Real estate developers have some of the most complex accounting needs of any industry. Projects can span years. Investments are often held in separate entities. Each deal often comes with its own financing, investors, and reporting requirements. As a company grows, keeping track of all those moving pieces can put high demands on an internal accounting team. This combination makes real estate developers especially strong candidates for outsourced accounting. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
What Is Outsourced Accounting?
Outsourced accounting means using an outside team to handle some or all of a company’s accounting and finance function. For real estate developers, support can start with day-to-day accounting and financial reporting and extend to higher-level financial analysis and CFO advisory services. The model flexes with the business. An outsourced team can work alongside existing staff or take on a larger share of the accounting function as needs change.
Key Benefits of Outsourced Accounting for Real Estate Developers
- Foundational Accounting — An outsourced team is equipped to handle accounts payable and receivable, reconciliations, month-end close, and financial reporting. For real estate companies, this often comes with managing the books for multiple LLCs across multiple properties and developments. Outsourced teams are experienced at keeping records for each business entity and individual property or development. This type of consistent and accurate recordkeeping practice makes year-end reporting, audit preparation, and tax compliance across multiple LLCs easier to manage.
- Cash Flow Management and Visibility — From there, developers need a clear picture of cash flow. This area can be particularly challenging in real estate because spending and income often happen at different times. A development may need cash months or years before it begins producing a return. It’s also common for established properties to be generating dependable income but still have unexpected maintenance or other expenses. Cash flow reporting can give developers a better view of what is available today, and then forecasting is available to show what’s around the corner. That visibility is especially important when leadership is deciding whether it has the capacity to take on another project.
- Project Cost Accounting and Job Costing — At a deeper level, real estate companies need to know what individual properties are costing to operate, and developers, in particular, need detailed information about active investments. For an existing property, that means keeping income and expenses tied to the right asset so management has an accurate picture of its performance. For development, costs need to be tracked throughout the project. On a 20-unit apartment development, for example, the accounting team might track specific construction costs next to industry benchmarks. Tracking in this way gives management the financial information needed to monitor performance at an individual level. Then management can make data-driven decisions about how to proceed.
- Budgeting and Financial Analysis — Budget-to-actual reporting helps developers see how results compare with the plan. At the property or project level, it can show where revenue or spending is higher or lower than expected and what that means for performance. At the portfolio level, developers can see how one investment is performing compared with any number of others in the portfolio. This type of analysis can help identify issues earlier and show where there may be opportunities to improve results.
- Reporting to Lenders and Investors — Real estate businesses are often accountable to lenders and outside investors. An outsourced accounting team can prepare the reports required by lenders and maintain the financial information and documentation needed for construction draws and other financing requirements. On the investor side, accounting may include tracking contributions and capital accounts, recording distributions, and preparing investor statements. Timely, reliable financial reports can give lenders and investors greater confidence in the company and build trust among stakeholders.
- Financial Planning and CFO Advisory — The next step is using the financial information to look ahead. A company may be considering another development, weighing financing options, or deciding where to invest its available capital. CFO-level advisory can help management understand the financial impact of those choices before moving forward. This gives leadership a stronger financial basis for strategic decisions about the future of the business.
What to Look for in an Outsourced Accounting Firm
Industry experience should top the list when evaluating an outsourced provider. Real estate development comes with its own terminology, transaction types, reporting requirements, and systems. A firm that knows the industry can also assess existing processes and controls, spot ways to streamline the work, and recommend technology that makes it easier to manage and use financial information.
Consider the depth of the team as well. One advantage of outsourcing is the ability to add or reduce support as projects begin or end and the needs of the business change. A firm with professionals at different levels can provide that flexibility while reducing dependence on any one internal person. That also supports business continuity through normal variances like vacations, turnover, or other staffing changes.
Contact Us
Outsourced accounting gives real estate and development companies access to the support and expertise they need without building every capability in-house. The right outsourced team can help fill gaps or provide broader support as the business grows. If you have questions about the information outlined above or need assistance with an outsourced accounting need, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.