Real estate companies have to deal with hefty transactions and bills. As a result, accountants of real estate companies are always under pressure.
Accounting errors can be quite costly for real estate organisations in the long run. This is why accountants cross-check every entry on the balance sheet to eliminate any errors.
Cross referencing is an age-old technique used by accountants to verify the entries in their books. Gone are the days when compliance laws for accounting weren’t so strict. At present, real estate agencies can get into legal hassles if bookkeeping errors are discovered.
But at the same time, these errors are very common and can be made by any human. Experts understand the importance of cross referencing and make it a point to prepare all financial reports and records with utmost care. Accounting is all about being good with numbers and matching the account balances. In order to get the best results, all companies must hire experienced professionals to prepare error-free accounting records.
Read on to know about the purpose of cross referencing for real estate companies.
Understanding Cross Referencing in Accounting
Cross-referencing can be defined as relating an entry in the accounting book to its source. You can explain how a particular entry has arrived in your accounting book with cross referencing.
It is used when line items in the accounting book have a direct relationship. For example, real estate accountants have to organise receivables and payables separately. With this feature, accountants can match receivables and payables for each real estate customer.
Consider a real estate customer who has paid for a property in instalments. For the last instalment, you will provide a receipt to the customer, informing them about full payment.
However, the final receipt will be linked to past payments from the customer. In such a case, cross-referencing can help accountants identify whether the customer has paid all the instalments or not.
At the end of the month, accountants spend hours reconciling payments from different sources. Cross-referencing in accounting can decrease the manual burden on accountants during backtracking/reconciliation.
Cross reference analysis is not just a random step in accounting but is must-do practice.
Why Cross Referencing Important In Accounting?
Cross reference in accounting is important because of various reasons:
It allows the creation of reliable financial reports.
Cross reference audits can help the accounts detect unpaid invoices and detect other errors.
Helps to have verified information for the future.
How Do You Cross Reference Financial Statements Easily?
For cross-referencing, accountants mark the related entries with the same letter/number to find them quickly. Usually, a reference number is provided for a unique transaction. Any related entry in the future will have the same reference number.
The balance sheet of a company consists of many invoices that are interrelated. Accountants can match them via the reference number using cross-referencing.
A real estate company has to deal with many invoices daily. Cross-referencing can thus be useful for property accountants to help them view the transactions in an organised manner. The identification of entries that have not been processed yet is also easier.
Cross-referencing helps enhance the visibility of transactions in the books. Since large real estate companies deal with a greater number of daily transactions, they can use dynamic cross-referencing software features to easily identify incomplete payments/invoices.
What Are the Pros of Cross Referencing in Accounting?
The pros of cross-referencing in accounting are as follows:
With cross referencing, one can know the status of invoices. Real estate invoices can be fully paid, partially paid, or not paid
Real estate accountants can determine the open balance for any client or supplier with cross-referencing
With cross-referencing, one can know which payments are applicable to which invoices
One can detect unpaid invoices, accounting errors, duplicate entries, wrong general accounts, and more with cross-referencing. The statement of accounting can also be verified easily with cross referencing
Through cross-referencing, structured communication is established between invoices and payments.
Conclusion
Cross-referencing can get tricky at times for real estate accountants. Hence, instead of hiring expert accountants for cross referencing, a real estate company can outsource the bookkeeping processes to a reliable third party.
By doing so, real estate companies can save costs for cross referencing and other accounting processes. Use cross-referencing in 2022 to identify accounting errors!
Cross reference financial statements do create an impact on the reputation of the company. It allows external users to get trusted financial positions of the firms and make wise decisions.
About Us
OHI is a fifteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We now provide these services to a portfolio of 75000 units across clients.
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