5 Common Real Estate Accounting Mistakes and How to Avoid Them

There’s a common expression that says, “Numbers don’t lie.” An agent can talk of success, but the numbers speak for themselves. High sales and the number of properties sold will tell the tale.

The saying, though, depends on the assumption that the numbers are accurate. Accounting mistakes can result in inaccurate numbers, and suddenly, the numbers are lying. To make sure your books are in order, here are some ways to avoid common real estate accounting mistakes.

Mistake #1: Disbursing Funds Before a Transaction Closes

Disbursing trust/escrow deposits to any party involved in a real estate transaction before it is officially closed is not such a good idea, but it happens more often than you might think.

This money is not considered commission until the closing of the transactions when all the required paperwork is completed, the property is registered, and the keys are exchanged. Disbursing such funds before the transactions close may result in your brokerage being non-compliant with your governing bodies.

Additionally, any last minute side agreements that may reduce commission disbursements would result in checks having to be redone, wasting valuable time for your office accountant or bookkeeper. Depending on the software your brokerage uses, what should be a straight-forward reversal is a convoluted, multistep process.

Mistake #2: Tracking Commissions Separately From the Accounting Software

When your brokerage tracks commissions separately from the main account software, you are relying on redundant data entry in order to pay those commissions. This sounds simple, but redundant data entry exposes your books to an increased chance of human error. What’s more, you’re paying someone to do the same thing twice.

That’s not how technology is supposed to work. It’s supposed to make things easier, not harder, so instead, choose a commission management solution that integrates with your accounting system

Mistake #3: Putting off Backups

Have you ever reopened a document only to realize that your work failed to save? It happens to the best of us. 44% of data loss is caused by mistaken deletion, system crash, or software corruption.

At month’s end, you don’t want an unexpected crash or error to occur. This would drastically set you back and possibly delete important files you rely on. Make sure you have a safety net. To avoid catastrophe, schedule a day in the week to automatically backup your data. Or better yet, go with a hosted back office/accounting solution so that you never have to worry about backups again.

Mistake #4: Not Hiring the Right Person for the Job

When a brokerage is first starting out, it’s not unusual for the owner to hire a family member, a close friend, a young high-school temp, or an inexperienced staff member to look over the finances. You’re just beginning to lay out the foundation for your brokerage, so this is an inexpensive way to get started.

In the months and years to come, though, these early stages actually set the tone and pace of your business. You want a professional to build a solid framework for those tax deductions you weren’t aware of, the IRS deadlines you forgot about, the payroll maintenance your employees need.

In addition, hiring a friend or family member in particular comes with its own set of challengers. It can bring relationship dynamics into the workplace – sometimes with no issue, but other times with an unfortunate outcome. If you do hire a friend or family member, make sure they’re the right person for the job.

Mistake #5: Skimp on Software Training

Accounting and commission management are complicated, so when you get new software, you and your staff will benefit from training – even for intuitive, easy to use solutions. Training is the best way to unlock functionality you might not know about. Even if your brokerage has been using the same software for years, staff changes and software upgrades might mean that a refresher course is in order.


Thinking of implementing new back office and accounting software?

Right now is a great time of year to do it before the summer season swings into full gear. Fill out the form below to speak to one of our technology specialists about your options.

Speak to a Technology Specialist


  1. September 22, 2017 at 11:53 am

    Interested in software to track commissions and agent productions

    • October 4, 2017 at 7:17 pm

      Thank you for your interest in our real estate back office commission management software. We have sent an email and one of our experts will follow up with you shortly.

Leave A Comment