4 Perks of Using an ERP Solution in the Real Estate Industry

Usually, the real estate organisations work in a competing ecosystem. To survive successfully in this market, they need to cope up with the fast-growing industry. More importantly, such real estate companies need to keep themselves constantly updated with information. Here lies the unavoidable importance of using a potent ERP solution.It can successfully streamline the entire business workflow. Starting from the lead management to the project closure – managing everything becomes utterly easier. A web-based and powerful ERP solution integrated with a robust CRM solution can diminish operating costs, simplify the daily management, remove wastage, offer a comprehensive view of the ongoing projects and enable better decision-making. Here is a list of 4 perks of using a robust ERP solution in the real estate industry.#1 Project Management

Using a potent ERP system dedicated for real estate companies, getting the positive impacts of a holistic project management becomes easier. More interestingly, such ERP systems enable furnishing the real cost by the sub-contractors. Apart from all these, making payment to the contractors and billing process become automated, accessing progress indicators and key cost become easier that caters to estimate the entire project cost along with the profitability.#2 Lease ManagementThe module of lease management includes exact lease requirement analysis along with the occupancy-vacancy metrics and the demand-supply graph. Moreover, it not only includes the rent management and tenant intelligence with an in-depth 360-degree view but includes renewals and escalation as well. With the help of timely notifications, keeping a proper track of lease deposits and tenancy checks become effortless. Hence, automatically, tenant satisfaction improves and results in augmented occupancy rates.#3 Finance ManagementA cloud-based and effective ERP system can efficiently collect real-time data from different departments like accounting, buy and sales and can generate precise reconciliation between different materials utilised, procured, spillover and work in progress. Apart from all the above-mentioned things, it provides facility of visual dashboards that offer a concise and clear view of such accounts that are payable, receivable along with balance sheet, trial balance and profit and loss. Getting insights of tax payment or deduction, fund planning, regulatory compliances etc. become smoother.#4 Inventory and Procurement Management

With the help of a powerful ERP software, getting real-time unification between material, finance, sales and construction data becomes remarkably easier. It not only improves the inventory procurement controlling process but also helps to avoid crisis situations. Other than these points, a robust ERP solution can help planning of material requirements, the process of purchase order preparation along with creating procurement evaluation charts and much more.Apart from all the above-mentioned elements to consider, using an impeccable ERP software, maintenance and complaint management in the real estate industry becomes utterly efficient. The better the maintenance management, the more scopes for businesses to grow. Thus, integrating a dynamic ERP software in the real estate industry would result in enhanced overall business growth.

Alternative Financing Vs. Venture Capital: Which Option Is Best for Boosting Working Capital?

There are several potential financing options available to cash-strapped businesses that need a healthy dose of working capital. A bank loan or line of credit is often the first option that owners think of – and for businesses that qualify, this may be the best option.

In today’s uncertain business, economic and regulatory environment, qualifying for a bank loan can be difficult – especially for start-up companies and those that have experienced any type of financial difficulty. Sometimes, owners of businesses that don’t qualify for a bank loan decide that seeking venture capital or bringing on equity investors are other viable options.

But are they really? While there are some potential benefits to bringing venture capital and so-called “angel” investors into your business, there are drawbacks as well. Unfortunately, owners sometimes don’t think about these drawbacks until the ink has dried on a contract with a venture capitalist or angel investor – and it’s too late to back out of the deal.

Different Types of Financing

One problem with bringing in equity investors to help provide a working capital boost is that working capital and equity are really two different types of financing.

Working capital – or the money that is used to pay business expenses incurred during the time lag until cash from sales (or accounts receivable) is collected – is short-term in nature, so it should be financed via a short-term financing tool. Equity, however, should generally be used to finance rapid growth, business expansion, acquisitions or the purchase of long-term assets, which are defined as assets that are repaid over more than one 12-month business cycle.

But the biggest drawback to bringing equity investors into your business is a potential loss of control. When you sell equity (or shares) in your business to venture capitalists or angels, you are giving up a percentage of ownership in your business, and you may be doing so at an inopportune time. With this dilution of ownership most often comes a loss of control over some or all of the most important business decisions that must be made.

Sometimes, owners are enticed to sell equity by the fact that there is little (if any) out-of-pocket expense. Unlike debt financing, you don’t usually pay interest with equity financing. The equity investor gains its return via the ownership stake gained in your business. But the long-term “cost” of selling equity is always much higher than the short-term cost of debt, in terms of both actual cash cost as well as soft costs like the loss of control and stewardship of your company and the potential future value of the ownership shares that are sold.

Alternative Financing Solutions

But what if your business needs working capital and you don’t qualify for a bank loan or line of credit? Alternative financing solutions are often appropriate for injecting working capital into businesses in this situation. Three of the most common types of alternative financing used by such businesses are:

1. Full-Service Factoring - Businesses sell outstanding accounts receivable on an ongoing basis to a commercial finance (or factoring) company at a discount. The factoring company then manages the receivable until it is paid. Factoring is a well-established and accepted method of temporary alternative finance that is especially well-suited for rapidly growing companies and those with customer concentrations.

2. Accounts Receivable (A/R) Financing - A/R financing is an ideal solution for companies that are not yet bankable but have a stable financial condition and a more diverse customer base. Here, the business provides details on all accounts receivable and pledges those assets as collateral. The proceeds of those receivables are sent to a lockbox while the finance company calculates a borrowing base to determine the amount the company can borrow. When the borrower needs money, it makes an advance request and the finance company advances money using a percentage of the accounts receivable.

3. Asset-Based Lending (ABL) - This is a credit facility secured by all of a company’s assets, which may include A/R, equipment and inventory. Unlike with factoring, the business continues to manage and collect its own receivables and submits collateral reports on an ongoing basis to the finance company, which will review and periodically audit the reports.

In addition to providing working capital and enabling owners to maintain business control, alternative financing may provide other benefits as well:

  • It’s easy to determine the exact cost of financing and obtain an increase.
  • Professional collateral management can be included depending on the facility type and the lender.
  • Real-time, online interactive reporting is often available.
  • It may provide the business with access to more capital.
  • It’s flexible – financing ebbs and flows with the business’ needs.

It’s important to note that there are some circumstances in which equity is a viable and attractive financing solution. This is especially true in cases of business expansion and acquisition and new product launches – these are capital needs that are not generally well suited to debt financing. However, equity is not usually the appropriate financing solution to solve a working capital problem or help plug a cash-flow gap.

A Precious Commodity

Remember that business equity is a precious commodity that should only be considered under the right circumstances and at the right time. When equity financing is sought, ideally this should be done at a time when the company has good growth prospects and a significant cash need for this growth. Ideally, majority ownership (and thus, absolute control) should remain with the company founder(s).

Alternative financing solutions like factoring, A/R financing and ABL can provide the working capital boost many cash-strapped businesses that don’t qualify for bank financing need – without diluting ownership and possibly giving up business control at an inopportune time for the owner. If and when these companies become bankable later, it’s often an easy transition to a traditional bank line of credit. Your banker may be able to refer you to a commercial finance company that can offer the right type of alternative financing solution for your particular situation.

Taking the time to understand all the different financing options available to your business, and the pros and cons of each, is the best way to make sure you choose the best option for your business. The use of alternative financing can help your company grow without diluting your ownership. After all, it’s your business – shouldn’t you keep as much of it as possible?