The guide to creating a paperless property management office
Paper is a staple in offices around the world. From legal contracts to payments to presentations, paper-use can add up fast. Studies indicate that we use more than 700 pounds of paper per person each year in the United States, and much of that use takes place in the office.
In property management, like other businesses, excessive paper-use is expensive, bad for the environment, inefficient, and insecure. Paper in the office might seem like a given, but the “if it’s not broken, don’t fix it” attitude with paper is a big mistake. It is possible that outdated, paper-heavy processes cost more than you think.
In this guide, we will look at some of the most significant problems paper causes in property management businesses, and solutions to cut costs and improve efficiency. Every time you make a paper-based process digital, you are adding to your bottom line. When it comes to payment, eliminating paper is easier than most business leaders may realize. Read on to learn more.
The high cost of processing paper payments
When you turn on a show like "Mad Men," you get a glimpse into antiquated office procedures that rely on typewriters, paper inboxes and outboxes, and carrying folders around the office for signatures and approvals. Modern technology has made much of this way of doing business extinct. With the right focus, nearly every company can take it a step further.
The all-in cost of processing a paper check ranges from $4 to $20 for most businesses, according to The Wall Street Journal. That’s a considerable cost. When you consider employee time to process, write, sign, mail, and enter into accounting systems, it is easy to see the dollars and cents add up.
If your business sends 50 payments per month, getting out of the business of writing checks may lead to more than $10,000 in annual savings. Big property management companies can save as much as $24,000 per year for every stack of 100 paper check payments eliminated.
Unlike emergency maintenance calls in the middle of the night, you can eliminate paper checks.
Accounts payable (AP) automation systems allow your business to send payments electronically. Vendors get paid with the ease of direct deposit, and your business will save hours of valuable work time to focus on more profitable tasks. To better understand the time and efficiency improvements of eliminating paper payments, consider the typical workflow your accounting or AP team must go through to process a manual payment.
First, the invoice shows up in your business mailbox. Someone has to sort that item and deliver it to the right person or department. Next, your AP clerk, who earns an average of $22 per hour according to PayScale, has to open the envelope, match the invoice to a purchase order, type the details into the accounting system or ERP, print the check, and take it to the appropriate manager for signing.
The check isn’t done with its journey yet. After signing, it has to get put in an envelope that your business paid for, get metered or stamped (another expense), and placed in the mail. Once it’s out the door, accounting teams still must reconcile the payment when deposited and ensure the cost was accounted for properly.
For large property managers, cutting down on the time your staff spends on payments may lead to headcount reductions or redirecting their time to value-add responsibilities. In some cases, companies can turn the AP department into a profit center: Some large vendors may offer early payment discounts, which AP staff can optimize for your business to grow the bottom line.
At small to mid-sized property management firms, AP automation can help you avoid the cost of a new dedicated staff member or alleviate the workload of a busy accounting team.
Improved controls and visibility
The benefits of moving away from paper help your business in some ways that are harder to quantify. For example, automated electronic payment systems remove opportunities for fraud, employee theft, inaccurate payments, mail theft, and other security issues that come with physical paper.
When vendors opt-in to get paid via automated AP, they can get paid faster and more securely. That is a win-win for both your business and your vendors. Opposed to the manual example above, here is a look at what an automated AP workflow looks like.
First, the vendor enters the invoice information based on a purchase order, which already exists in your accounting system, into an online system or sends the invoice via email. The computer matches the invoice to the purchase order, adds it to an approval queue, and notifies the approving manager. That manager logs into the system at a convenient time, can review payment details and approve individually or in bulk, and the payment is sent.
That’s it. The AP system takes care of the accounting based on the purchase order details. When the payment is approved, funds automatically withdraw from the sender’s bank account and deposit directly into the vendor’s bank account via ACH, a system maintained by the Federal Reserve.
Without paper floating around the office or the mail, no one can steal your bank account numbers from a paper check. With a centralized payment approval system, accidental payments become a thing of the past. With automated accounts payable, fraud and embezzlement become much more challenging.
As an added check, automated AP systems give managers enhanced reporting on payments. This is another opportunity to spot problems before they spiral out of control. Quality management reporting helps business leaders make the best decisions with the best possible information.
Large companies employ teams of financial planning and analysis professionals to pull together data and look for trends and opportunities to improve profits. High quality automated AP systems give you many of these reports right out of the box. When attached to your accounting system, you can get even better reporting.
