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Balancing company expenses is a vital task every real estate business needs to learn. According to a Zillow report, operating costs can take up anywhere between 35% to 80% of the gross operating income (GOI) of rental properties. So, without efficient tracking and resource management, companies can’t meet their profit margins successfully.
To maintain an excellent profit-loss ratio, real estate businesses must limit unnecessary costs. The following expense tracking and management solutions can help with this.
6 Ways to Keep Track of Real Estate Expenses
Real estate expense tracking and management solutions can range from manual spreadsheet reporting to business expense tracking software. Companies can even use third-party services to optimize their operations. While all methods have their benefits, some solutions are more feature-laden and advanced than others.
1. Using Spreadsheets
Conventional manual models like spreadsheets are commonly used to track real estate expenses. This method requires little to no prior experience. Any employee with a basic knowledge of computers can use spreadsheets to track operational costs. A spreadsheet-based report is pretty straightforward and requires users to feed the data into the system manually. Workers also benefit from choosing from multiple template sets for the most appropriate outline.
However, manually keeping track of property expenses is tricky. This method is prone to error and inefficient. Companies also manage multiple properties simultaneously, making manual tracking tough. They may have to maintain multiple spreadsheets to look after the business expenditure efficiently.
Additionally, manual expense reporting is particularly inefficient during tax season. Human workers are prone to errors when accounting the returns and payments. Even small mistakes in spreadsheet reports can have significant repercussions later on. To avoid such issues, real estate businesses can turn to more advanced methods.
2. Installing a Property Expense Management Tool
Well-rounded real estate software like Yardi or MRI can help rental companies balance their expense-profit margins. These programs enable users to track and manage operations expenditures by letting them
- Centralizing the transactional database
- Creating electronic reports for servicing, repairs, and more
- Automating rent collection data
- Create cloud-based storage
- Categorizing expenses
- Enabling multi-user access for easy data input
- Supporting receipt scanning
A property management program must also have an automatic payroll scheduling feature. An expense tracking integration like this will help real estate companies automate their tax filing. It may also enable same-day deposits.
An automated payroll feature makes wage calculation more efficient by eliminating human input. With this setup, the expenses are calculated faster and without errors. It also makes expense tracking and recordkeeping more accurate.
3. Training Employees in Property/Expense Management Software
According to a Forbes Magazine report, training employees is critical to optimizing business operations. This article highlights how introductory programs help businesses cut back on expenses in the long run. An often underlooked solution, training employees in real estate software can also make data (expense) tracking more efficient.
For example, receipt entry is one of the most common reporting issues for real estate companies. Management software can make this process more efficient by allowing receipt scanning or digital receipts. However, without proper training, even this tracking method can fail to reach its potential.
Employees unfamiliar with the software may face issues scanning receipts onto the database. Errors like this can complicate overall expenses and make tax deductions a nightmare. Proper training will eliminate these issues and help you optimize your software integrations.
4. Getting a Third-Party Service
Working with a third-party professional can help real estate companies reduce expenses. Hiring analysts will give business owners a bird’s eye view of their operations. A professional can detect and find issues in your operations you may otherwise overlook. Outsourcing tasks thus helps companies in the following ways
- Thorough assessment of operations
- Professional recommendations
- Highlighting of areas for improvements
- Detecting low-profit regions
- Focus on core business
- Budget forecasting
For best results, companies should look for a service that offers a dedicated account manager. A real estate consulting firm with 24/7 support helps businesses relieve the load of tracking daily expenses. These professionals may also bring expense tracking software otherwise missing in their operations.
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5. Setting Up a Dedicated Expense-Management Role
Real estate companies working without a dedicated expense management role can benefit from hiring a qualified professional. Tracking operational costs requires a thorough knowledge of related software and accounting. A sales or marketing team member cannot efficiently commit to such a role.
Thus, creating a property/expense management role can benefit real estate companies. A dedicated team/employee managing expenses makes the system more efficient.
6. Revamping the Current Expense Tracking Model
Real estate businesses facing unexpected costs and expenditures may need to re-evaluate their expense-tracking model. Lack of training, absence of essential software, poor infrastructure/appliances, and more may be causing an imbalance in the profit-expenditure ratio.
For example, a real estate company may be incurring losses from poorly managed assets like
- High-consumption lighting
- Faulty plumbing requiring frequent repairs
- Dated HVAC systems
- Inefficient payroll system
- Underfunded property management plan
- Faulty marketing strategy
- Dated accounting system
- Inefficient tenant acquisition policy
To cut down on expenses businesses first need to identify these critical threats to cut down on their expenses. Such a change may demand an upgrade from the current operating model. A revised cost reduction plan will help them track and manage their expenditure more effectively. The new model will account for all the issues of the previous one and make provisions for the same.
For example, revamping a real estate cost management plan may require upgrades in property management software. Businesses may need to switch to automated programs to eliminate inefficient systems like spreadsheets and paper tickler files.
Last Updated on by Icy Canada Team
