A major shortage of accounting talent is plaguing the real estate industry.
Everyone from the largest funds and institutions to small shop syndicators are dealing with finding and keeping accountants, particularly all-important controllers. To solve this major pain point, many firms are turning to outsourcing, a one-size-fits-all solution that gives companies access to expertise, industry knowledge and best practices for critical accounting functions, as well as the ability to easily scale up or down as needed. In honor of their recently-released e-book on the subject, Guide to Outsourcing Financing for Real Estate, we sat down with the Business Process Outsourcing (BPO) Practice at Citrin Cooperman to learn how outsourcing can prevent major accounting headaches across the real estate industry.
The Dangers of High Turnover
Whether a company has a large portfolio or just one or two properties, there are a multitude of transactions with tenant payments coming in and vendor payments going out. If a company isn’t staying on top of those payments, things can go sideways very quickly.
That’s typically where a controller or CFO is needed to make sure things are running correctly, and that the monthly, quarterly and annual financial statements going out to investors and lenders reflect that accurate and up-to-date accounting.
However, these crucial positions have become hard to hold down in the last few years.
“Finding someone who understands the industry, understands the software and understands what things should look like is really hard right now,” says Ryan Moore, a director in Citrin Cooperman’s BPO Practice. “The cycle of hiring, training and then the person leaves, and they have to do it all again is exhausting for lots of owners and operators.”
Outsourcing these functions is a way to introduce stability to this crucial operational practice, allowing managers to focus on other business areas instead of being distracted by a constant hunt for new accounting talent.
Outsourcing for Efficiency
There are more advantages to outsourcing than reliability. Due to the ebb and flow nature of the real estate market, right-sizing your accounting team can be a constant struggle, which BPO services solve by automatically scaling up or down to match your immediate needs.
“If a company’s going out and buying 5,000 apartment units, they’re expanding so quickly that, even in a market where you had ample people to hire, you couldn’t keep up with it. And that’s what this BPO solution provides for our clients,” says Mark Mindick, a partner at Citrin Cooperman. “A company could double the size of their business in a year and still stay up to speed because they have the services they need, whether it is the whole accounting department or a resource alongside their internal accounting team to assist them.”
Citrin Cooperman offers both outsourced bookkeepers to provide basic accounting services and a full-service outsourcing model that is custom-tailored to a client’s needs. Services range from providing standard bookkeeping tasks to more sophisticated and complex needs, such as getting a company ready for an audit or an IPO. Services range from providing transaction-level work to more sophisticated and complex needs, such as getting a company ready for an audit or a sale.
Oftentimes, the cost of BPO is offset by savings and increased efficiencies.
“Many of our clients are surprised that they get a team of three people just to replace one controller, and that’s because we have the right person doing the right task and have a separation of duties,” says Moore. “You don’t need five years experience in the industry to do a bank reconciliation or to code accounts payable, but a lot of times that’s what a controller is also responsible for doing in smaller organizations.”
The Right People for the Job
Another major pain point for real estate firms is that they don’t know exactly what they need in an accountant or finance executive. That might result in overpaying for internal staff.
“We have direct access to good people,” says Moore. “We also have the ability to identify the needs of the client and what they actually need in their people.”
In other cases, a company might promote an existing senior property accountant into the role of controller because they know the industry and the software, but it ends up being a stretch.
“What that typically leads to is a situation where at year-end they are sending their books to the tax accountants, and the tax accountants are finding a lot of mistakes because things were being done wrong all year,” says Moore.
For asset management companies that work with multiple property management companies, there also are advantages in working with one outsource firm that can work across different software platforms and bring all of the different financials together. Having a BPO also can help companies improve their speed and turnaround times, such as hitting earlier reporting dates and providing more timely data to their investors or stakeholders.
“One of the added advantages of our BPO model is that we’re working with lots of different clients,” says Moore. “We see what works, what doesn’t work, and we can bring in those best practices and knowledge.”
Read the ebook here, and visit the Citrin Cooperman BPO website to learn more.