BLOG: Outsourcing property management and client accounting can be a risky business

In the last financial crisis in 2008 we saw several estate agents move into the lettings market with a view to subsidising income by delivering a recurring income stream and adding value to their business.

Now with day-to-day lettings activities at an all-time high and rent reform on the horizon it is understandable to see the logic behind outsourcing property management and client accounting.

But there are risks associated with outsourcing and research into how to deliver the service in-house should be completed before making the final decision.

REPETITIVE

Property Management software and automation can be deployed to reduce repetitive business processes in an estate agency and help keep them compliant.

It can also help manage headcount in the lettings department, which in turn can help agents scale their business. It can appear easier to throw people at the problem rather than invest the time, money and effort in systems and technology. But this can often prove to be false economy.

AUTOMATED

Many areas can be automated for example, chasing rent arrears; reminders for upcoming gas expiry dates; electrical testing and CO2 detectors to name but a few. It can also be used to manage external communications, internal reporting and day-to-day reminders. If agents use automation over outsourcing, relationships can be built throughout their client accounts and property management teams and new opportunities can be identified.

There is risk involved when outsourcing because you are trusting an important service to an external company.”

There is risk involved when outsourcing because you are trusting an important service to an external company, which may include the management of bank accounts, client money and tenant deposits.

An example of this was seen with the demise of Ash Residential Property Management (ARPM). When the company went into liquidation it created chaos for those agents who had trusted ARPM to deliver their service.

LIQUIDATION

As with any liquidation, assets and bank accounts were frozen which also meant that the client accounts were also locked. As a result, some agents had to subsidise their landlords in order to comply with the terms and conditions they had signed.

There are areas where outsourcing can work, such as an inventory company, to ensure that all check-in and check-outs are documented accurately.

Also, ‘out of hours’ or overspill call answering is a good use of outsourcing as it minimises the need for your staff to take emergency calls outside of working hours or at antisocial times.

We recommend that agents keep property management and client accounting inhouse.”

We recommend that agents keep property management and client accounting inhouse. Our view is that when your services become disjointed, it adversely affects communication and relationships are not built across the business.

The combination of a sensible fee structure, good people, and a sound technology stack will allow you to deliver a viable service and maintain profit margins whereas outsourcing will cut into your profit.

You will also remain in control of client monies and deposit protection, mitigating any serious liability issues should the outsourcing company fail.

Richard Murray is Chief Executive of property software provider Veco