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Accounts Payable professionals in the real estate sector face several unique challenges when it comes to VAT’s, projects and allocating costs. Getting things right is beneficial for the whole company, and incorrect ways of handling AP is sanctioned. This increases the need for top-notch AP professionals. In this blog post we go through some of the challenges real estate companies face in the Nordics and how AP automation software can ease them.
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One of the biggest challenges Real Estate companies struggle with is allocating right costs to correct properties. When real estate companies make changes to the properties, for example fixing and renovating, the cost must be allocated to the exact correct property – and even the correct room and wall. There are multiple reasons to this, which depend on the operation countries, like deductible costs and different VAT-rules depending on the space and tenant.
Did you for example know that in Finland, things are very different if the renovation happens in a space where the tenant is an apothecary compared to a space where the tenant is a shoe shop?
When the invoice for the renovation or other service arrives, AP professionals need to know exactly in which property and space the cost belongs to. As we all know, AP professionals are excellent at what they do, but they might not know the properties by heart or the tenants using the spaces. When the invoice without clear markings arrives, it can take a lot of investigation time to get this knowledge – all of which could have been avoided in the earlier stages of the process. One of the most common situations are small projects that property managers want to get done quickly by ordering the work with a phone call. The seemingly easy project ends up taking a lot of AP professionals time in the end.
The best place to state the correct property and space is to mark it in the invoice. Therefore, it is important to make sure the whole organisation is aware of the nature of these unique challenges Real estate companies face when handling AP. This goes especially for the people who order services for the properties. There should also be a very clear invoicing instructions that can be given to the service provider. When the correct process is widely known inside the organization, that makes the life of AP professionals much easier. It also enables the best usage of AP automation software.
When new tenants move in, there might be a bigger renovation project in the rented space before the move. This is to make sure the space accommodates the new tenant the best way; for example, building new walls or taking them down. Depending on the country specific rules and regulations, these renovations can be deductible costs. The renovation gets its own project and project number with specific coding.
Everything that happens for this space needs to be coded with the same project number. If the incoming project invoices are correctly marked, AP automation software can make the project handling easier through automated coding, AI, and automated approval workflows – all of this based on the project number found on the invoice. Again, if the project number is missing and there is no mention of the property on the invoice, it can take some time for the AP professional to get all the needed information. With an integrated AI solution, Rillion learns from historical data, which can be a big asset with missing project information on the invoice.
Real estate companies often have one holding company that owns multiple real estates. Each real estate can be its own limited company. This is an extra layer of complexity as the costs need to be assigned to the correct company. As with all cost, well planned property management and well-ordered services and supplies is a must to get the purchase invoices with all needed information from suppliers.
The service we at Rillion offer is an integrated AI engine where no additional integrations are needed. The prediction is done within seconds and predictions are colour coded. I the settings you can tailor which objects and suppliers to predict and if you want to get all predictions or only the highest ones. Due to business specific requirements, there might be a point to exclude certain costs from predictions. Help with a thorough analysis of cost structure is available and recommended both at onboarding of AI as well as after some time of use.
Read more about real estate accounts payable
AP automation software is just one piece of the real estate company’s IT environment. It goes without saying it is important that the AP software and ERP-system are integrated in the best way to ensure seamless the two-way data transfers. Sounds easy but requires time to think through the needed data sources and how well they match between the systems. All needed invoice and vendor data should move seamlessly to AP software, and the coded invoices need to move back to the ERP. This means the ERP system needs to be able to receive the coding information in the correct form. For this we recommend engaging in dialogue with the AP automation software vendor and discuss ways to build the integration.
We make our clients’ jobs easier by letting them do more, with less. We call ourselves AP Automation experts, providing the proper tools to allow finance professionals to transform how they manage invoices – from data capture and requisitions, to invoice matching and approvals. We come from over 25 years of experience providing the best customer service in the industry resulting in a more efficient invoice process and peace of mind to Accounts Payable. To date, Rillion has supported over 3,000 companies across over 50 countries. For more information and to learn more visit www.rillion.com
Maya Hänninen | Solutions Consultant
Maya is a real estate professional with 15 years of experience working with AP. Her passion for knowledge of tax rules in real estate is evident in her work and she approaches every project with attention to detail.