Efficiency in Accounts Payable is the Smart Way to Manage!

A property management company manages several multifamily residential buildings across States. The company regularly works with numerous vendors, such as maintenance contractors, utility providers, landscaping services, and suppliers of building materials. The company has a complex network of vendors that provide essential services to its properties. Each vendor submits invoices on different schedules, and the payment terms vary (e.g., net 30, net 60). Managing these payments efficiently is crucial to maintaining good relationships with vendors and ensuring the continuous operation of the properties.

Now, this is an ideal state but imagine a scenario, when an actual invoice differs from the purchase order. Yes, this situation can put you, the property manager, in jeopardy.  You find yourself in a state of shock, wondering why there’s such a big difference between the initial order and the final bill. Desperate to resolve the discrepancy, you scramble to find the corresponding purchase order, but it’s nowhere to be found.

You start to piece together what might have gone wrong. One of your employees, pressed for time, might have split the process of issuing the purchase order to secure an early payment discount from the vendor. This well-intentioned shortcut has now led to incomplete documentation and a significant billing discrepancy. 

Now, you’re faced with an urgent dilemma: Should you pay the vendor or dispute the charge?

This is where an accounts payable process becomes important. It provides accurate record-keeping, timely payments, and effective handling of discrepancies, preventing such stressful situations. 

In the following write-up, we’ll dive deeper into the intricacies of accounts payable, explore common challenges faced in the process, and discuss strategies to overcome them efficiently. Let’s uncover how a streamlined accounts payable system can save you time, money, and a lot of headaches in property management.

What are Accounts Payable in Property Management?

Property management accounts payable (AP) involves managing the money a property management company owes to vendors for goods and services like maintenance, utilities, and repairs. It includes processing invoices, scheduling and making payments, and ensuring accurate financial records to maintain cash flow and good vendor relationships.

To better grasp the concept, let’s consider an example involving Susanah, a property manager who manages several rental properties.

Susanah regularly needs to pay for various services and supplies to maintain her properties. Each time she receives an invoice for these services, it gets recorded under accounts payable. 

Here’s a snapshot of what accounts payable might include for Susanah –

This table highlights that accounts payable cover a wide range of expenses necessary for property management, from utility bills to maintenance fees. Each entry represents a liability that needs to be paid off to keep the properties in good working condition and maintain healthy vendor relationships.

Generally account payable process involves the following steps – 

1. Invoice Capture: The initial step involves collecting all invoices from vendors. This can be done manually or through automated software to minimize errors.
2. Invoice Approval: The received invoices are then reviewed and approved. It confirms that all invoices are legitimate and accurate.
3. Payment Authorization: Once approved, the payment is authorized. This involves setting a payment date, method, and amount.
4. Payment Execution: The final step is the actual payment to the vendor. This process includes sending remittance details to the vendor and updating the financial records.

Overcoming Common Challenges in Accounts Payable in Property Management

1. Invoice Processing Delays

Problem: Imagine you’re managing multiple properties, and each month you receive dozens of invoices. Manually sorting and approving these can take time, which leads to missed payment deadlines. Delays in processing invoices can result in late payments and strained relationships with vendors .

Solution: Implement automated invoice processing software like RealPage or NetSuite. These tools can quickly capture and approve invoices for timely payments and maintaining good vendor relationships. One categorizes invoices based on due dates, payment terms, and priority levels. For example, utility bills might be flagged for immediate payment to avoid service disruptions, while landscaping invoices might be scheduled for payment closer to the due date.

2. Managing High Volumes of Transactions

Problem: As a property manager, you might process hundreds of transactions monthly, from utility bills to maintenance fees. Handling a large number of transactions can be overwhelming and prone to errors.

Solution: Use property management software such as Yardi or RentManager. These platforms are designed to handle high transaction volumes efficiently. They provide real-time updates and minimize errors.

3. Vendor Management Issues

Problem: : You might have multiple vendors providing services like landscaping, cleaning, and repairs. Without clear communication, payment terms can get mixed up, leading to delays and disagreements.

Solution: Establish clear communication channels with your vendors using software like ResMan or Leonardo. These tools can help maintain accurate records and streamline vendor interactions, guaranteeing everyone is on the same page.

4. Timely Payments

Problem: Suppose you struggle to keep track of various due dates for different vendors. This can result in late payments and additional fees. 

Solution: Automate your payment schedules using AP software like Sage or Outperform. These tools can send automatic reminders and schedule payments to ensure they are made on time.

5. Reduction and Accuracy Improvement

Problem: Manual data entry and processing can lead to errors that can affect the accuracy of your financial records.

Solution: Automate data entry with tools that offer optical character recognition (OCR) technology, such as NetSuite or RealPage. This technology accurately captures invoice data and reduces manual entry errors.

6. Integrating AP Software with Existing Systems

Problem: If your new AP software doesn’t sync well with your current property management tools, it can cause data silos and operational disruptions.

Solution: Choose AP software that offers seamless integration with existing systems. Software like Yardi and RentManager are known for their compatibility and ease of integration. 

7. Compliance and Fraud Prevention

Problem: Ensuring compliance with financial regulations and preventing fraud is challenging without good controls in place.

Solution: Implement strong internal controls and regularly audit your AP processes. Use secure, encrypted payment methods and segregate duties to reduce fraud risks. 

8. Invoice Discrepancies

Problem: Discrepancies between purchase orders and invoices can lead to confusion and payment delays.

Solution: Implement a three-way matching system where the purchase order, invoice, and receipt of goods are compared before payment. Software like ResMan and Sage can facilitate this process, so that all documents match and discrepancies are resolved quickly.

Outsourcing Property Accounting and managing Accounts Payable need an expert like EXO Edge?

EXO Edge Is renowned for its comprehensive property management accounting services. With a deep understanding of the challenges faced by property managers, EXO Edge offers solutions tailored to simplify your accounts payable processes. Their expertise in integrating advanced accounting software ensures that all your financial transactions are handled accurately and efficiently. Our full-time team of 900+ employees work US hours and have the, real estate experience you require to reduce errors, improve compliance,  enhance overall financial management, and have a positive impact on vendor relationships.

Visit EXO Edge to learn more about how we can help transform your property management operations. Enjoy the efficiency and accuracy that come with professional accounting services, and see the difference it makes in your business!