Holistic Expense Management

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You’re on top of things. You know that utility expenses are one of the largest costs in running your multifamily property, with prices that seem to spike at random. You’ve dealt with the challenge by implementing RUBS to allocate utility costs to your residents who, after all, control consumption. You’ve got your expenses under control.

Or do you?

Implementing a utility management program is an important step on the road to controlling the expenses on your multifamily property, but it’s only a step.

The technologies that make utility management systems function—using sensors to monitor utility consumption, collecting that information in a connected system and processing the data to provide meaningful operational intelligence—can be leveraged to create other cost-saving opportunities.

An obvious and oft-discussed extension to your utility management system is to use anomalies identified in utility usage patterns to identify maintenance issues. While there is value to being able to generate a work order to fix a problem before the resident is even aware of its existence, this capability only scratches the surface of what is possible with an intelligent, connected expense management system.

Procurement management

Suppose that your maintenance technician finds that he needs to replace a leaky shut-off valve. Your expense management system can provide him with a list of approved parts from approved sources.

The system can place the order electronically while handling the vendor’s invoice electronically, eliminating paper from the parts-procurement process.

Vendor management: What to Consider?

A note regarding vendors—your expense management system should put this list under your control, allowing you to funnel your business to the most cost-competitive suppliers. Thus, your expense management system can allow you to save money on the cost of parts on the front end even as it saves you money on invoice processing on the back end.

Larger vendors of expense management systems may have marketplaces of vendors that they have accredited and that they can leverage to further reduce your spending on maintenance.

Energy management

With the right vendor, the data collected by your utility management system can also be leveraged to create an energy efficiency benchmark for your property. This benchmark can be used for your internal purposes, such as to compare the operations of similar properties in your portfolio, or it may be compared to an industry-standard such as EPA’s EnergyStar rating system.

Given the increasing importance of living sustainably for today’s residents, having an EnergyStar rating on your property may allow you to command a price premium for your units, boosting your NOI. It may also allow you to qualify for reduced cost “green” loans from Fannie Mae and Freddie Mac, reducing your cost of capital.

Expense management

While we have discussed the data that the provider of your expense management system collects on your operation, a modern, connected expense management system also allows the system supplier to collect and provide data for your operation.

This data may be on things such as current utility rate schedules by the time of day, which allows you to fine-tune your operation to minimize your utility costs, or it may be information on pending regulatory changes. Regulations currently being imposed on multifamily housing providers by some jurisdictions include mandatory submetering (p. 14) and mandatory benchmarking and reporting of the consumption of utilities. Knowing the changing rules of the road allows you to mitigate your regulatory compliance risk.

When considering providers of utility management systems, owners and managers of multifamily properties should look beyond simple utility expense management to management of all related expenses. By selecting a system supplier with the product breadth and depth to improve your maintenance operations, streamline your vendor relations and alert you to imminent pitfalls, you can reduce your operating expenses and increased NOI.

This article originally appeared in the Journal of Utility Management

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