4 Tips For Streamlining Accounts Payable And Receivable In Real Estate

Real estate business owners value consistent income and on-time payments. The property value will be adversely impacted if it is not maintained adequately. However, repairs, maintenance, and other regular expenses like taxes can be managed only when the asset generates positive cash flows. The tenant occupancy ratio, rental yields, and on-time rents determine the accounts receivable of a real estate company.

Establishing a managed accounts receivable will ensure a seamless AR system. In such an environment, rent is collected efficiently, resulting in a positive influence on the accounts payable function. The property owner will not have issues paying the vendors who manage the cleaning services, utilities like water, and electricity, and other contractors who maintain the property like turf-management companies. There is no late fee levied on the business as they meet their financial commitments promptly. Stronger relationships are developed over a period with vendors when their dues are cleared by a business in time.  

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Real estate owners always complain of inconsistencies they face with rental dues from their tenants or customers. Different people manage their finances as per their best abilities. Some of them face short-term financial constraints due to changes in jobs or some emergency funding. Tenants falter with their rental obligations, causing a strain on the real-estate receivables. Since these issues are common, the projected income is also not definite. Managing the commitments of the businesses without understanding the future flow of revenue is challenging for real estate companies. When accounts payable and receivable processes are automated, the barriers to efficient operations will improve tremendously. Here are some tips to streamline AP & AR processes:

  • Automation Platforms

Availing managed services for accounts payable and receivable processes will reduce errors, increase the cash flows, maintain liquidity, enable payments on time, keep the days-to-outstanding low, and help the business maintain working capital through self-reliance and sufficiency. 

  • Reduce The Transaction Cycle

In business, time translates to money. Every delayed payment due to business will lose on accrual of interest that can be earned in an overnight fund. Likewise, if a business delays the payments to vendors, a penalty interest is incurred. The solution to this issue is maintaining short transaction cycles. It means that you are collecting the payment due to business in advance. The rental deposit should cover any unforeseen discrepancies. 

  • Reward & Removal

Rewarding your good clients, reducing business with repeat delinquents, and avoiding with one’s who are not showing signs of improving their ways, is a practical means to manage your winners and laggards. Give a discount or coupon for the tenants who pay before the due date to keep them motivated and encourage them for their good actions. 

  • Improved Communication

Having the same platform for managing AR and AP functions will reduce inter-functional communication gaps. When teams are on the same page, the commitments can be easily handled.

Conclusion:

Real estate appreciation is capped in most populated places around the most lucrative markets. In such scenarios, maintaining steady cash flows from operations is the only way to confirm the upkeep of the properties. 

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