Section 3: RealDesk / QBO Setup & Configuration

introduction and objectives this section explains the initial configuration of both realdesk's accounting settings and quickbooksonline mapping realdesk to the appropriate accounts in qbo will ensure that the sync between the two applications works properly, with the correct recording of transactions and robust reporting learning objectives for this section understand the importance and structure of a chart of accounts learn how to categorize and code accounts for assets, liabilities, income, and expenses map realdesk specific accounts to qbo, including bank accounts, commission income and expenses, trust liability, deductions, and expenses understand how effective entity management contributes to accurate record keeping of agents, vendors, and customers set up qbo chart of accounts if your brokerage hasn't used qbo before, the first thing you'll need to do is set up your chart of accounts (coa) if you are already using qbo and have a coa set up, you can skip this section a chart of accounts is a financial organizational tool that provides a complete listing, by category, of every account in the general ledger of a company account identifiers to make it easy for readers to locate specific accounts or to know what they're looking at instantly, a coa typically contains identification codes, names, and brief descriptions for accounts for example, a company may decide to code assets from 100 to 199, liabilities from 200 to 299, equity from 300 to 399, and so forth those could then be broken down further into, e g , current assets (110 119) and current liabilities (210 219) the number of figures used depends on the size and complexity of a company and its transactions account types the main account types are asset, liability, income, and expense asset accounts include anything you own that has value, such as buildings or land equipment and supplies inventory liquid assets, including bank accounts accounts receivable liability accounts can be divided into current (typically, due within one year) and long term (>1 year to maturity) liabilities and include items such as bills / accounts payable income taxes payable credit card balances funds held in trust mortgages personal or shareholder loans income accounts represent funds you have earned although many businesses tend to lump multiple streams of income together, it can be very useful to split different income generating activities into separate accounts for better analytics income accounts can include items such as commission income deal fees split fees other sales income dividend income billable expense income expense accounts represent funds you have spent, and can include items such as cost of goods sold (commission expense) advertising expense salaries / wages interest expense map qbo accounts in realdesk bank accounts realdesk supports up to 3 bank accounts trust commission trust general all brokerages need to have trust and general accounts commission trust is optional in realdesk, but may be mandatory depending on your jurisdiction each bank account used in realdesk must be mapped to a qbo account of type "bank" commission income & commission expense commission income represents a brokerage's top line revenue it includes all internal (commissions to the brokerage's agents) and external (commissions to referring realtors or other brokerages) commission funds commission income must be mapped to a qbo account of type "income" commission expense represents a brokerage's cost of goods sold in most cases, commission income and commission expense will be equal as of september 2024, realdesk can support two separate commission expense accounts in qbo — with one being used for internal commission payments (selling realtor / buying realtor), and the second for external commission payments (referring realtor, commission payment to other brokerage) it is not mandatory to do this; you can simply map both realdesk accounts to the same qbo account if you don't want to track internal and external commissions paid separately in qbo commission expense accounts must be mapped to qbo accounts of type "cost of goods sold" or "expense" accounts payable & accounts receivable accounts payable represents goods or services delivered to your brokerage but not yet paid for, while accounts receivable represents the opposite — goods or services you have provided, but not yet been paid for these are used in a relatively limited way in realdesk, as generally there is little delay between the provision of services and payment thereof however, it is still important to map realdesk's a/p and a/r accounts to their qbo counterparts accounts payable must be mapped to a qbo account of type "accounts payable" accounts receivable must be mapped to a qbo account of type "accounts receivable" liability accounts a trust liability account is a specialized account where a real estate brokerage holds funds on behalf of its clients these funds typically include deposits, down payments, and other monies that need to be held in trust during real estate transactions because these funds do not belong to the brokerage, but are held on behalf of other entities, they represent current liabilities rather than assets or income it's crucial to maintain an accurate accounting of all trust liabilities, to understand how the overall trust account balance is composed of funds for many different deals and clients in qbo (via sync from realdesk), every time a deposit or withdrawal is created in the trust or commission trust bank account, a corresponding entry is also created to debit or credit the matching trust liability or commission trust liability account trust liability, and commission trust liability (if used), must be mapped to qbo accounts of type "other current liability" realdesk also uses