By Mike Ballard
Outsourced operations have continued to gain traction in the multifamily industry as new technology and providers emerge. Many find themselves questioning if this is a quick fix or the dawn of a new industry-altering work model. Such practices may not fit perfectly into every business, but its versatility throughout a range of departments and roles can make it extremely valuable to many.
Outsourcing is neither a trend or temporary fad, but rather a solution for optimizing internal and external performance. Since 2012, outsourcing providers have maintained a multi-billion-dollar industry that shows no signs of stopping. Its global revenue has fluctuated around $80 billion to over $100 billion for more than ten years.
Amid the pandemic, a majority of the workforce shifted to online and remote models, furthering the widespread interest of outsourced services and automation. According to Fortunly, 66 percent of companies with 50 or more employees are outsourcing. At the forefront of industries adapting to the shift are multifamily and property management.
If you’re currently an owner or developer thinking about starting your own management firm, you’ve probably gone back and forth on weighing rewards and risks. Some of the first things that can come to mind are balancing staff, finances, time and operations. These functions can add up but shouldn’t hold you back from making the leap.
Through outsourcing your back-office, operations can be streamlined to allow you to focus on growing and managing your business and optimizing performance. While payroll tends to be the first and most popular outsourced function, owners and management companies are extending their outsourcing efforts onto more back-office functions like human resources and accounting.
What is Outsourcing?
Outsourcing is the practice of one company forming an agreement with a third-party provider to perform services that are traditionally completed in-house. At Ascent, we partner with multifamily owners, operators and management companies to perform accounting, human resource and payroll services.
When it comes to outsourcing, the priority is finding a partner that aligns with your goals and functions. The purpose is to ease your workload while getting those key tasks completed. To ensure it’s right for you and your business, it’s important to fully grasp the concept: what it is, how it works and why it’s necessary.
Each partner for which we perform services has a controller or senior accountant with whom they interface with on a weekly, bi-weekly or monthly basis, as determined by the client. This allows our team to handle these functions while you focus on critical areas like clients, expansion, development and acquisitions.
We operate like an internal back-office department would by handling daily operations, including paying bills, account reconciliations, posting month-end journal entries, payroll, employee training and development, custom reporting and more. What makes outsourcing these functions drive your business is simple. We are specifically trained to be experts in the multifamily industry and these individual fields.
If you are just starting your management company, this saves you the hassle and stress of trying to do it all yourself or finding someone that can. In fact, we’ve had a few clients hire us before they acquired their first property. One client that did this now has more than 12,000 units under management.
It is impossible for managers of small to medium sized real estate operations to stay on top of it all, especially when they must focus on responsibilities other than human resources.
What are the Benefits?
The efficiency of an outsourced relationship can be significantly beneficial, from cutting costs to business growth and flexibility, the possibilities are endless. The majority may outsource to cut costs, but the advantages can extend beyond financial reasons:
Freedom and Flexibility
By removing in-house operations, you’re making room for your time to be focused elsewhere. As you acquire, sell or manage more properties, there is no need for you to hire or fire anyone. The worries of being over or understaffed are no longer in the picture and your efforts can remain on your clients.
The elimination of daily complications like employee issues, dealing with errors or technology issues allows you to scale your business. At Ascent, we provide our clients around-the-clock access to records, reports and transactions for that exact reason.
Outsourcing offers a substantial financial advantage for most companies. Hiring, training and maintaining a back-office department can be costly. In addition to the salaries and benefits, you don’t have to worry about purchasing computers and other technologies or the cost of real estate. On average, our clients experience a 25 to 50 percent reduction in operating costs.
Business Continuity and Security
Now more than ever, good employees are hard to find…and keep! When an employee leaves a company, the information, time and experience they have gained over time goes with them. Thus, restarting the entire training and developing process of a new employee, but with outsourcing this can be avoided. It eliminates the risk of such valuable loss and enhances business continuity.
Data and reports are also typically stored virtually on secured servers in the cloud, which protects your company from more physical data loss and eliminates the need for disaster recovery.
Buying Power and Credible Information
Depending on whom your provider is, outsourcing firms tend to have reliable and unparalleled buying power which allows them to secure competitive property insurance and payroll processing costs. For instance, our team packages insurance products, such as health insurance, voluntary benefits and workers’ compensation under an umbrella policy, offering clients economies of scale.
Outsourced providers are also experts of their specific trades, who know how to get the job done accurately and on time. They are consistently working on tasks in real time to provide accurate, current and live data at your fingertips. With Ascent, your accounting is processed at transactions come in, whether that is daily, weekly or monthly.
The most important factor when considering outsourced services is determining if a provider is the right fit for your company’s overall goals. In order for outsourcing to be efficient, your business model and partnership must align.
And while it doesn’t always work out for everyone, I can help you determine whether or not it’s right for you. I’m here to share real examples and experiences to help with those tough questions and decisions. If you’re interested in discussing, please give me a call at (702) 467-0789.