Happy Halloween to all members of the Ontario Real Estate Association and the Young Professionals Network.
Since fall is a slightly quieter time than the upcoming holiday season, it is an excellent opportunity for real estate professionals to get our finances in order in advance of year end. Before you know it, tax time will be here.
My accountant always raves about how organized my real estate business is, so I thought it might be helpful to share a few tips with you especially if you are new to the business.
The first thing I suggest is to set up two business accounts, a chequing account and a tax savings account. I like to deposit all commission income into the chequing account. From there, I take 25 per cent off of every cheque and place it in the tax savings account. If you do this faithfully each year and do not touch that money, you will always have sufficient funds set aside to pay your income tax at year end. Many companies will do this for you automatically, but I prefer to do it myself.
Each month, regardless of how much I make in commissions, I pay myself a set amount from the business chequing account. That money gets transferred into a personal account from which I pay my monthly personal expenses. This approach is a great way to budget and always know how much you are spending.
I also recommend purchasing an accounting program for your laptop. I use Quickbooks. I set up my real estate business as an actual company. It enables me to track income, expenses, HST, dues, licensing fees, etc. Everything related to my real estate business is tracked and recorded. At any time I can go in and see how much I have spent on a specific item such as advertising or my cell phone. The best part is that come tax time, I just shoot off an electronic copy of the information to my accountant and he figures out whether I owe money or will receive a return. Once you get the hang of this process, you will love it.
Another tip is to try and run as many of your expenses as you can through auto withdrawals on your credit card. This is a great way to keep track of expenses as well as collecting valuable points on rewards programs. Each month, when my credit card statement comes in, I pay the bill in its entirety and then enter all expenses into my QuickBooks. I also attach the original receipts to each statement just in case. Even if you are doing your bookkeeping electronically it is still a good idea to keep original receipts or a scanned copy.
The above are just a few tips to help you get started. The less time you spend getting your accounting in order, the more time you have to focus on selling homes and generating new business. So get on those finances, get organized and be ready because tax time is just around the corner!
Barbara Sukkau is a real estate salesperson in St. Catharines, Ontario and immediate past president of the Ontario Real Estate Association.
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