Five Things Every Property Management Purchasing Team Should Know

Last Updated: May 28, 2015By

177378487-formationDeveloping a formal product procurement policy is essential for property management teams. Clearly defined strategies and processes help you control day-to-day costs across all departments, and benefit owner revenue streams when applied consistently.

If you’re looking for a way to benefit all of your multifamily property stakeholders, take a look at your inventory and supply policies. Every product and service directly impacts profitability. It’s important to reduce costs without compromising service and quality.

Remember, everything from replacement appliances to those tiny rubber kitchen faucet gaskets that seem to wear out at the least opportune time must be acquired and installed in the most cost-effective, efficient way to achieve maximum results.

Here are five tips to help you develop a smart property management strategy to reduce expenses and increase your profit margin.

NUMBER ONE: Negotiate volume discounts. On-demand-supplies typically cost more than items purchased under a volume stock and replenish plan. Running to the hardware store every time you need a gasket or value adds extra expense in the form of fuel, man-hours and wear and tear on vehicles. Plus, if parts must be ordered, delays completing repairs often frustrate tenants and owners.

NUMBER TWO: Designate a purchasing control center – even if you assign those duties to a single employee. Greater control improves consistency and accountability. A streamlined system reduces time spent chasing quotes from non-qualified vendors and ensures your property always gets high-quality services or products from pre-vetted vendors and contractors.

NUMBER THREE: Annual process reviews ensure continuity of service for your tenants and higher profit margins for your owners. Once a year – either at the turn of the calendar year or the beginning of your fiscal year – have your purchasing team review the prior year. Standardizing brands, replacement parts, office supplies and other consumables saves time and money stocking and replenishing supplies.

This is also a great time to review volume discounts and contractor agreements for outside services such as landscaping, HVAC repair, tenant liability insurance coverage and other services not provided by your in-house staff.

NUMBER FOUR: Maintaining a warranty-tracking system eliminates unnecessary equipment purchases. Your purchasing department should have a complete list of all equipment – vehicles, in-unit appliances, security system components, office equipment, computing devices, etc. – with serial numbers, purchase date, warranty information and any other pertinent data that identifies relevant details about maintenance and upkeep. Before you order a new frig, check the warranty, and if applicable, identify approved repair centers.

Supplementing your warranty-tracking program with a spreadsheet used for tracking equipment and supplies strengthens internal controls. We’ve all heard stories about laptops sprouting legs and walking off the property or unexplained shortages of office supplies. Your purchasing team should know where every purchase finds a home on your property – and be able to verify it’s movements by serial numbers or other identifying tags.

NUMBER FIVE: The accounting office is no place for ambiguity. Initiate a purchase order system for any item or service over a set threshold. Depending on the size of your property management company that may be $50 or $100, or if you really want to take control of your operating expenses, you may mandate that all purchases require management approval or have a purchase order.

Reconciling and allocating charges is essential. Prior to payment, every invoice must be reviewed for:

  • Price inconsistencies/variances
  • Unapproved charges
  • A clearly defined due date and late fee policy
  • Itemized listing of charges
  • Correct quantity ordered/received
  • Authorization (signature or employee name identifying who placed the order)

Think about this for a minute. If you have a modest profit margin of just ten percent on sales and you shave your expenses by five percent, that generates a fifty percent increase in profit. Naturally, property management accounting structures don’t work exactly like retail outlets, but the point is: eliminating unnecessary costs associated with daily operations has a dramatic impact on profit.

Getting started may seem overwhelming, but your team is here to help.

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AppFolio, Inc. develops Property Management Software that helps businesses improve their workflow so they save time and make more money. Appfolio submits articles & blogs including topics of Resident Retention, Improved Owner Communication, Time Management, and more.


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