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What Makes Outsourcing Accounts Receivable a Smart Choice for Real Estate?

by | May 3, 2024 | Real Estate

With a multitude of core responsibilities, real estate companies often find themselves with little to no time to manage their accounts receivables, a critical aspect of maintaining healthy cash flow. In tackling this challenge, these companies generally have two options: managing these receivables in-house or outsourcing them to a reliable partner. 

Studies and industry data suggest that outsourcing reduces errors and enhances efficiency. In fact, statistics show that firms outsourcing their financial tasks can reduce operational costs by up to 30% and improve accuracy by 50%. 

Curious about how outsourcing can be the superior choice for your company? Dive into this article to discover the finer details and advantages of outsourcing accounts receivables and see why many use this solution to streamline their cash flows.

What are Real Estate Receivable Services?

Accounts receivable services are essential for real estate businesses as they directly impact cash flow, an integral part of financial management. These services include managing payments due from clients such as tenants or property buyers, which is vital for maintaining liquidity and ensuring business operations can continue smoothly.

Key Receivable Services in Real Estate:

  1. Rent Collection: Timely gathering of rental payments from tenants.
  2. Other Receivables: This would include charges over and above rent viz., Parking charges, Pet fees and other sundry receivables
  3. Lease Management: Administration of leasing terms and ensuring compliance from both parties.
  4. Invoicing and Billing: Issuing invoices for rent, management fees, or other related charges.
  5. Payment Processing: Handling and processing received payments and updating accounts accordingly.
  6. Account Reconciliation: Ensuring payments matched the invoices issued and resolving any discrepancies
  7. Implementation of Escalations: Timely intimation of rental increase/ escalations

How Effective Receivable Management Fuels Real Estate Stability?

In real estate, managing receivable services effectively is not just a requirement but a strategic advantage. Let’s understand the importance of it through the examples:

For instance, 

Consider the challenges faced due to mismanagement of rent collections: a real estate company that fails to collect rent effectively can experience significant cash flow problems. If a company with monthly operational costs of $100,000 fails to collect $30,000 in rent, it risks not meeting it’s financial obligations, such as paying staff or maintaining properties. This can lead to cash flow mismatch and delay payments and thereby, impacting the service delivery. ..

Similarly, ineffective lease management can confuse payment obligations, leading to delayed or missed payments. If lease agreements are unclear regarding due dates or rent increases, tenants might not comply on time. This triggers a cycle of unwanted follow-ups and disputes and diverts resources from growth-focused activities.

As seen in these examples, managing real estate receivable services is crucial for maintaining a company’s financial health. Proper management ensures a steady cash flow, fulfilling financial obligations timely, and thereby nurturing positive relationships with tenants—all vital for a thriving real estate business.

Benefits of Outsourcing Real Estate Receivables 

Generally, companies choose between managing receivable services in-house or outsourcing them to specialized partners. 

  1. Enhanced Cash Flow Management: Outsourcing can accelerate the payment collection process, which is crucial for maintaining a healthy cash flow. This is achieved by efficient invoice processing and timely follow-ups on overdue payments​.
  2. Cost Reduction: By outsourcing, real estate companies can save on the expenses of maintaining an in-house team, such as salaries, benefits, and technological infrastructure. This makes outsourcing a cost-effective alternative​.
  3. Access to Specialized Expertise and Technology: Outsourcing firms often have access to the latest technology and specialized skills in accounts receivable management, which many real estate companies may not possess internally. This expertise helps in ensuring accuracy and compliance with current financial practices​.
  4. Focus on Core Business Functions: Delegating receivable tasks allows businesses to concentrate on their core activities, such as property management and customer relations, rather than administrative and financial operations​.
  5. Scalability and Flexibility: Outsourcing receivable services provides the flexibility to scale operations up or down based on business needs without hiring or training additional staff. This is particularly useful for handling fluctuations in workload during different business cycles​.
  6. Risk Management and Compliance: Outsourced providers are adept at resolving complex credit situations and regulatory environments. Thus, it reduces the risk of non-compliance and errors in financial processes.

Hence, it is of vital importance to select an outsourcing partner with proven expertise and knowledge in this field, as it significantly impacts the efficiency and reliability of your receivables management.

Why Choose EXO Edge?

EXO Edge is the #1 outsourcing partner for real estate management companies.  We support clients with services such as Property Accounting, Capital Projects Accounting, Receivable Management and Accounts Payable.

  1. Expertise in Real Estate: EXO Edge has significant experience and proficiency with real estate management software and specialized accounting practices.
  2. Comprehensive Service Range: They offer a broad spectrum of services, from bank reconciliations to lease file audits, accommodating all aspects of real estate financial management.
  3. Operational Efficiency: Clients have reported that outsourcing to EXO Edge has given them more time to focus on core business functions.
  4. Cost Effectiveness: Real estate management companies can reduce operational costs by outsourcing to us. This cost-effectiveness extends beyond mere savings on salaries and benefits for in-house accounting staff; it also encompasses savings on infrastructure, software, and training costs. By entrusting their accounting tasks to our expert team, companies can streamline their financial processes while enjoying significant cost savings. This, in turn, provides them with more resources and time to focus on their core business functions, such as property management, client relations, and strategic planning. Ultimately, outsourcing to EXO Edge not only enhances efficiency but also ensures that real estate management companies can maximize their resources and remain competitive in today’s dynamic market.
  5. Best of Services: We at EXO Edge aim for client delight and this is reflected in the numerous testimonials we have received from our clientele. For more details, you can visit our finance and accounting support page or contact us at sales@exoedge.com