The Growth Conundrum

How can successful block managers ensure that profitability isn’t threatened by the cost of expansion, asks Matthew Smith?

The block management market is on the cusp of dynamic growth. As the demand for new homes grows there is increasing pressure to build more flats, which in turn is creating opportunities for property managers keen to property manager has reported taking on 60 new blocks. Multiply this by the whole market and it is easy to see the potential for expansion. This is great news for property managers, but residential management is not a simple task. Block management companies have a complex mix of accounting and property–related challenges to deal with. They need to regularly send out service charge demands and record the progress of maintenance work while keeping budgets under control. They need to have all relevant information available to them in one easily accessible place and, at the same time, they have to deal with complex differences between individual leases, payment plans and schedules.

These challenges are likely to be further exacerbated by business growth. Ambitious companies are constantly looking to expand to drive profits and compete against the heavyweight players. Unfortunately growth can lead to escalating costs, with significantly more service charges to collect, more maintenance to organise and suppliers to pay. It may also increase one of the other biggest drivers of expenditure for block managers – postage. Throughout the year, they will have to send out multiple documents to each flat owner. Estimates suggest that there could be about ten documents issued as standard annually, typically including end-of-year statements and details of planned maintenance work. There are also likely to be several ad hoc letters sent - from general correspondence to arrears letters, as well as information about ad-hoc repairs.

Block managers may on average end up paying as much as £6 per flat owner in postage costs every year, a figure that grows as they take on more blocks - and that’s without considering the time and money spent in administering the whole process. And it’s worth remembering that generally agents don’t charge separately for this postage. Instead, it just comes straight out of their management fee.

Block managers are not always helped in managing the impact of these challenges by the systems and solutions they use. They are often left and try to meet them through a combination of legacy spreadsheets and entry level accounting packages. The problem is that these solutions are not specifically designed to address the job in hand. Accounting software often has no way of setting up service charge schedules or lease service charge agreements. As a result, block managers often have to do all the work themselves manually in spreadsheets - a laborious, time-consuming process.

Finding an answer

To cope with the workload, firms may look to bring on more staff, pushing running costs up still further. It seems an intractable problem. Fortunately, block managers can now achieve sustained growth and keep costs under control by basing their approach on automated technology that integrates financial and property management and that conserves resources and drives enhanced profitability.

The best of these systems are intuitive and easy-to-use. They can handle the day-to-day management of properties and also deal with the accounts. This means managing service charge accounting, including budgeting, reporting and reconciliation pre-payments and accruals, but also sending out demands to lessees.

Critically also, where blocks have complex schedules in place, the latest IT solutions can automatically work out the exact share of the overall block expenditure for which each individual lessee is liable, as well as quickly calculating any over or underspend compared to budget at the end of each year. This is a much quicker and more efficient approach than managing the process with spreadsheets. This kind of integrated property management and financial accounting software also brings benefits when it comes to keeping postage costs under control. By automatically emailing reminders, demands, arrears letters and statements rather than sending out physical documentation, property managers can save time and money as postage and stationery costs, the cost of paper, envelopes and stamps, are all reduced.

Reaping the rewards

Of course, there does have to be a cost/value calculation made when it comes to making an investment in IT solutions. For the smallest businesses and start-up block management companies, spreadsheets are initially likely to be the tool of choice but as they grow, the latest integrated property management and financial accounting software becomes a more viable and attractive option.

When they achieve a roster of between 500- 1,000 flats, firms will typically have sufficient management fee income to make these solutions a hugely beneficial choice. But for fast growing businesses with a strong business plan in place, good relationships and confidence in their future growth potential, it will make sense to start thinking about specialist software solutions from the word go.

Ultimately, though, the predominant benefit these systems bring to property managers is that by reducing the time it takes them to carry out their regular duties as well as the costs incurred, they are able to manage more blocks and bring in greater revenues with the same staffing levels as before – and that’s an issue that becomes more acute as businesses develop and expand.

It seems likely that there will be growing demand for these solutions over time. The block management market is expanding as the demand for flats increases over time and such are the compelling benefits driven by the latest integrated property and financial management software solutions, that we expect companies which adopt such software solutions to show dynamic growth today and long into the future.

Matthew Smith is sales manager at Grosvenor Systems

Case study: Supporting business development

Chamonix Estates is a fast growing property management company operating across England and Wales. The company is constantly growing its management portfolio and purchased Propman from Grosvenor Systems in order to balance the requirements of a strong accounting system with the need for a comprehensive set of property management tools.

According to Chamonix director Adrian Povey, Propman has allowed him and his fellow directors to focus on growing the business, knowing that the operational system they have in place is able to cope, “so that we don’t have to keep taking on additional staff to do routine data management tasks”. Staff at the company have also built up personal relationships with the training & support and software development teams at Grosvenor. “We like the fact that we are able to speak directly with the directors of the company who are closely involved in the development side of the business”, says Adrian