Have you ever wondered how much your clients might be costing you? If you haven't, now is the time to reevaluate. The National Association of Realtors (NAR) has made a significant decision, one that is bound to affect your earnings. We may not have a crystal-clear picture yet of how these changes will impact your business, but one thing is for sure: it’s time to dig in and really get to grips with the cost implications of your buyers.

Time is Money

Are you keeping tabs on your time expenditure? 

To gain a more in-depth understanding of what your buyers are costing you, it's time you started monitoring the amount of time you invest in each one. Your worth as a realtor is not only measured in monetary terms; the time you've spent with a client significantly matters as well. Ask yourself: was it 5 hours? Perhaps 25? Or maybe even 100? Knowing how much you've earned per hour could be a game-changer for future considerations. 

At our bookkeeping firm, we've use  Clockify.me, a cost-effective tool that enables comprehensive time-tracking and reporting. If you take one piece of advice from this post, let it be this: monitor your time moving forward. In fact, use this opportunity to reflect on your ideal hourly rate and the lowest you're willing to accept.

Track Costs Per Client

It might be a no brainer that your listing is costing you money. But what about your buyer? Outside of your time, what buyer costs are you accruing? At the very least you likely paid for meals and tanks of gas (or mileage). Did you agree to buy a home warranty or pay for an inspection? Start tracking these costs and flagging them to your buyer. Knowing that commission structure for buyers may change, you need to ensure that you are still profitable and you CANNOT do that without knowing what you spent.

Your business is designed FOR PROFIT. Tracking expenses per client is the only way to know if you are hitting that mark.

You May Need to Up Your Accounting Software Subscription

Excel is just not going to cut it anymore.

While a QuickBooks Online file may seem daunting, you need to treat your business finances like what they are, a business. In addition, a proper accounting file will save you hours tracking these expense and attributing them to transactions and will make working with your tax preparer so much LESS STRESSFUL.

Not only that, but in light of recent events, you may want to consider upping your subscription level to even more fully understand your per transaction finances. 

Consider Moving Out of Quickbooks Self-Employed

QuickBooks self-employed is a good entry point for new realtors, but it won't easily grow with your business and limits collaboration with your tax preparer and bookkeeper.

The goal of your business isn't to be stuck managing your finances forever is it? Ideally a bookkeeper and a CPA assists you with the minutia so you can either focus on selling or take a break(hello beach vacation). Not only that, but self-employed is designed for a side hustle or the self-employment track and realtors quickly move from filing taxes as self-employed to filing as an s-corp for tax advantages. 

Additionally, you NEED to make sure that you are capturing expenses that your brokerage took out before paying you. There's no adequate method to do this in QuickBooks Self-Employed. If you aren't including those business financials, there's a very real chance that you could be missing out on THOUSANDS in deductions at tax time.

At its core, Quickbooks Self-Employed is essentially a spreadsheet and is very difficult to grow with. We recommend at least using QuickBooks Simple Start.

You May Want to Consider QuickBooks Plus

The gold standard of QuickBooks Online plans is the Plus Subscription as it allows for a lot more detailed tracking including class tracking and by customer tracking, but let's be honest it is not cheap.

At this point, many of our realtor clients use QuickBooks Simple Start as it has generally been robust enough for agents up to this point. With Simple Start, you can set it up to track income by type: Listings, Buyers, Referrals as well as set up several "Cost of Good Sold" accounts to better reflect what each transaction costs you.

What Simple Start lacks is really great functionality around per client expense and income tracking which may be a financial game changer moving forward in light of recent events. However, there are some work arounds to get  per client info into Simple Start and before upgrading you may want to consider implementing Tags(reach out if you'd like to know more about how) to help you keep track of your per client income and spending.

It might be time to get help

You've been managing your finances just fine, right? Well, hang onto your calculators, because we're diving into some need-to-know info that could change the way you do business from here on out. 

First off, let's get one thing straight. Being a realtor doesn't just mean finding beautiful homes and matching them with eager buyers. It's about handling a business with countless transactions, towering expenses, and, not to forget, multiple tax obligations. With all these responsibilities, there's always a chance that some expense would slip through the cracks, unrecognized and unaccounted. And that's where the need for a bookkeeper comes in. 

Bookkeepers bring a new sense of clarity to your business. Our skills go beyond simple math — we're capable of interpreting complex data and transforming those confusing numbers into understandable information. We're your own financial detectives, uncovering the hidden costs of your business, and yes, including the unaccounted expenses of dealing with your buyers. 

"In the ever-changing business landscape, having a bookkeeper is no longer just an option — it's a necessary staple for any successful realtor wanting to take proactive control of their financial health."

• Clarity: Bookkeepers sift through your finances, separating necessary expenses from the wasteful ones, and shed light on where your money is actually going and if what you are spending makes sense
• Optimization: They can help identify patterns, trends, and potential areas of savings. Real estate is dynamic; having someone who can flexibly adapt your financial strategies is a game-changer.
• Preparation: Nobody likes tax surprises. A bookkeeper will ensure you’re compliant, accurate with your tax filings, and ready for any potential audits and not missing any valuable deductions.

With the National Association of Realtors (NAR) having recently amended their policies, it's more important than ever to understand the cost implications of each buyer you deal with. A bookkeeper's expertise in tracking and classifying expenses can help pivot your business strategies, ensuring you're not losing valuable dollars in the process. In fact, that is what we LOVE doing for our clients at The Balanced Broker, our whole mission is to make send of the numbers for realtors like you. 

So, are you ready to take the plunge into the world of organized financial tracking with a trusty bookkeeper by your side? If so, we'd love to help.