Outsourcing Accounting and Back-Office Functions
Digested from “Back-Office Accounting: Doing the Math”
Units magazine (3/16) Bergeron, Paul III
The apartment industry, after some reluctance, is warming up to the idea of outsourcing accounting and back-office functions.
Not every apartment property manager sees the outsourcing of services as a worthwhile venture: Just 5 percent of owners or management companies in the industry hire companies to do their accounting and other back-office work. It’s anticipated, however, that this percentage may eventually increase to 20 percent, in light of recent trends.
Commercial real estate has typically shown more of an interest in “managed services” or “business process outsourcing (BPO)” than the multifamily sector has, but this is gradually changing, says Alan James, senior vice president at RealPage.
Especially for property management companies that engage in large property transactions, outsourcing accounting work to one firm can save time and money, James said, freeing up capital that they could invest in other parts of their businesses.
NWP has been offering BPO services over the last four years. This includes handling information technology and back-office support as well as accounting duties, such as financial reporting, account reconciliation, and accounts payable. It also produces monthly financial reports. Kim Kowalski, NWP’s managing director of operations, says that such services will become more useful to property management companies as the apartment industry continues to grow and expand its portfolios on a geographic basis.
“In many cases, the person who handles accounting no longer is in the same building as the person who needs those answers. Maybe they are at the corporate level or in the regional office, so moving to an outsourced team doesn't necessarily change the proximity of the person providing the answer,” she says.
Diamond Realty Management, a Tennessee company that stabilizes and sells apartment communities, discovered the benefits of outsourcing after an experience with hiring a local accountant ended up in frustration.
“We had brought in a CPA, but ended up spending a ton of our time explaining to them, line by line, what the revenue and expense lines meant in relation to apartment management,” said Billi Jo Suiter, ARM, RAM, business manager at Management Consultants of Tennessee and manager at Diamond Realty Management.
“We do use property management software, but this is the accounting side of the business. When you have a business strategy like ours, often turning over properties, the financials are key when the time comes to sell a property,” she said.