In a property management setting, managers and finance leaders are just a few clicks away from reports showing spend by vendor and average days outstanding for unpaid invoices to help you choose the right vendor for each job.
A brief analysis might help you choose a less expensive supplier for cleaning products. It could show an obvious problem with maintenance at a specific property. The potential for savings in overall spending may even rival the savings of getting rid of paper payments. However, one thing is sure: More information on expenses can only help your business.
Better vendor and client relationships
When you need something in a hurry, it is essential to have healthy and trusting relationships with your vendors. If a pipe bursts in the middle of the night, getting the right parts and people in place quickly could save thousands of dollars in damages. If you owe your plumber for several late payments, they might conveniently miss your emergency message.
Paid vendors are happy vendors. As you save money when you eliminate paper from the office, your vendor doesn’t have to open the envelope and deposit the paper check. The cash shows up in the bank by the due date.
When you move to automated AP, you might also eliminate paper for your vendor. When they send you an electronic invoice, they don’t have to print or mail anything. Your vendor might find that they get many of the same savings as you. With more tightly integrated systems, your vendor is more likely to act as part of your team instead of an outsider.
If a dispute ever does arise between your property management company and a vendor, your AP system might even come into play to help find a speedy resolution. After all, digital purchase orders and records are securely stored in your AP system so that you can access them in just a few moments.
This improved access to payment information isn’t limited to the office. Because modern AP systems, such as the automated AP solutions from AvidXchange, are based in the cloud, you can access payment systems from your laptop while traveling or even your smartphone. Rather than holding payments until you return from a conference, you can tap approve on your phone anywhere in the world to push a payment onto the next step.
Access to digital files also comes in handy on the go. While standing at a property, you can instantly pull up purchase order and invoice history with up-to-date information. If you head to a client meeting at a managed property, this can help you look more professional, better organized, and puts you in a position where you do have all the answers.
This can lead to better customer service and stronger client relationships. Jeff Fruhwirth, a real estate investor in Wyoming, recently fired his property management company after a series of missed payments led to problems with his insurance and other key vendors. When you have client needs under control, they are more likely to keep you as a manager and even refer new properties and clients your way.
“When my property insurance company sent me a cancellation notice, I was shocked to see that my monthly bill wasn’t paid,” Fruhwirth said. “I need a property manager I can count on and who takes my needs seriously.”
No matter the industry, customer service is key to success. Automated AP systems help property managers stay organized so that important client payments don’t slip through the cracks. Your clients put a lot of trust in you as a property manager. With paper all over the office, mistakes are inevitable. When you cut paper from the process, you can deliver a better quality of service with less work.
Automating supplier payments to eliminate paper
Property management best practices today have left paper checks in the dust. Gone are the days of mountains of paperwork. From small property management firms with just a few employees to property management empires with properties across the country, keeping the old and outdated paper invoicing and check-writing process in place costs time and money.
Automation may sound like a costly and expensive proposal, but with the right partner it doesn’t have to be. AvidXchange integrates with most popular real estate accounting systems and property management software for a seamless payment process. You can get up and running quickly so you and your staff can focus on what’s most important: giving your clients the best possible customer experience.
With automated AP, each payment costs just cents to process and deliver. For less than the cost of a few stamps, you can do what used to cost up to $20. Automated payment systems offer a high ROI. Depending on your check volume today, you could see a swift payback. In any case, you should see a near instant improvement in efficiency on the finance and accounting side of your business.
Take on the power of paperless processes
It’s never too late to improve your business and going paperless is an ideal way to increase efficiency and profits. Banks and credit card companies have made statements paperless. Insurance and utility providers give customers auto-pay. It’s time for your property management company to get on board with the paperless revolution.
Don’t let savings and improved efficiencies pass you by. Automated AP solutions are affordable and easy to get started.
AvidXchange can help you better manage your spend while lowering costs to process invoices and send payments. At the same time, automating AP gives you and your team more time to focus on clients, tenant needs, and marketing your business to take in new clients. And because your AP is automated, you can scale up to the task whether a new client wants you to manage one unit or 1,000.
This guide was created by AvidXchange™, the industry leader in automating invoice and payment processes for mid-market businesses. Founded in the year 2000, AvidXchange is distinguished as a global fintech unicorn and one of the fastest growing technology companies in the U.S. For more resources on the advantages of AP automation, or if you’re interested in scheduling a customized demo, visit us at www.avidxchange.com.