Hidden costs are inevitable in property management, and most communities’ maintenance shops and offices will be reduced at some point. Keeping a detailed, close eye on inventory will help some, but there are other ways to boost your bottom line.
1. Consolidate contracts. By adopting the streamlined approach to national contract negotiations, companies can save thousands. The old-school way tells us to use multiple vendors for the same materials but by streamlining and standardizing the process, it can pay off handsomely.
As an example, Company A buys about $4.5 million in appliances each year and has always split those purchases between two vendors. After approaching them and asking, “If we give you the whole contract, how much better could we do?” they were surprised by the results. The winning vendor came back with a 20 percent reduction, meaning that Company A will save $900,000 on appliances this year just for choosing one primary vendor. Taking the same approach with carpet suppliers, the company saved about $175,000.
And by going with one vendor for maintenance, repair, and operations items—such as plumbing supplies and light fixtures—the company again had two vendors duke it out. They are going to get anywhere from $500,000 to $1 million in savings in a year because of the discounts they will be getting.
At the end of the day, those appliance, carpet, and maintenance materials savings could add more than $2 million to the bottom line.
2. Reduce invoice processing. Processing of supplier invoices for both approval and payment is one of the most overlooked areas where hidden costs lie. Research has shown that it costs anywhere from $45 for $75 to process one invoice. Processing (soft) costs include employees’ time, usually multiple employees, postage and paper costs.
Do not have your team price shop. This takes away valuable time that they could be spending on residents or leasing vacant apartments. If you have chosen your key suppliers and points of contact are in place, this should not be something your onsite people need to do.
Think about this scenario: Your empowered property manager has taken it upon herself to price shop her needed widgets of the day. She finds a few at ABC Parts for a good price and the rest at XYZ Parts. She is so excited because she feels she has been a good steward of the owners’ money. She saved a total of $35 by using two vendors instead of the one. What she doesn’t realize is she actually cost her company money, because to process the second invoice, it will cost the company anywhere from $45 to $75. This does not even take into consideration the amount of time she spent Googling and price shopping!
By implementing the first point in this blog, you will take this component away from your onsite team. By consolidating suppliers, you won’t need to price shop!
3. In-House training. Believe it or not, spending money on training programs for your team—either at the onset of employment or throughout their tenure—actually saves you in the long run. Hiring and training new people is costly. Choosing the right person for the job in the beginning is the most important factor here, but training them the right way to give them the tools they need for the job is just as important. The Army conducted a study that shows online training can cut costs by one-third and is delivered in one-third of the time, with one-third better comprehension over classroom training. Employees feel the company cares enough to invest in their growth and improvement when training is available. This enhances the employees’ performances and your property’s bottom line.
Melissa Palmer has a 20+ year history in Property Management and has held various positions at both the site and corporate levels. In her experience she has assisted over 60 property management companies totaling over 350,000 units. Melissa is a Certified Apartment Manager (CAM) through the National Apartment Association and attended The University of North Texas in Denton, Texas. She is currently Partner, and Vice President of Operations, for The MaRK Advantage, a boutique consulting firm in the D/FW area.