committing theft or fraud. Communication with employees can assists companies in determining possible risk relating to fraud. It is significant for organizations to engage with their employees so they can haveknowledgeregarding their behaviour and attitude. Frequently, monitoring of their attitude could provide hintto businessrelating to risk. It can also disclose issues to internal management that are required to be attained for securing the financial system of the organisation inan appropriate manner.

Implement Internal Controls

Internal control can be specified byapplication of various methods in order to protect and maintain assets ofthe company, ensuring the reliability of accounting records, prevention of fraud and theft. By applying these measures inan appropriate manner and with efficiencyrisk relatingtothe occurrence of fraud can be minimized to a major extent. For instance, a real estate agency has one manager, one employee for cash registration and one for selling agreements. The cash register is registered by one employee at the same time the other one organise the slip of deposit, and the third one carries the deposit to thebank.This could assist in disclose any inconsistency in the collections. Thus, it should be made sure that all the related activities should not be provided to one person as chances of risk relating to fraud increases in that case.

Internal Controls to Minimize Fraud Risk

Hire Experts

Companies can establish anti-fraud strategies and procedure with the help of Certified Public Accountants (CPA), Certified Fraud Examiner (CFE) having a degree of CFF (Certified in Financial Forensics). All these experts can offer several services which comprise controlling of audits and analysis of business procedures.

Live the Corporate Culture

A good and positive environment can avoid employees from engaging in theft and fraud (Sangster, 2015). There must be proper managerial structure, strategies and procedures developed inthe organisation and followed by whole management inan appropriate manner. A fraud avoiding system can be held by implementing an open door policy because it supplies better communication of employees with management.  Management and owner ofthe business must present themselves as anexample andallege all employees for their events in spite of position.

In order to ensure accuracy and timely provision of information regardingthe transaction of agency, working capital and cash flows following financial information method will be considered:

Financial Reporting system to manage working capital

Above specified reporting system is used to efficiently deal with operations of theorganization,as managers’desire accurate and trustworthy financial data. Managers make use offinancial reports for developing data required for their particular use; itis stated as internal financial reports for better management working capital. These reports are intended to achieve desired balance of current assets and current. This reporting system will offer information on existing practices required to make better future financial plans such as preparation of budget of working capital of next year.

Financial Reporting system to manage agency transactions

Short and long term business requirements are fulfilled by efficient  financial reporting system through reforming  collections of bills and invoicing, removing errors in accounting, reducing redundancy of record-keeping, guarantying  fulfilment with tax and regulations of accounting, assisting human resources to compute budget planning, and providing flexibility to cope up with changes and make increment in growth and development.

Financial Reporting system to manage cash

An external financial report to evaluate cash management of business. For this purpose; all transaction associated with cash will be recorded separately. For monitoring and prevention of discrepancy physical cash and accounting records will be managed by separate individuals.

An organization can ensure the extent of familiar nature of agency staff with the needs regarding financial recording and reporting by doingthe basic introduction of operating activities. In accordance with views of Heifer, (2016) it involves induction, guidance and training and requires regular monitoring of work for efficient flow in business operations. It also includes time to time review and checking of final records and financial records. In case staff is not able to provide services with efficiency than efforts should be made to ascertain the reason behind it.

In order to ensure that agency and interested parties are kept informed regarding agency’s financial position, internal audit reporting process and reconciliation procedure have been instituted in the organisation. Internal audit is conducted by professional and experts so that in case any information which is required to be provided in the financial statement and is not provided in it can be ascertained and further recorded in books of accounts (Shostack, 2014).

Expert Hiring and Corporate Culture

Application of this process ensures that all required information bythe agency as well as other interested parties are provided to them inan appropriate manner. The same assist in taking investment as well as other decision relating toan organization inan appropriate manner. Reconciliation procedures are conducted in order to check the balances available in financial statements such as bank balance, closing balance of debtors as well as creditors, etc. This procedure ensures that appropriate balance has been made available in financial statement and it representsappropriate financial performance of the agency.

By considering the aspect relating to ensuring general agency and trust account operations are true, accurate timely and reviewed on regular intervals, therealestateagent must keep a proper and complete account of trust reconciliation statement at the end of everymonth. This statement assists in finding out the trust journals balances, settles the trust cash journals and trust bank account balances, settles the balance of trust ledger accounts with the balance of trust cash journal.

