By Brian Thayer, vice president of real estate, AvidXchange
Over the past 18 months, the real estate industry has encountered unprecedented challenges, radical demand fluctuations and workplace shifts in which employees conduct business virtually more than ever before. And now, because of all this, the industry has made necessary adaptations to maintain the status quo.
Technology changes, particularly back-office automation, have been a big part of this newly coalescing industry. How might these changes affect the financial operations and management of commercial properties for real estate professionals?
Decentralized Industry Structure
According to the Association of Finance Professionals, paper checks still comprise 42 percent of all business-to-business (B2B) payments in the United States. This use of paper — still remarkably popular in 2018 — has become an even bigger pain point due to the demands of the real estate industry’s decentralized structure.
Today, property managers employed by the same company are often dispersed and manage hundreds of units across multiple states, creating an increasing need for the use of automation technologies. And no matter the location or number of projects, paper invoices and payments still must be processed and paid on time to avoid late fees.
During the pandemic, automation technology was a driver in helping consolidate payment systems in ways that allowed finance professionals and property managers to easily see the status of arrivals, approvals and payments of bills. This helped tenants avoid the incurrence of aforementioned late fees and also enabled managers to gain control over the entire payments process.
Additionally, this technology allows these tasks to be managed all in one platform, providing the ability to greatly reduce complexity and eliminate the need to manage all these financial transactions separately from each individual office.
Accelerating Automation
The growth of automation is part of a larger trend in which more real estate companies have been investing in technology to ensure business continuity through uncertain operating conditions.
A recent World Economic Forum report points out that “technology and digital solutions will be among the most critical enablers to usher in the new era of real estate.” According to the report, there will be an acceleration in digitalization and innovation for attracting workers with specific talent and knowledge of digitalization, as well as in enhancing their workplace skill sets.
Consistent with this, Bitwise Industries notes that “the immediate need for innovation and automation is now a necessity to not only survive, but also to truly thrive in the real estate industry…[During the pandemic] there was also a huge influx in artificial intelligence (AI) tools ripe for adoption.”
Automation and other advanced technologies help differentiate real estate companies from other firms. It gives finance professionals new and easier ways to serve and support customers, vendors and suppliers while eliminating the sluggishness and unreliability of paper processes. Automation can also make employees happier because it allows liberation from manual tasks and the ability to sharpen other, more valued skills like financial analysis and reporting.
Three Critical Tech Components
Ensuring a strong tech stack — a combination of integrated solutions used to manage daily operations — is essential to today’s back-office success, and finance leaders should consider a few key technologies that enhance automation.
First, managers must have the right software itself. It’s the engine with the rules and instructions to automate each step of the invoice and payment process.
Second, business leaders should consider solutions with application programming interfaces (APIs). These are the software-based connecting “plugs” that enable various types of business software to “speak” the same language. APIs’ open communications pathways allow for easy transmission of invoice and payment data between systems.
Third, leaders need to embed machine learning capabilities within their back-office automation systems. As these systems gather more data, this technology generates more accurate predictions about future metrics, such as the percentage chance that a vendor will make late payments.
Final Thoughts
Real estate companies must continue to adapt to the new way of working. Paper-based, manual processes are no longer a feasible option to remain successful. Instead, leaders should look to implement automation solutions to support operations — both remote and in-office — and to help bolster their business with faster, more efficient and more secure electronic processing of invoices and payments.
— AvidXchange is a Charlotte-based firm that helps middle-market businesses automate their accounts payable processes to boost efficiency, accuracy and speed.