Over the past two years, the real estate industry has evolved beyond maintaining portfolios and properties. Associations and property management organizations alike are focused on growing portfolios and revenue to keep up with demand for more commercial and residential properties. Every process and payment comes at a price, however. Property managers are juggling the cost of maintenance, leasing, inspections, evictions, and more. Every payable passes through the accounting department to be paid, but what happens in between is a mystery for most companies. It’s the moment where your company could sink or swim.
The State of Real Estate
Today’s real estate industry is small but mighty. Most have six or less full-time employees, with contracted or part-time hires to lend a helping hand. The majority of property managers are making less than $500,000 in revenue annually. Most of these small businesses own between two and ten-unit properties. To no surprise, single and multi-family rentals are driving property success – much more than commercial and industrial properties. They have big goals to increase their portfolio and revenue this year significantly but need the right tools and resources to score big and boost efficiency.
The AP Manager’s Payment Pains
To keep up with industry goals, grow revenue, and expand portfolios, most organizations aren’t ready to grow at their full potential. Associations are typically small with limited resources. To start, the State of Property Management report share that most property managers serve at least two other roles in the organization because of small headcount and limited resources.
“Most often, property managers selected ‘company owner’ as an additional title (42%), along with ‘realtor’ (15%), ‘office manager’ (22%), ‘accountant’ (17%), ‘maintenance manager’ (11%), or ‘broker’ (11%).”
But that’s not all of the problems the industry faces. Associations struggle with maintenance, efficiency, accounting, and growth. When it comes to managing payments, small businesses struggle to streamline processes and cut costs with limited resources.
More specifically, the accounts payable process is bogged down by processes that waste time and money. Ardent Partners shared a few of the top challenges faced in today’s accounts payable process:
- 41% of respondents struggle with a high percentage of exceptions – adding additional steps to property review and route the invoice.
- 39% struggle with invoice and payment approvals, delaying payment distribution and driving up costs.
- 38% are still faced with piles of paper, often leading to lost invoices and documents which forces a manual, time-consuming payment process.
Most property management organizations provide nearly 13 services. Among these services, 62% offer ePayments and accounting as an offer. However, PayStream Advisors shared that 89% of small-medium companies are still handling paper and emailed invoices. These same companies are sending 52% of their payments via checks, while middle market and enterprise companies are relying on ePayments, like ACH. These statistics beg the question – how are businesses keeping up in the Digital Age with Stone Age internal processes?
How Scaling for Growth Impacts Goals
For the second year in a row, property management survey respondents (39%) identified growth as the top objective for the second year in a row. The property management industry is expected to continue to push for high growth in the coming years with an estimated 12.5 million new households being built over the next decade.
When considering growth, most companies are focused on scaling first. Reducing or eliminating headcount and manual tasks in exchange for improved efficiency and cost savings gives property management companies more flexibility when executing growth strategies. The only way to truly save time, money, and resources is to automate as much as possible.
Accounts payable automation electronically routes invoices with exceptions based on your organization’s preferred process. Approval workflows are customizable and can be designed to follow your current workflows without paper or delays. With AP automation, there’s even the convenience of assigning an ad-hoc in your approver’s absence to keep the approval process moving. Naturally, electronically handling each part of the AP process eliminates the need for paper. Invoices and documents can all be recalled with the click of a button.
According to PayStream Advisors, however, most companies are hesitant to implement AP automation for a few reasons, namely lack of budget, current processes work, and lack of understanding the currently available solutions. Smaller organizations fear that given the number of invoices, there will be little or no ROI from implementing an AP or payment automation solution. Financially speaking, most residential property management’s annual gross revenue is less than $249,000, which makes a case for new technology and resources challenging to sell to leaders.
With manual processes, organizations have to choose which avenue for growth is best for business. With AP and payment automation solutions, organizations have the opportunity to reach their full potential with streamlined processes. Most property managers plan to grow by acquiring more properties, referrals, and leads. But property management associations are failing their business if they’re wasting money on processes that could be used to support resources for smarter, faster growth strategies.
