Multifamily Companies Increasingly Turning to Outsourced Accounting
A recent webcast, “Staying Agile with Outsourced Accounting,” confirmed what most multifamily owners and managers already know: for an array of strong reasons, the industry is more and more relying on outsourced accounting for property-level financials rather than building out internal teams to handle it.
These reasons tend to run along similar lines, and usually include the following:
- The cost and difficulty of finding the right accounting staff
- Inability to flexibly scale up and down as the portfolio changes
- Limited time for strategic work due to the burden of mundane tasks
In the course of the webcast, participants elaborated on these and other factors that convinced them to go with RealPage’s SmartSource™ Accounting Services, a platform-agnostic, multifamily-specialized outsourced accounting service that can work with companies using MRI, ResMan and other software platforms in addition to RealPage’s. They’re using SmartSource for property-level accounting while keeping control of the more strategic corporate-level functions. Typical outsourced accounting tasks include such things as financial statement preparation, bank reconciliations, funding request support, and replacement reserves.
The frustrating search for accounting talent
Good accounting professionals, particularly those with multifamily experience, have become harder to find and more expensive to hire. Annette VanDuren of RealPage noted a 5.4% increase in accountant salaries in the multifamily sector over the past year, running far ahead of inflation and the highest increase in 15 years.
And salaries aren’t the only cost. There are benefits, office space, training, and the other usual expenses of full-time staff to consider. “When you do find good people, you don’t want them spending most of their time on standard accounting activities that an outside company can do perfectly well,” VanDuren says. “You’re in the multifamily business, not the accounting business, and in general you’re better off from financial and other standpoints sticking with the strategic functions rather than staffing up to handle the entire scope of accounting.”
Outsourced accounting right-sized to fit your needs
Webcast participants were quick to mention the advantages of scalability. Tim Hruska of Lindemann Multifamily said: “We’ve been much more transactional this year than we had anticipated, and (SmartSource) allows us to dispose and acquire properties quickly without having to build out teams.”
Anthony Magnelli of MultiVersity Housing said much the same thing. “To be able to work with a group like SmartSource that already has the (multifamily) experts in place has allowed us so much more flexibility. We feel confident we can take on a property on a moment’s notice. We can take on a portfolio of, say, five properties at one time, and not have to worry about making a mad dash to hire more staff.” He added that SmartSource assigns dedicated staff to clients, so property managers don’t have to worry about working with different people all the time.
Outsourced accounting offers the additional advantage of eliminating workload problems caused by illnesses, vacations, family leave, and turnover.
“We originally looked at SmartSource as a temporary solution until we could build out our back office, but things have gone so well that we think this is turning into a more permanent arrangement,” Magnelli said.
Addressing the fear of loss of control
Probably the biggest factor holding multifamily companies back from outsourced accounting is the fear of somehow losing control of the accounting function. Anthony Magnelli had some words of advice for those plagued by this concern:
“I would tell people don’t hesitate, don’t worry about not being as involved,” he said. “I know you want your hands on everything, that’s just how (accountants) are. And believe me, we’ve still got our hands in everything. We’re able to see all that is going on. All this does is free you up to work on other things. You still have control of what goes out and you’re still able to customize your packages.”
Outsourcing of accounting by multifamily companies is part of a now well-established, steady trend in corporate America of shedding functions that are not core to their missions. Where once it was assumed to be practical and economical to bring more activities in-house, the word on the street today is that many things are better left to outside companies who specialize in them, freeing costly staff for activities that improve the bottom line.