Management spending money in the most prudent and judicious manner can result in more savings for property management and ultimately result in improved profits. In fact, adopting an effective financial management strategy is critical for property managers. When there are no policies about spend management and the purchasing program lacks standardization, expenses can escalate unreasonably.
The Details Matter
For instance, consider a situation where annual rebate is missed which could have saved several thousand dollars, because the maintenance team was not aware of the preferred vendor. Spend management includes policies about what to purchase, whom to purchase from, and how to implement best practices.
In these aspects, implementing standardization will bring about consistency in the spending, which is quite important. Standardization will not only promote consistency in procedures but also help in promoting compliance. Product purchasing will be done according to set procedures, which includes pricing options.
When standardization brings about better compliance, property managers will strive to optimize partnerships with suppliers. Additionally, everybody is kept on the same page with execution resources, and training for establishing a basic workflow. Purchase of major items such as HVAC systems, garbage disposal units, and toilets will become streamlined and there will be much less chance of missing opportunities of rebates and discounts.
Another major advantage of standardization is that it will remove the play of emotion from the purchasing process. Maintenance staff might want a say when you are purchasing caulking material, but for big-ticket items, it is best to have uniformity and standardization for the entire portfolio to derive maximum benefits.
Here are certain important elements that can be used in developing a successful standardized system.
Data intelligence will be the main component of spend management program, since it will be determining what you are negotiating about, how your process is going to be tuned, and how all this information is going to be communicated to the team for maximum compliance. For instance, comparing invoices of paint purchased on different properties might reveal price differences for a gallon of paint. In such instance, the property manager could start negotiations for a standardized rate for all properties from a particular supplier.
Effective communication is another major component that is crucial when changes are taking place. It could be for developing long-term relationship with a preferred supplier or for getting the whole team on the same page.
Maintaining transparency in the whole process or work flow is also very important. Everything should be visible right from the time spend is initiated at the property level, and all the way through receiving the products. Maintain a system for accounts payable where all the invoices are transmitted electronically.
Develop System for Reporting
It is important to monitor compliance of purchasing procedures and that agreements are followed. A reporting system will reveal inconsistencies in the negotiated price or the choice of suppliers.
Maintaining Compliance at Every Level
Communication and reporting are the two important elements driving compliance that has to be inherent in the purchasing structure. Implementing mechanisms for ensuring complete compliance is important, and it could include education and training sessions for staff.