AP & Payment Automation’s Big Efficiency Boost
As associations strive to achieve growth and efficiency goals, it’s all about managing processes, time, and resources effectively. The State of Property Management report shares that efficiency is a high priority for the real estate industry. It’s all about keeping up with industry growth and goals but doing so without increasing money and time. To expand, they must do so skillfully.
Real estate associations focused on increasing revenue are heavily relying on improved efficiency to meet their financial goals. 53% of associations have the goal of expanding their portfolio. But, whether property managers are managing their own property or associations, or managing others most portfolios have not grown significantly. Most have stayed the same, or stagnant.
A step in the right direction is property management software. Property managers and AP managers alike rely on software to boost efficiency with multiple processes in one platform. Property managers can manage leasing and business operations without piles of paper or storage cabinets.
Thanks to technology, 90% of survey respondents relying on property management software have noticed improvements in portfolio expansion, revenue, and efficiency. Other significant benefits included improved organization, easier finance management, scaling for growth, and more. However, most property managers still use a combination of Excel and accounting software to crunch critical numbers, which often leads to manual mistakes and poor efficiency efforts.
But even the most trusted property management software lacks the accounting integrations needed to be the best. The report shows that most software needs accounting, leasing, and business operations features to simplify processes. Accounting capability is the top request for an ideal property management software solution according to those surveyed, but the cost of new management software far exceeds a simple integrated solution.
Relying on property management software alone still leaves a few unresolved problems that profoundly impact payments including mortgages, suppliers, and maintenance. They lack a standardized AP process that increases the risk of lost invoices, missed payments, and fraud. There’s also the inability to measure payment performance including approval time and costs effectively.
Companies pairing their management software with AP automation integrations are reaping significant time and money savings. They’re only spending $2.52 and three days to process a single invoice, while those using a mix of manual processes and standard software are spending over $14 and over ten days per invoice.
Although accounts payable processes are only one piece of the real estate puzzle, it makes a big difference in the day-to-day. Associations that trust automation have more time to focus on developing data-driven strategies that support their goals. For instance, managing maintenance requests and costs are a big concern for most associations. Allowing technology to handle invoices in a centralized location improves data collection and organization to review maintenance costs and payables to scale and streamline those processes as much as possible without adding time, headcount, or money.
What’s Next for AP Automation and Associations
For many associations, ePayments and payment automation aren’t foreign ideas; they’re just not top of mind. Chances are, limited money and resources are preventing your organization from implementing automated solutions. Even though accounts payable and payment automation solutions are known to improve daily duties, there’s are still a few concerns including the cost, learning curve, and metrics for success. Here are a few tips to get your association started:
- Evaluate your current payment processes. Your organization is juggling different payments including repairers, supplies, mortgages, and more. Determine what part of the payment process takes the most time, and how your team could work smarter.
- Think about the ‘next big thing.’ Even though most small companies are still issuing printed checks, consider ePayments for better visibility and faster payment delivery. If your association offers ePayments, consider how your accounts payable department could benefit from sending more of them for your association’s benefit.
- Explore simple solutions. Find the solution that easily integrates with your accounting system and scales for growth. Cloud-based, centralized solutions should streamline the payment process without additional headcount or help from employees or volunteers. Remember, achieving your goals starts with efficiency.
- Do the math. Consider, hard and soft costs that come with automation. Think about revenue, the number of invoices received, and current cash flow. Don’t forget to add up how much it costs to process an invoice. Keep in mind, the journey to AP automation doesn’t have to happen overnight. Speak with an expert to see where’s the best place to start.
The Bottom Line:
Companies are all about saving time and money whenever they can. AP and payment automation are no longer a ‘nice to have’ for most businesses, it’s a necessity. Download Ardent Partners’ report, The State of ePayables 2018, to learn more about the current state of payment processes, and leading technology innovations that are changing the way we do business.