For accomplishing theobjective of effective control, the officer should sort out any existing issues regarding reconciliation statement as accurate and true to the time period of 14 days at the end of every month. Further, all the data of accounting must be backed up once in a month. Each copy of back-up is held by the in charge of the business, officer or in the effective control. The total copies of the backup should always be kept in a separate part. Surprise checks methodology can also be indulged in order to ascertain whether accounting operations are reviewed at appropriate intervals or not. It can be said as one of theefficient methods for ascertaining the extent to which policies formulated by organisations are being followed(Cvijanovi?, 2014)

It is important to keep general agency, and trust account records separatelyfor the purpose of accomplishing objective relating to developing better financialmanagementsystem. Thus, the separation will provide appropriate tracking fair trading and review of financial transactions(Korngold, 2015). Further, therealestate agency also has legal obligation to maintain a ledger including a separate individual account for eachindividual on whose behalf business retains trust money and all transactions and record by which a business retains trust money. Therefore, it can be said that it isthe liability of the organization to maintain separate accounts records for general agency and trust accounts. EachLedger’s title must be inclusive of client’s name and address and for what purpose the money was received.

In accordance withthe study of Florance and et.al, (2015) this system will be ensuring separate accounting as well as proper transaction description relating to money received by clients. This will create ease for auditor and senior management inare view of business performance and transaction details. Even rechecking and reconciliation procedure relating to accounts will be accomplished with ease as all relevant data is available in the records.

In real estate companies, the management company or the manager of the property contains the following responsibility: these following responsibilities are enumerated as below:

• Assuring relationship between financial management system to the strategic plan

Real estate managers are engaged in consideration reducing and appropriate calculation of expenses and financing. By getting this information, appropriate rental rates are determined. Information relating to market to which company relates should be regarded while determining the rental rates and an appropriate relationship between financial management systems with strategic business plan is maintained

• Managing and assessing all the parameters and components of financial management system

Financial Reporting Systems for Working Capital Management

The manager of property as the partner of the owner has to increase the ROI through making effective use of these four mentioned areas of responsibility. Management of the company should take action for providing best benefits to the owner for upholding the property, by keeping it engaged with occupants, taking rents, improvements in budget and record maintenance. Various real estate experts take a look at property management for assessing the possibility of tasks and record keeping in an easier and understandable manner. It is absolutely a role meant for more comprehensive and approachable in business. This part of role comprises analysis of all components of financial system while playing the role of property manager such as -books, ledger etc.

• Application of equipment and software

Appropriate equipment and software are being applied by the manager which is required for enhancing the efficiency of financial system. Further efforts are also made to update the same in case the requirement of system change. The same are applied with an objective of creating strong internal system in the organization.

• Assuring that procedure are in place within agency for financial management

It is one of the vital roles as a manager. The same is done through assessing and analyzing all the function of management at reasonable intervals. Further, if any issues are assessed than the same are rectified at initial stage so that they do not increase to an unmanageable level.

• Enhancing the mechanism for complying with regulatory and legal structures

The available area with a maximum number of the lease or rental house might be considered as an opportunity area for the practice of property management. On the other hand, after analysing it might be concluded that it would be better to take more time off. Those who take consideration of specialization in real estates in order to know the needs and requirements and has the capability of meeting them all along with satisfaction and efficiency(Bhatia and Barwal, 2015).

• Assessing whether risk management strategies are in place or not

The unwanted eviction tasks for breach or non-payment are also elements of this function and other risk management strategies are also managed by him as a manger. Strategies are developed by a manager in order to face the changes in external environment in appropriate manner. Further evaluation of same is done on reasonable intervals in order to ascertain whether the same are in place or not or they require changes or not.

• Monitoring and reviewing mechanism for the system

For performing this function, firstly it is essential; to understand the needs and requirements of the tenant (Banfield, 2014). Carrying out this action is the initial step. The manager after that provides response to the available requests and further supervises their activities regarding. The manager of property should make a better relationship with the companies, contractors, budget capital expenditures and check the quality of existing system through monitoring and reviewing the same on an continue basis (Moss and Baum, 2015).

