The Importance of Automation in Helping Solve the Real Estate Labor Shortage
Contributors
During the past few years, we have seen a massive disruption in the labor force, with more than 47 million American workers leaving their jobs in 2021 alone. Many of these workers are permanently exiting the workforce and opting for early retirement or self-employment. More than 75 million Baby Boomers will be retiring soon, and there are not nearly enough workers in the younger generations to fill this workforce gap. If hiring enough workers to fill the great resignation gap is not an option, companies must look for alternative solutions. A key element in this solution is automation.
What Is Automation?
Automation can be as simple as automating an email you send regularly or automating monotonous, manual steps you perform on a report to avoid having to repeat those steps each time (transforming data). It can be as complex as artificial intelligence and utilizing robots to perform job functions. Automation produces more accurate, real-time information and allows us to deal with large datasets more efficiently. Whether you are using automation for simple or complex processes, the most important reasons to automate are to utilize your employees’ time as efficiently and productively as possible and eliminate manual processes that do not add value to your real estate company.
There is a common misconception that automation will replace employees and the labor force, especially CPAs and accountants. However, this is not the case. Automation helps us elevate employees’ roles, so they can better use their time to help employees be more productive. Instead of manual input and data manipulation, employees will have the time to be involved in higher-level processes that require judgment. In turn, they will gain more experience in less time than in the past, even at lower staff levels.
Six Steps for Implementing Automation at Real Estate Companies
1. Automation Project Planning
For some real estate companies, it can be daunting to start planning and implementing something new. Still, proper planning will provide an effective and efficient process from start to finish. Consider creating a task force or committee that includes management and employees to spearhead the automation efforts. A good place for real estate companies to start is to get team members involved from the accounting and asset management departments since those are typically heavily report-driven. The critical step for companies is to commit the time upfront to get various employees and management involved and invested from the beginning. Remember that automation can be fun and exciting!
2. Determining the Best Candidates for Automation
Automation is important for every company in every industry. But for real estate companies, it can be crucial given the amount of daily, weekly and monthly reporting required for investors and the day-to-day operation of investments. One of the first steps for the task force to tackle is bringing together the users and preparers of critical reports to discuss and determine the best candidates to begin automation. The best candidates for automation are frequently-created reports that require a lot of manual input or effort to get the data into a format that is useful for the report user and are in a fairly consistent format each time you generate the report. Upper management and report users are sometimes unaware of how much time employees spend on these manual processes. Communication between all levels and departments is critical to determining the best candidates for automation.
At Moore Colson, we have automated our clients’ internal and external processes for several years. For some of our real estate clients, we have automated elements of monthly reporting packages, investment business plans and waterfall calculations. Management should challenge each report in a monthly package and determine which parts can be automated. There is potential to automate the entire report, from transforming the data to communicating the report to the user via email or a shared drive. More specific examples to trigger some ideas for your company are:
- Complete account roll forward automation (fixed asset, leasing commissions, tenant improvements, etc.). All you need is the current year activity in an agreed-upon format, and with one click, a roll forward is created from the prior year by job, tenant, etc.
- Accounts receivable reporting on delinquent customers. What if you could automatically search all accounts receivable agings to find delinquent tenant balances over a certain dollar threshold for monthly reporting?
- Scrubbing hundreds of thousands of lines of general ledger detail for unusual transactions or key words, tenants, etc.
- Complete automation of waterfall and promote calculations where the user inputs the necessary ending balances and the hurdles and the promotes are automatically calculated in an error-free, consistent format.
3. Choosing an Automation Solution
There are many automation solutions, and the options can be overwhelming. Each solution will have unique advantages and disadvantages that you must evaluate against your specific automation needs. It may be worthwhile to invest in several solutions depending on the complexity of automation and the types of reports you are automating. Some solutions can complement each other and work in conjunction with each other where one has an advantage, and one has a disadvantage in the same area. You should determine if the solution you choose can pull real-time information directly from your current systems (accounting, real estate modeling software (e.g., ARGUS), human resources, CRM (Customer Relationship Management), payroll, etc.). You may not need all your systems to connect to your chosen solution. It will depend on what you have determined are the best candidates for automation and which systems house that information.
4. Automation Training
Whatever solution your company chooses, investing in training will be necessary for employees who will lead the implementation of the automation effort. This training could come from the vendor, an outside consultant or videos accessible on the web. Given that most users have an accounting or finance background, we have chosen solutions that do not require an IT background or coding experience. Many of the solutions out there are very technical and require this background, so this will be an essential factor to consider when choosing a solution.
5. Implementing Automation Technology
Once you have identified the reports, picked an automation technology solution and trained your employees, the fun begins with the actual implementation, which will vary widely based on the steps chosen above. The most crucial factor is to stay invested in implementing the automation ideas developed during planning.
6. Analyzing Data After Implementation
Once you have implemented the automation process for specific areas or reports, you will likely have more accurate, real-time and easily accessible underlying data. Now that the data is easily accessible, the next step in automation is to layer the data onto a visualization solution. Instead of static excel spreadsheets, visualization solutions allow you to slice and dice and drill down into the underlying data. Think about analyzing NOI, cap rates, net asset value, returns, promotes or other key investment metrics by location, asset type, etc., with the click of a button. Visualization could also be beneficial for residential properties where you need to drill down and analyze unit information like monthly rentals by floor, bedrooms, etc. A visualization solution could be the same as your automation and transforming data solution. However, this will depend on your employees’ skill sets and the specific needs of the reports and automation.
Whether it be to help solve staffing shortages or to create insightful and easily accessible data, automation is our present and future. It should be at the forefront of every company’s mind. The most challenging part is to begin the process and get management and employees to embrace all the positives of having automation embedded in their everyday lives. Once you have a few automation wins under your belt and employees see the advantages, the ideas will start flowing, and you will be in business!
At Moore Colson, we have been through each of these steps and understand how challenging implementing automation into our everyday lives can be. If you have any questions or need assistance in any phase of the implementation, whether in the planning phase, being a sounding board for the best candidates for implementation, choosing an automation solution or the actual automation and visualization of the reports themselves, Moore Colson is here to help. Contact us for more information.
