How To Keep Your Budget Under Control With A Spend Management Strategy

Last modified on January 4th, 2023
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It’s no secret that maintaining and upgrading your properties can be a labor-intensive, stressful, and costly process. Proper maintenance means regularly incurring costs that are very difficult to control. And with 2022 consumer price inflation reaching levels not seen since 1981, it’s now more vital than ever for your business to have a spend management strategy. 

Think of your spend management strategy as a safety net  

A spend management strategy helps minimize errors, spot savings opportunities, eliminate out-of-compliance spending, and ensure team members follow company protocol. Strategies can range from a simple list of pre-approved suppliers or items to a more robust program that leverages property management software to help manage your spend management process digitally. 

Whichever direction you choose, it’s important to first understand that there’s a relationship between maintenance and your net operating income (NOI). In an episode of the Top Floor titled “How optimizing maintenance boosts NOI,” Melissa Palmer gave her thoughts on maintenance and the importance of preparation. Drawing from knowledge gained over 25 years of property management experience, along with previously owning and operating a national procurement company, Melissa says: 

“If you don’t have any kind of preventive maintenance program in place, you’re going to end up spending more dollars on replacements and other costs in repairs that could have easily been avoided if they would have checked those units periodically.”

Procurement: more value for your buck

Simply put, procurement is the sourcing and purchasing of goods, services, or raw materials from vendors or suppliers. And while all property management companies need to procure materials, many don’t have a true procurement strategy.  A procurement strategy not only keeps your entire team accountable and compliant, but it boosts efficiency and consolidates your total spend. Consider how much time team members spend away from the property making one-off purchases, and how difficult it is to keep track of these purchases at scale.

Designing your strategy

When developing a procurement strategy to complement your spend management processes, there are a few things you should consider:

Determine your business needs

To design a robust procurement strategy that will be successful for your business, it’s important that you understand your organization’s needs clearly. 

The first step is to identify any inefficiencies or buying processes that can be automated, such as creating standardized lists of the products your property needs. This could be quantifying the time your maintenance team spends completing a new request from start to finish, or the amount of manual processes your accounting team has to do to approve invoices for materials and your vendors. 

Next, you need to determine what type of solution will work best for your organization. This can be something as simple as having a binder of preferred vendors and supplies needed for your community, or using a robust procurement software. As Melissa Palmer explained in the joint AppFolio and Grace Hill ebook, Unlock hidden revenue and drive NOI

“If your company does not have the dollars or oversight for technology, you should at least have a Purchasing Guide or some kind of policy manual that shows what the requirements, preferred providers, and other standards and expectations are for the company.”

You’ll then need to analyze your maintenance spend, which may take additional time and effort since you’ll need to obtain data from suppliers, stakeholders, and other people involved in purchasing supplies. 

Find the right software solution

Property management software can make the procurement process easy, enjoyable, and operationally efficient for your teams. As you browse software solutions, look for the following:

Direct integration with your supplier 

This allows for your team to easily access and request purchases from a list of approved materials available through your supplier. 

Automatically generate purchase orders 

Once you’re ready to purchase the supplies, you’ll be able to submit the items for approval. Purchase orders typically include item descriptions, quantities, and costs. 

Electronically submit approved purchase orders

When the purchase order is approved, your team can electronically submit the order for fulfillment from directly within your property management platform.

Electronic invoice processing

Post purchase, your team can electronically process the invoice and automatically generate billable line items from the order. The benefits include reducing paper waste, minimizing errors, and ensuring all documents are electronically accessible at all times.

The right property management technology partner will give your team greater visibility — from the initial purchasing request and approval all the way to final accounting — as well as greater insights into Maintenance, Repair, and Operations (MRO) spend with expense tracking and categorizing.

AppFolio Stack™ offers a seamless integration with Lowe’s that does all of the above. You and your team can shop and purchase from a pre-approved list of maintenance items that you can set for in-store pickup or have delivered to your property. AppFolio Property Manager then generates your Purchase Order,  where you can view invoices and pay your bills all in one place. 

Matt O’Cain, Director of Maintenance at Ness Management (1,500+ units), explains how technology has elevated his company’s spend management strategy:

“The biggest surprise is how it has pushed us to be more proactive with our purchasing. It’s so simple and easy to use that we are now planning ahead more, establishing inventories, and ordering parts and supplies more efficiently than just going to the store anytime we need something.” 

Set clear objectives and policies

Once you’ve outlined your business needs, set your budget, and selected your software, the final step is to set clear policies and procedures. Having the proper procedures in place makes a significant difference in how smoothly your daily operations run and how equipped your team is to do their job. As mentioned before, it’s important that your strategy includes a standardized list of approved products and vendors. By standardizing your products, you reduce the risk of having unnecessary inventory, reduce budget waste, and can buy things you need in bulk (with the possibility of a discount).

Your policies shouldn’t stop with products. Your team should have the proper training and understanding of how your procurement strategy works. Having an on-boarding plan is helpful so new team members don’t have to reinvent the wheel. 

When implemented well, your business can find great success and peace of mind in having a solid procurement strategy enhanced by the right property management software partner. 

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