Five Ways to Create a Powerful Spend Management Program
When revenue management gets more scrutinized during shifts in market cycles (such as is the case now in the apartment industry), focus on expenses becomes more intense. Offsetting deficits of dollars coming in can, in many cases, be achieved by juggling the dollars going out.
That seems to be top of mind for many stakeholders, considering that the industry has normalized from a rapid growth cycle in recent years. Since the third quarter of 2015, the nation’s apartment market has experienced a general decline in rent growth, only just recently showing signs of improvement. In some markets, concessions are being offered to fill apartments.
Lindsey Cade, senior director of product marketing for RealPage, says clients are getting more serious about spend management and how it can fill the gap when revenue isn’t as flush.
“There are a few things in 2018 that we’ve heard over and over again, and we expect we’ll hear in 2019,” she said. “One is increased focus on expense management. It’s not how much can we increase rent year over year. It’s about how we can bring expenses down.”
Spend management not without challenges
Monitoring spending is the sure-fire way to get expenses under control. But that is not without its challenges.
Industry pros say a spend management program often fails because of bad habits, lack of budget controls, cracks in approval processes and increased risk from non-credentialed vendors. Companies without a spend management solution typically bear the burden of manual processes and sorting through stacks of paper.
“It can be a lot to consider,” RealPage Vice President and General Manager of RealPage Spend Management Sara Jones said in a recent webcast.
Jones oversees RealPage’s automated spend management software, which focuses on increasing productivity and efficiencies in purchasing, invoicing and vendor management. RealPage currently has over 4 million managed units on its spend management platform, which has a robust vendor inventory. Eighty percent of vendors on the list typically match those of apartment portfolios across the nation. More than 15,000 vendors are set up for electronic invoicing.
Jones said multifamily operators have the best intentions when establishing spend management processes but don’t always get maximum value.
“Some of our customers try hard to get negotiated contracts, but the problem is that they don’t have a tool to showcase those contracts and they don’t have a way to convey the message to their site level,” she said. “And, overall, they miss out on compliance.”
How to overcome the pitfalls of managing spending
An integrated spend management solution reduces operating expenses, drives purchasing power and increases overall efficiencies.
Here are five ways that an integrated solution can overcome typical pitfalls of managing spending:
1. Eliminating Maverick Spending
The Problem: Despite establishing contracts with vendors, onsite or other personnel may make rogue purchases from other companies at higher prices because they are not following the rules.
The Solution: Establish a purchasing platform that guides buyers to the right vendors, the right products and the right pricing. Flagging preferred vendors and catalog tools that impose restrictions on certain categories that may show up in the shopping process keeps buyers focused.
2. Removing Manual Processes and Paper
The Problem: Manually keying invoices and tracking documents are dreadful tasks. “It’s time-consuming and leaves room for errors,” Jones said. “And, of course, there are lost invoices.”
The Solution: A central platform where all orders and invoices are processed and removes the burden of site staff keying in all paper invoices. Electronic invoicing reduces processing time to eight days from 30 days when paper is involved. “Vendors love this,” Jones said.
3. Mitigating Vendor Risks
The Problem: Non-credentialed vendors are risky when issues arrive with workmanship or whether or not they are properly insured. A small repair or purchase can turn into a big problem if the vendor hasn’t been fully vetted for the proper certifications.
The Solution: Work from a master account of credentialed, approved vendors from across the country. Increased corporate control through vendor credentialing allows buyers to approve and access the right vendors who carry proper insurance coverage and are licensed with documentation accessible. “An important piece of your vendor management program is making sure your vendors are compliant with credential solutions,” Jones said.
4. Getting Control of the Budget
The Problem: Jones has heard many apartment operators express buyer’s remorse, that they need to track their spending and monitor budgets.
The Solution: An online spend management solution aggregates all data in one place − organized and categorized – with standardized and customized reporting capabilities. Tools that enable ordering items with more precision, followed by tracking and reporting help buyers within a budget.
5. Streamlining Offline Approval Processes
The Problem: Managing the paperwork coming in through a disjointed spend management system can be a headache and jeopardize vendor relationships if invoices aren’t paid timely or work isn’t signed off on in time.
The Solution: Working through one solution to upload documents with the ability to track status. eSign ability enables stakeholders to sign off on work, purchase orders, invoices and other documents without waiting for a folder of paperwork to slide across the desk.
By linking procurement, invoice processing, vendor credentialing and facilities through a single solution, properties gain visibility, financial transparency, and ultimately accountability.
To learn more about the benefits of an integrated spend management solution, watch the full webcast.