Year-end accruals in real estate accounting help present accurate financials, support compliance, and build stakeholder trust.
As December draws to a close, real estate accounting teams operating on the accrual basis face a critical window to properly record every dollar of revenue and expense before the books are closed.
This final sprint is essential — missing key accruals can distort net operating income (NOI), jeopardize debt covenant compliance, and complicate investor reporting. Precision at this stage helps safeguard your organization’s financial integrity and stakeholder trust.
Three key focus areas for a strong close
Real estate businesses encounter distinct cut-off challenges, and mid-December leaves little room for delay. Prioritize your attention in these areas:
1. Revenue recognition
Rent receivable
Review rent rolls and tenant ledgers to confirm all December rent is accrued, even if payment arrives in January. Omissions here can inflate or understate NOI, skewing property performance metrics.
Percentage rent
Estimate final amounts owed based on year-to-date sales and accrue revenue where thresholds are met. These figures often impact lender reporting and investor expectations.
CAM and operating expense recoveries
Complete annual reconciliations and accrue any amounts owed from tenants, or due back to them, before closing the books. Inaccurate reconciliations can lead to disputes and unreliable forecasts.
2. Expense matching
Property taxes
Accrue the portion of tax expense attributable to the current year, even if payment occurs after year-end. Missing this accrual can significantly distort NOI and affect covenant compliance.
Utilities and property services
Estimate December costs for electricity, water, cleaning, landscaping, and snow removal when billing cycles extend into January. These often represent material expenses that impact operating results.
Professional fees
Record expected costs for legal, accounting, audit, and consulting services using estimates or engagement terms.
Payroll, bonuses, and incentives
Accrue final December payroll and earned bonuses, even if approval or payout occurs in the new year. These obligations affect both expense recognition and cash flow planning.
3. Prepayments and deferrals
Deferred revenue (prepaid rent)
If tenants pay January rent early, classify it as a liability, not current-year income. Recognizing it too early inflates NOI and misrepresents performance.
Prepaid expenses
For insurance or service contracts paid upfront, expense only the portion related to December. The remainder should remain on the balance sheet for accurate reporting.
Final push for a clean close
A disciplined year-end close enables your financial statements to accurately reflect property and portfolio performance. Every accrual, deferral, and cut-off decision directly influences valuations, lender compliance, and investor confidence.
If you haven’t started your year-end accrual review, now is the time. Acting promptly can maintain reporting integrity and sets the stage for a successful new year.
How CLA can help with year-end planning
Managing year-end accruals in mid-December can be overwhelming, especially when juggling multiple properties, complex lease structures, and tight deadlines.
CLA’s Client Accounting and Advisory Services (CAAS) team offers more than bookkeeping. We deliver strategic outsourcing solutions that combine technology, industry expertise, and proactive advisory support.
Our professionals can help you:
- Streamline financial close processes
- Enable compliance with GAAP and lender requirements
- Deliver timely, accurate reporting for stakeholders
- Leverage insights for better decision making