Outsourcing Accounting Has Become a Competitive Advantage
Apartment acquisition is not just a question of having the investment capital in the tank, but also a matter of enough horsepower to get there. Expanding a property management portfolio requires effective administration of new properties, from onsite personnel to the back office. If there isn’t enough muscle, the profitability goals won’t be met.
“I’ve had portfolio executives share concerns about taking on management of additional properties due to their ability to hire enough property accountants to deliver the monthly financials,” says Annette VanDuren, an industry principal at SmartSource Accounting. “It’s become a reoccurring conversation.”
In today’s multifamily marketplace, personnel management has become a competitive advantage. Industry professionals say there are deals to be had, and those who have the right financial personnel to divide and conquer have a leg up.
Leaving accounting to someone else relieves time constraints
VanDuren, a 10-year real estate veteran, says financial leaders are mismanaging their time when they can’t focus entirely on an acquisition because of being bogged down in administrating the property level financials.
A property acquisition mostly affects the workload of administrative staff – particularly in accounting.
Taking on one or a handful of properties usually means divvying up duties or hiring additional personnel to ensure that financial reporting is managed efficiently. The hiring process and time it takes to train can slow a portfolio in getting up to speed.
Leaving the accounting to someone else, VanDuren says, enables property management companies to make faster, better decisions to grow a portfolio and not worry about staffing. Companies like RealPage’s SmartSource Accounting work with property management firms to provide the right staffing when growing a portfolio without having to make a major investment growing their team. The service helps firms pull the trigger faster on acquisitions and portfolio growth opportunities.
“It’s a very quantitative solution,” she said. “If you’re bidding for new management deals you can be assured you can handle this windfall. If you have 4,000 units coming in, it’s very challenging for a property management company to hire accountants that fast.
“One of the topics CFOs discuss with me is, where is best place to spend my time? Do I bring more value spending time chasing the next deal or building an accounting team? No one will pay more to rent an apartment if you have killer balance sheets, but you may lose deals if you don’t produce financials on time and accurately.”
A sophisticated tool that works within specific property perimeters
VanDuren says SmartSource Accounting isn’t a one-size-fits-all solution but a sophisticated management tool designed to work within the specific accounting perimeters of any property. The software allows for documentation of specific property requirements, deadlines and approvals needed to eliminate the undependable “tribal knowledge” practice of many accounting teams. One unexpected team member departure can play havoc with the loss of knowledge.
RealPage works with several universities that are producing a strong pipeline of property management accountants to recruit and maintain talent. Providing trained personnel that can step into a multifamily environment and quickly be at speed is an advantage, VanDuren says.
Having a right-sized staff no matter market conditions
The solution is particularly effective in a tight job market such as today, VanDuren says. The country’s low employment rate, which is particularly lean among accountants and auditors, has made recruiting, training and maintaining staff levels more challenging. In March, the unemployment rate for financial activities sat at 2.3 percent, compared to an overall 4.5 unemployment rate, according to a report of the Bureau of Labor Statistics reported by Accounting Principals.
When property management companies expand and have difficulty adding talent, the existing staff can become overtaxed and prone to mistakes. Corporate officers, therefore, may get a cloudy picture of performance.
“You have right-sized staff at all times, even with dispositions,” VanDuren says. “It’s quite tempting to keep good property accountants on the payroll, even if you’ve sold or lost management of some assets. CFOs see the value of paying for only what’s needed through outsourcing.”
Piggybacking on the globalization of the accounting platform
Alan James, senior vice president at RealPage, says outsourcing day-to-day accounting activities frees up leadership from the hassles of managing tactical duties like accounts payables, general ledger processing, financial reporting, payment processing and bank reconciliation. The in-house finance staff can better focus on strategic responsibilities like forecasting, planning and budgeting.
In short, it’s technology working for the benefit of property management firms.
“It’s made it easier to do what we do and how we do it with less training time,” he said. “The rapid progression of technology itself and the maturity of software in general has made it much more possible. It’s the globalization of the accounting platform that makes it possible.”