Final modified on February seventh, 2023
By Matthew Kaddatz
Understanding the monetary efficiency of your property administration enterprise is vital if you wish to keep compliant and worthwhile, particularly in immediately’s actual property market. Again once I used to personal and function my property administration firm, I evaluated my accounting course of efficiency metrics regularly. By doing so, I used to be capable of uncover inefficiencies and enhance my accounting operations throughout the board.
In case you’re not at the moment monitoring or evaluating your accounting course of KPIs, then you could be unaware whether or not or not the present methods you’ve in place are working, making the mistaken selections, or lacking out on progress alternatives. To not point out, while you don’t have a transparent image of your monetary efficiency, it opens your small business and purchasers as much as potential losses and danger — one thing all of us wish to keep away from.
Partially two of our accounting and reporting instructional collection, I’m going to share 4 vital accounting course of KPIs it is best to monitor and why, and the way you should use the most recent accounting instruments to avoid wasting time, make higher selections, and enhance money circulate.
Whereas this text incorporates useful info, I’m not offering authorized recommendation and it is best to seek the advice of a professional tax legal professional for any particular questions on your accounting processes or taxes.
Course of KPI #1: On-line Hire Assortment
Aim: Each property supervisor ought to try for 100% on-line hire assortment. These funds needs to be made on-time and on-line.
In all probability some of the business-critical KPIs you ought to be monitoring is on-line hire assortment. In case you don’t at the moment have on-line funds, then it is best to significantly take into account adopting a property administration software program that has them constructed into the platform. Why? As a result of in response to NMHC 72% of renters are lower than 45 years previous. They’re accustomed to utilizing digital instruments to carry out a lot of their each day duties, and paying their hire isn’t any exception. Moreover, over the previous two years, the pandemic has made the necessity for on-line funds important.
On-line funds profit everybody — property managers, homeowners, and distributors — since they transfer cash sooner and simpler than conventional strategies. When you’ve on-line funds you possibly can velocity up the downstream processes, like paying homeowners and distributors because you’ll be getting cash into your checking account sooner. On-line funds additionally save time, as property managers not have to gather and course of checks or money funds manually. By encouraging your prospects to pay hire on-line, you’ll profit from extra hire collected general and extra inner efficiencies.
Twelve years in the past once I was working my enterprise, I transitioned to on-line hire funds and noticed the profit nearly instantly. In some communities we noticed a 30% enchancment in on-time funds once we switched to on-line funds.
Figuring out that on-line hire assortment is vital to the success of your small business, you want a platform with a purpose-built fee portal to make the change from writing paper checks to paying their hire on-line as simple as attainable. Beneath is an inventory of issues it is best to take note of when you’ve transitioned to on-line funds:
- Is the instrument you provide protected, accessible, and mobile-friendly? Can renters go online from their desktop or their cellphone to securely pay their hire?
- Has a renter made at the least one fee on-line through their most popular technique?
- Are they utilizing the net fee choices persistently, organising recurring funds?
- Is the renter having a very good expertise utilizing the net instrument? Is it simple and intuitive? If the primary impression is an effective one, they’ll proceed to make use of the platform persistently. If not, you may even see them resort again to paying by verify to keep away from the effort of poor expertise.
Course of KPI #2: Normal Hire Assortment
Aim: Constant hire funds > 95%.
This course of KPI is an extension of on-line hire assortment, however encompasses all hire assortment (on-line and offline). 100% hire assortment is troublesome to do, nevertheless it is dependent upon the demographics of your properties. So it’s essential to know who your renters are and if they’re open to adopting on-line choices. Briefly, it is best to all the time goal to have constant hire funds and greater than 95% collected each month persistently. Whereas on-line hire assortment is unquestionably most popular, having a mixture of each on-line and offline hire assortment strategies is best than no on-line hire assortment in any respect.
The sorts of hire assortment processes you’ve in place can even affect your skill to draw new enterprise. As an example, homeowners in the end select property administration corporations to handle their investments primarily based on hire assortment historical past and if the enterprise is reaching their hire assortment objectives persistently, amongst different issues. Once I was working a property administration enterprise, I used to be capable of appeal to new homeowners due to a powerful monitor report of excessive hire assortment.
One of the best ways to drive hire funds — exterior of shifting as a lot on-line as attainable — is to be constant. This begins from the start with deciding on what varieties of rental candidates you’ll or gained’t settle for. You want a constant standards, clear delinquency coverage, and late charge coverage if you wish to guarantee your funds are on-time and in full. Utilizing a property administration system that has built-in tenant screening can allow you to create a preset leasing standards, so each applicant goes by the identical course of each time.
Moreover, it is best to all the time observe equity to everybody and make no exceptions to your standards or insurance policies — in any other case this might result in danger or lawsuits. A great rule of thumb is to comply with all Truthful Housing Legal guidelines and to remain updated on any housing legislation modifications that will have occurred in your state or native jurisdiction.
In the case of expertise, a system with automated fee reminder notifications and late charges can immediately enhance your on-time funds and mitigate danger.
Course of KPI #3: Financial institution Reconciliations
Aim: 100% accuracy within the numbers.
The third KPI it is best to monitor is financial institution reconciliations. Whenever you reconcile your property administration financial institution accounts, every thing ought to match greenback for greenback in your software program. It’s extremely essential to make sure you have accuracy, or else you possibly can open your small business as much as an audit.
One of many issues I discovered most essential in my accounting workflows every year was to reconcile and tie funds to every particular person property proprietor — it made issues quite a bit clearer and helped me to remain compliant inside my native actual property bureaus. By doing reconciliations that tie to homeowners and banks (aka Triple Tie Out), it reveals that the funds are being held clearly and transparently. All financial institution accounts which might be belief accounts needs to be achieved on this method — 100% of the time and on a month-to-month foundation.
If in case you have disjointed methods or use spreadsheets to reconcile your accounts the method of reconciliation may be tougher and value your group extra time. Adopting an answer that gives financial institution reconciliation and diagnostic reviews may help you shortly run reviews and guarantee your entire numbers align.
Course of KPI #4: 1099s
Aim: On-time submitting of all 1099s.
Making ready and sending 1099s to property homeowners and distributors is extraordinarily essential because it’s a requirement of working a enterprise. In case you dread this activity yr after yr, you’re not alone. Many discover it to be cumbersome and error-prone. Plus, when you’re late on submitting them to the IRS you possibly can face some hefty fines — as much as $100 per 1099 in some circumstances.
There’s a big worth in producing 1099s robotically and to have accompanying reviews, as a result of it saves time and will increase accuracy. Having your 1099 course of streamlined and automated can even show you how to keep away from these extraneous late charges. By switching to an automatic system to course of 1099s, property managers are saving hours per yr on accounting. To not point out, they by no means must pay a late charge.
Preserve an in depth eye on the accounting course of KPIs I discussed on this article to extend efficiencies and scale back danger for your small business. And when you’re nonetheless utilizing restricted or disjointed options to deal with your accounting workflows, then take into account going digital and embracing automated instruments like I did. To study extra about how one can overcome frequent accounting challenges and save time, check out this information.