a 3rd party withholding liability account for deductions that are payable to third parties these types of deductions can be used for garnishments, tax liens, commission advance loans, or in some cases for deferred payments to an agent (such as separating gst / hst collected to pay out at a later date) these funds are accounted for as 3rd party withholding liability between the time when they are initially deducted from the agent's commission payment and when the third party payment is created 3rd party withholding liability must be mapped to a qbo account of type "other current liability " deduction accounts deductions are created in realdesk's deduction manager and can be customized in a variety of ways for each agent when a user creates a new deduction, they are prompted to map it to a qbo account only qbo accounts of type "income" can be selected ; other account types will not display in the drop down menu for efficiency, it is also possible to create a "default deduction account" in the accounting settings again, a qbo account of type "income" must be selected note as well that if the "3rd party deduction" option is checked when creating a new deduction, it will automatically be mapped to the 3rd party withholding liability account (see above) and the account selection drop down will be disabled expense accounts expenses are created in realdesk's expense manager and can also be customized in a variety of ways expenses can be one time or recurring (monthly, quarterly, annual), and can apply to only one agent or multiple agents when a user creates a new expense, they are prompted to map it to a qbo account only qbo accounts of type "income" can be selected ; other account types will not display in the drop down menu there are two general types of realtor expenses that a brokerage may wish to create reimbursement — these recover funds from an agent to reimburse an expense that the brokerage incurred on their behalf, such as mls fees, reb dues, or office supplies brokerage income — these are typically recurring expenses that agents pay as part of their arrangement with the brokerage, such as monthly desk fees (whereas for income generated on a per deal basis, a deduction would be used) it is a recommended practice to differentiate between these types; those in the first category can be mapped to a "billable expense income" account in qbo, while the brokerage can determine how it wishes to recognize different income types for the second category a key point with "expenses" in realdesk is that although they represent expenses to the agent, they represent income to the brokerage; hence why they must be mapped to income accounts in qbo for efficiency, it is also possible to create a "default expense account" in the accounting settings again, a qbo account of type "income" must be selected if your brokerage pre pays a significant volume of expenses on behalf of its agents, selecting "billable expense income" as the default expense account may save considerable effort gst / hst accounts although realdesk has separate accounts for gst/hst payable and gst/hst input tax credits, in practice, qbo deals with these in the same account, such that the total gst/hst payable reflects the total tax collected, minus the tax paid out gst/hst payable and gst/hst itc must be mapped to a qbo account of type "other current liability" tax codes the "sales tax" mapping is dictated by your province and the legislation applicable to real estate transactions most provinces (e g bc and alberta) will map to gst only ; while ontario maps to hst "exempt tax" is always mapped to "tax exempt" note that you must have completed the initial sales tax configuration in qbo for tax codes to be visible in the realdesk account mapping entity management (customers and suppliers) the realdesk platform includes a sophisticated entity management function to create and maintain information on the various parties (agents, other brokerages, lawyers, and clients) with whom you do business as qbo was not built with all of the complexities of real estate accounting in mind, its entity management capabilities are somewhat more simplistic qbo defines a "supplier" or "vendor" as someone whom you pay transactions are conducted via bills (representing accounts payable, until funds are disbursed) and corresponding bill payments qbo defines a "customer" as someone who pays you transactions are conducted via invoices (representing accounts receivable, until funds are collected) and corresponding payments per qbo's definitions, an agent in your brokerage is both a vendor and a customer your brokerage will create bills for commission payments, and invoices for realtor expenses this in turn requires realdesk to create separate vendor and customer entities for each agent, which you can differentiate by the tag "v" or "c" after their name; e g "agent joe smith (v)" and "agent joe smith (c)" separate vendor and customer entities are also created for any other third parties entered into the system, including other brokerages, lawyers, clients, and sellers (in ontario, where excess funds are paid to the seller) this is done automatically in realdesk and does not require any active management the sole exception is in a case where your brokerage has already been using qbo, and you have existing customer or supplier accounts that you wish to link, as opposed to creating new ones this can be managed in individual agent and lawyer profiles summary by understanding and correctly setting up your chart of accounts in qbo, and then correctly mapping realdesk's accounting settings to your coa in qbo, you'll ensure seamless synchronization with realdesk, accurate financial reporting, and effective management of all transactions this foundation will support your brokerage's financial health and operational efficiency