Realty IQ- Property Management Accounting Newsletter

March 4, 2011 - PRLog -- Article 1: Expert’s Column

Surviving the Economic Downturn- Property Management Firms

Let’s face it - we now live in a different world from the one that existed before recession set in late’2008.  Property management firms are finding it increasingly tough to maintain occupancy and sustain (leave alone increase!) rental revenues.  With a flat or declining top-line, it becomes imperative to squeeze margins out of every dollar earned. In today’s business environment, the firm’s very survival could be determined by its’ ability to cut costs and conserve cash while maintaining good standards of service. We provide a simple list of measures that firms can take to improve margins and enhance cash-flow with minimal spending:

•   Collecting rent, security deposits, and all fees online saves time and money for owners and managers. Most of the tenants are willing to pay for the convenience and flexibility of online payments

•   Start accepting more payments by credit-card as the higher collection levels tend to offset the merchant card processing fees

•   Full maintenance contracts may be a good way to budget for major unexpected expenditures. Any replacement cost and labor becomes the maintenance company's headache as the firm only pays a flat monthly fee

•   Outsourcing non core activities such as accounting and bookkeeping helps bring in sustainable recurring cost savings as high as 30%-50% of the original costs.  Outsourcing also helps you ensure your business is well positioned to capture growth without adding fixed over-heads once the economy recovers.

•   Review your insurance policy- Perhaps you've had the same insurer for 20 years and have considered this to be something you've just crossed off the list and have never looked backed

•   Collection of past due debt often gets put on the back burner due to other priorities.  Collect more aggressively through collection agencies

•   Look for ideas outside the box, there are small services or amenities that can be provided at low or no cost that could be offered at a minimal fee and would enhance the properties and provide some income. Examples include pet fee & credit application fee.

•   Track damages, cleaning and replacement expenses in move-outs carefully. There are many simple easy-to-use online property management software that can help you in this activity.  

Article 2: Study and Surveys

How Are Property Managers Using Technology?

Technology is increasingly playing a critical role in helping property management firm compete better. Technology savvy firms are using technology to run targeted marketing campaigns, to manage operations minutely and to generate and understand their operating numbers better.

A recent study done by an independent organization to find how property managers are using the vast amount of technology available to them threw up some interesting findings:

Businesses using technology better grow faster

Nearly half of the companies surveyed grew their business over the last few years, either by revenue or by number of units. The companies that were able to grow their business in a recessionary economy made extensive use of technology. Over 60% of those growing businesses use property management specific software system such as Buildium, Appfolio, Maxwell Systems or Spectra. In general, those that were successful were able to: automate tasks, track online leads well and provide their tenants with online options.

Great Software Equals Efficiency

Companies who used property management specific software managed an average of 102 units per employee. Those that using generic software or spreadsheets only managed an average of 61 units per employee!! An integrated software suite frees up property management employees to do more tasks.

These specific software are helpful to track rentals and lease renewals better. They also help manage property level data and business information more efficiently and present it in a readable and accessible form.  Also most property management software integrates well with accounting software or has an accounting module. They give everything you need to take charge of your payables and receivables, maintain customer agreements and relationships, track your financials, and proactively manage your cash flow. Web based software’s help property mangers connect offsite and report in real time.

Companies are struggling to Track Online Leads

Much of the discussion on property management web sites is centered on online marketing and lead generation. However surprisingly, about 36% of property managers don’t even use computers to track online leads. Instead they rely on the tenant to mention it on an their application forms. In addition, 19% of the respondents don’t track leads generated online!

This statistic is surprising given that tools like Google Analytics and sites such as Stat-counter have made it easy for even small firms to track origins of online leads and website visits extensively. They also have multiple reports to help determine the effectiveness of an ad campaign and keywords. Even banner based advertising can be tracked by banner tags.

Social Media Use Widespread but Is It Effective?

Despite the evangelization of social media over the last few years, the survey showed no sizable growth in business between companies who are using social media and those who are not. Social and business networking websites such as LinkedIn, Twitter and Facebook are being increasingly adopted and are fantastic for networking. For example, LinkedIn has various groups for property managers which they can join and network with people and generate business.

In sum, there is a substantial difference in doing business now and even five years back. It is not only property management, but all facets of real estate from the buying to selling to renting to managing that is turning to technology for answers to different business problems!

Article 3: Case Study

Firm: A well-established full service real estate firm providing real estate investment, development and property management services. They have developed and built 79 properties totaling approximately 11 million square feet in 10 western US states. Over the past decades, their projects have a development value in excess of $1.2 billion dollars.

Needs: Reducing accounting costs substantially to help improve profitability in a tough economic scenario. The firm needed a variable cost structure to manage dynamics of a changing economy.

Challenges:

1.   Large scale project-property management accounting for more than 4800 units across 28 properties involving four property accountants and two accounts payable processors
2.   Manual processing of large volume of utility bills necessitated a stringent quality check to ensure accuracy
3.   Service provider needed to learn two new software-OneSite from RealPage for property management and Timberline from Sage for accounting in a short period
4.   Minimal existing process documentation of several key activities
5.   Strict deadlines for month-end closing meant that the team had to quickly learn key activities
Results:

1.   Firm reduced the accounting costs by a significant 60% on their base accounting costs.  They achieved annual savings of $130,000 through this solution.
2.   Creation of low cost variable staffing model equipped to handle slowdown in business environment
3.   Extensive documentation of existing processes resulting in better handling of staff changes, faster training and  standardized processes

Please contact us for the complete case study.

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