Cash flow is the mainstay of any company. How money flows in and out of your property business has a direct impact on the success of your organization. Here are five ways to improve cash flow, and ultimately drive more revenue.
1. Add New Profit Centres
Auxiliary income is gaining more attention because it is usually pure profit. Typical revenue streams include communications (Internet/TV/phone) door-side garbage pickup, and concierge services like dry cleaning pick-up and delivery, housekeeping and even dog walking.
You can capitalize on your existing assets such as selling advertising in your parking area. Some resourceful property management companies are becoming affiliates for meal plan delivery services like Hello Fresh, and earning commissions for each tenant that signs up. Look for other revenue streams opportunities. For example, does your gym sits empty for most of the day? Why not rent it out to yoga teachers and personal trainers? Your residents will love the service, the instructors will love the space and the money, and you will maximize the amenities on the property and increase revenue.
2. Get Rid of Paperwork
Paperwork means one thing: manual work. If you are filling out paper forms, you and your teams are not only wasting paper, but you are wasting time and increasing the chances of error. Paper forms necessitate rework… you need to re-enter information into your system, raising the possibility of misspelling something or transposing numbers. It slows you down, and also requires extra work like filing, scanning and printing. That adds up to time and money lost. Going digital helps you to reduce costs and reap more profit.
Speaking of paper – get rid of paper cheques. The cost of one cheque might not seem like a lot. But think about all the associated expenses and they start to add up. There are bank fees, charges on bounced cheques and administrative costs in the form of labour and resources required to process the paper-based cheques. Independent studies have pegged cost can run between $15 to $25. Paper checks have a higher chance of going missing, either through fraud or simply getting lost in the mail, or being misplaced in the office.
Ultimately, you want to digitalize and then optimize your business practices to streamline your organization and help your people to be more productive. Usually, payroll is the single biggest operating expense of any business, so supporting your people to get out of the weeds and focus on the work that improves your bottom line is vital.
3. Create a Culture of On-Time Payment
Another key way to increase your cash flow is getting your tenants to pay their rent on time. It’s sometimes easier said than done, but there are plenty of practical strategies to increase the likelihood of getting paid faster. For example:
Get Them Set Up with Online Payments
The flip side of the coin of no longer accepting payment by cheque is that you increase payments by credit card or automated online payments. This vastly increases the odds of on-time payments, and improves cash flow.
Use Follow Up Reminders
Remind your residents when their rent is due. Send email reminders a few days before payment is due, the day the rent is due, and a few days after. If they still haven’t paid, automate escalating reminders.
Charge A Late Penalty
Another key to successful invoicing of tenants is having a strong policy and sticking to it. Have a late payment penalty in place for residents who pay after the first of the month (or whenever their rent is due). Not only will this help increase your chances of getting your money, but it will also help curb future late payments. Much of this begins with tenant education at the time of signing or renewing a lease, by going over the terms of the leasing and letting tenants know about late fees. Ensure that this is spelled out in clear terms in the lease.
Have a Disciplined Approach
In order to shorten your receivables period, you'll need to have a good collection system in place. Pull reports from across your portfolio to see how long it takes to get paid. Many rent collection policies allow for a grace period that gives residents a few extra days to pay their rent in full after the due date but before incurring late charges. Review your collections activities for when tenants go past this grace period. Can you identify problem payers fast enough, and do you have a policy in place for getting them resolved? No one wants to go to evictions; it’s a costly and time-consuming activity. Most rent collection problems occur not because the collection policy is bad, but because it wasn’t followed.
4. Manage Your Payables
Enforcing payment discipline should also be part of your payables operations. If your AP department isn’t on top of the terms and conditions of payment, there’s a good chance you are missing out on discounts. And, if you push your vendors and make a habit of paying late, that could come back to hurt you the next time a contract comes up for renewal. When you pay your bills on time, not only are you showing respect for your vendor, you are also building a positive relationship and are in a better position to negotiate for future discounts or payment terms that are more favourable to your business cycle.
Be sure to segment your suppliers - separate them into your regular vendors/contractors versus your one-off buys. How do your regular suppliers’ terms stack up against others in the marketplace? Would changing vendors provide you with better payment terms without affecting the quality of work? It’s often worthwhile to re-bid contracts once a year or more, especially for pest control, alarm monitoring and inspections.
In short, product inventory and operational goods and services provided by your vendors are essential line items, however if you’re just adding them up at the end of the month without question, there’s a good chance you are spending more than you have to.
5. Analyze Repairs & Maintenance
Maintenance costs are a huge part of a multifamily property’s expenses. Look across your portfolios and review your maintenance costs and how you are addressing maintenance issues. Deferring maintenance activities such as repairs in order to save costs can actually vastly increase your costs. A solid preventative maintenance program will extend the life of major mechanical machinery, saving you money over the long run as it results in less capital replacement costs. When you can lower maintenance costs because less maintenance is reactive, you are also lowering overtime hours and improving the flexibility of scheduling work.
Consider equipment as well. There can be a big payoff if you invest in the tools to perform some of the maintenance in-house, such as augers and pressure washers, rather than using a third-party supplier. As well, technology and equipment wear out eventually. Auction or sell-off outdated equipment.
How Property Vista Helps
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