• Ensuring separation of trust and other accounts

In accordance with views of Haynes, Nunnington and Eccles, (2017) Although regarding functions of financials, there are some stiff and severe needs in most of the states in relation to managing of money paid by renters for payment to owners. Thus, it is the duty of manager to ensure that separation of trust and other accounts for smooth functioning in organization. Local, state and federal government have the rights on all the activities of real estate property management. Detailed files and records regarding taxes and accounting are required to be maintained on a mandatory basis. Considering liability, all the occupant communications and activities should be properly recorded in particular time periods and risk management strategies have to be developed in order to minimize the related risk.

• Assuring compliance with other details relating to managing efficiency of financial system

Financial Reporting Systems for Agency Transactions

As per the study of Tao and Hutchinson (2013), Property management is considered as physical management of exterior and structured areas.  The parts of physical properties are electrical, roof, walls, landscaping, plumbing or applications, etc.  The entire function binds with financial parts; it is because some progressing will need considerable budgeting and capital expenditures. It binds with occupant and management of occupancy as it is significant to the occupant to contain better-maintained properties.

Secretary of real estate agencies who manages accounts meant for organizations of property management, community associations and firms of real estate development. Secretary plays a vital role in the preparation of financial reports and records and consequently assists their employers and clients. In accordance with views of Knechel and Salterio (2016), secretaries are considered to be common connection for calls and email communications.

Duties and responsibilities of real estate secretary as an accountant:

• Taking overview of book keeping system used in agency

As the secretary is responsible for managing the accounts, he will analyse that whether accounting records are presented are in appropriate manner or not. As a secretary he has to assist managers of real estate to improve and deal with their budgets. Overview of  system which is being applied in the agency is to be taken so that appropriate guidance relating to same can be provided to specific authority.

Assessing procedure and process for receive income

As a secretary, it is to be assessed that the income is accounted in appropriate manner or not. For same it is necessary to analyse the method adopted by company to account is income i.e. whether it is on cash basis or accrual basis. It is also necessary to assure that whether all kind of income is recorded in appropriate manner and with specific bifurcation.

• Assessing procedure and process relating to payment of purchase and settling invoices

The manner in which payment are being done is to be assessed in detail, as there are higher chances of fraud if same is not checked closely. It should be assessed that the account in appropriately settled after making the payment. Different persons should be authorised for making payment and settling accounts for decreasing the chances of fraud.

• Generating financial reports and assessing their accuracy

 Further, they make a contribution to documents or papers like annual reports, rental agreements, leases or cost estimates, procedures and processes of receiving income (Fayol, 2016). They also estimate liabilities of tax and set up tax returns on real estate organizations behalf. These financial records and reports consist a wide variety of transactions in real estate which are inclusive of rental, sales and leases, procedure relating to payments of purchases and settlement of invoices (Page, 2014). Reports might comprise operational cost, income and expenses.

• Managing petty cash system and relating procedures

It is one of responsibility which is to be accomplished after application of high concern because petty cash is an account in which chances of fraud and error are high. The reason behind the same is that all miscellaneous expenditure are part of this which are major in quantity and less in amount; so possibility exists that someone has taken advantage of it.

• Analysing process of monitoring cost centre and evaluation of performance indicators used in same

In mid-sized or small offices, secretaries are tasked to perform routine accounting tasks and responsibilities to help others. In accordance with views of Hopkin (2017), it comprises terminating or rescheduling of appointments, office supplies, collecting notes at the time of meetings, and arranging complimentary for manager and guests. The specified activities lead to monitoring and evaluation of cost centre through analysis of performance indicators.

• Authorised to access account records

Secretaries are given tasks of copying of documents for mailing or for distributing, they also prepare fax on company’s behalf to customers and clients, and further collect received faxes to pass them out tosuitable person. As per the views of Gitman, Juchau, and Flanagan, (2015) several secretaries make use of emails, excel and work in order to make documents or spreadsheets and passing them to customers and employees. Another duty has proofread the documents before sending them out of the office.

• Assessing whether legislative requirements relating to financial management system

The secretary reflects the whole image of the business through providing a pleasant yet specialized application of procedure relating to legislative controls comprising audit requirements (Gitman, Juchau, and Flanagan 2015).

References

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