Cutting costs in the back office

Real Estate Weekly, August 17, 1994 by Eric R. Gerard

In the name of cost efficiency, such tasks as billing and collecting rent, tracking tenant arrears, paying taxes and vendors, and performing routine administration are increasingly being outsourced by co-ops/condos and other owners and managers of residential real estate. Automated Property Administration (APA) was founded to handle administrative back-office work for residential real estate properties and portfolios.

APA, which its principals say is the first company of its type dedicated exclusively to residential property administration, performs such functions as accounting, bookkeeping and billing, creating significant cost reductions for companies whose back-office operations do not have the critical mass to operate at maximum efficiency.

"In the current economic climate, improvements in productivity can have a meaningful impact on the bottom line of any business," said David Small, senior vice president of APA. "This is especially true for real estate owners and managers, and they have found such an opportunity in outsourcing."

APA's service can be used by co-ops/-condos, individual owners, managing agents, multi-family housing developments and financial institutions without any conflict since the firm's activities are limited strictly to administrative work.

"Just as outsourcing is proving cost-effective in many other service and manufacturing industries, and for many other functions, real estate operators have found significant advantages in shifting the burden of the back office from inhouse staff to an outside specialist," Small said. "By outsourcing these tasks to an experienced and professional firm which will handle their entire back-office needs, managing agents cut personnel costs, computer budgets and administrative overhead, while simultaneously making more time and energy available to managing their properties and their business. In addition to freeing up valuable resources, outsourcing these functions may actually prove to cost less than it would to handle the operations in-house."

APA does not act as a managing agent or broker. Neither does the firm engage in any front-office activities for itself or on behalf of clients. Currently, APA handles thousands of residential units, and interest in the company is growing rapidly.

APA uses the most popular, non-proprietary property management software systems available. Computer hardware is state-of-the-art. Each APA client can get confidential, on-line access to review all transactions to closely monitor its finances. The use of this software insures the smooth transition of back office operations, should clients decide to bring the operation back "in-house" in the future.

All data entry is done by APA, unless a client requests otherwise, to ensure the integrity of input information. Clients are sent complete back-up records once a week.

APA's entire system is backed up every 24 hours. A complete back-up record is always maintained in a secure, off-site vault facility to ensure against any catastrophe.

In addition to billing and collection of monthly charges to tenants and payment of all properly approved invoices, monthly statements include statement of cash position, a summary and detailed report of cash flow from operations, rents receivable aging, a rent roll, a disbursement report, an accounts payable report, as well as copies of all paid invoices.

APA's employees are all bonded. While the company does not sign checks, it does provide complete check-writing and document-processing services, and clients remain in full control of revenues and expenditures.

Managers Get More Time To Manage

Management expertise is a valuable and limited resource. APA attends to details that accounting and smooth administration demand, and frees managers to focus on their most productive activities - revenue enhancement (sales and marketing), tenant relations, working with vendors and contractors, planning and supervision.

For many property managers and for most self-managed buildings, APA provides back-office services at sizeable savings over the cost of doing work in-house. The company assures consistent handling of work loads, regardless of fluctuations in the size of the portfolio, without the necessity of having to increase or decrease staffing.

Using A also minimizes or eliminates the need for: new computers, licensing, maintaining and updating software, salaries, benefits, sick-day and vacation replacement, training, and costly hiring procedures for permanent or temporary employees. They can also help reduce your overhead by eliminating excess leased office space, telephone and general administrative expenses.

Clients receive a complete back-up of their records every week. APA backs up their entire system daily and keeps a duplicate at a secure, off-site location to protect against any emergency.

APA can also easily provide clients with instant real time electronic access to their data via computer terminals in their own offices, allowing clients to review all transactions and closely monitor their finances whenever they wish.