Do you hate the record-keeping part of being in the real estate business? In most cases the answer will surely be a resounding "yes", but unfortunately it's also a vital part of staying legal.
But when it comes to the independent contractor real estate agent, there really aren't that many income and expense categories. Get advice from your accountant, but most of us can get by with:
You can have more, or break these out into sub-categories. The point is that real estate professionals really don't have a very complex accounting system. Yet, many spend way too much time and expense keeping track of their expenses. What I've found over time is that, the more detailed my system, the more lax I am at keeping up to date with it. Then, late in the year, I'm spending many late night hours trying to gather receipts and input a long list of entries.
After a great deal of trial and error, I've found a system that:
It will only take two online services to put this system into place, one free and the other inexpensive. First, set up an account at Xpenser.com, a free service at this time. Though primarily designed for those keeping expense records for submission to an employer, we can get this useful service to do what we need. Use their help to get started, then set up what they call "reports." Use a shortened text version of each of your income and expense accounts as the title of a report.
Using my accounts listed above, I might have accounts with these titles:
If you're in the office, and you have an expense to enter, you just type it into the appropriate report screen. But that's not the way most of your expense details will be entered. What makes this system so easy to post and keep current is the voice entry of expenses.
Next, set up an account at Jott.com. Choose the service cost that best meets your needs. I buy blocks of minutes rather than a monthly plan. Learn how Jott works, and send yourself some Jott messages to your email for practice. Once you understand how it works, go to the "Links" screen and choose the Xpenser link. Once Xpenser approves the link, you're ready to enter your expense, income and mileage items. Though Xpenser considers all entries as outgoing money, we will be lying to it about commission income and car mileage.
Now, wherever you might be, when you call in to Jott and tell it that you want to Jott "Xpenser," you might give it three new entries like this:
When you return to the computer, all of these will be in your main "Expenses" window. All you have to do is assign each to the appropriate report category. A couple of minutes and you're finished! Though it thinks the mileage is a $104 expense, we know better. That report will merrily keep up with our mileage to two decimal points.
I'm always completely current with my entries. And, at any time, I can add up my report totals to see where I stand on tax liability. Sometimes effective solutions are both simple and well worth the cost of the Jott if you want to post with cell phone voice calls.