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Commercial Real Estate Firms Focus on Operational Efficiency


With new cost pressures, automated CRE payments can boost bottom-line performance.

Commercial real estate companies are experiencing the economic impact of inflation and labor shortages. In an effort to offset these challenges, many firms in the industrial, multifamily and hospitality sectors are tightening expenses and searching for alternatives to increase efficiency.

CRE firms are often working with manual, paper-centric and decentralized payables processes as a standard part of operations. A paper check costs between $6 and $10 to process, and it can take an average of five times longer to process and approve an invoice manually than using an automated process.

With the variety of pain points that are part of manual payment processing and the increased pressure to reduce expenses, many CRE firms are turning to automated payment solutions that can increase efficiency and solve three principal challenges facing the industry: managing multiple entities, legacy processes and hiring and retention of employees. Here is a look at those challenges and how they can be resolved:

1. Managing Multiple Entities

Many CRE firms operate across different regions of the U.S. and manage multiple single-purpose entities or LLCs. It’s not uncommon for some companies to have 50-100 operating accounts, which can be challenging and a drain on resources. Creating such single-purpose entities is a standard way to separate ownership and mitigate asset risk.

Companies need to be diligent to avoid commingling funds from those structures, but the downside is that it can result in cumbersome payment processes and workflows. "For firms that are still managing payables manually, the pain points, inefficiencies—and frankly the likelihood of human error and fraud — grow exponentially," said Adam Keck, Director, Product Management at Fifth Third Bank. He pointed out that a typical organization loses 5% of its revenue to fraud every year, with a median loss of $117,000, according to the Association of Certified Fraud Examiners.

2. Legacy Processes

"Developers are often family-run firms where the patriarch or matriarch in the past insisted that every invoice crossed their desk so they could view it and authorize it," said Eric Heuser, Vice President, National Commercial Real Estate Treasury Management at Fifth Third Bank. "Those decision-makers are absolutely changing and their expectations and their acceptance of digitization of that process has dramatically increased."

In fact, the real estate industry is working to embrace new technology. Real estate firms across the board are bringing in younger, tech-savvy talent at all levels of organizations, and the new generation of workers expects to have automated, digitized processes instead of trying to manage antiquated procedures and systems. Those expectations are evident both with a company’s internal workforce, as well as with contractors, vendors, tenants and investors.

3. Hiring and Retention of Employees

The CRE industry’s new generation of personnel expects to work with cloud-based automation. As a result, firms that offer this technology have an advantage over firms that do not, giving them the opportunity to promote a flexible work environment to attract, develop and retain the best possible employees. About 58% of Americans now have the flexibility to work remotely at least part of the time, according to consulting firm McKinsey & Company.

Identifying the Best Solutions

For CRE firms seeking to overcome legacy payables issues, Fifth Third Bank has a robust set of payables solutions from end-to-end process automation to working capital optimization tools. Fifth Third’s treasury management experts work to understand the challenges and structure of an organization and offer solutions that best fit its specific needs.

In some cases, the best solution might involve converting manual processes that rely on paper invoices and checks and introducing automation, such as with electronic invoice capture and software that’s integrated into a customer’s current systems.

Rather than having couriers manually delivering invoices to a main office for processing by hand, Fifth Third centralizes the collection of invoices digitally at a bank facility, reducing costs by up to 50%.

The Path to Digitization

Fifth Third can work with firms to create solutions that enable efficiencies without disrupting operations, existing business or banking relationships. Customers can continue to utilize multiple banks and still access the efficiency of having a single payables bank. Fifth Third also can help firms identify the preferred payment methods of suppliers to improve the process of submitting invoices and receiving payment, resulting in increased satisfaction.

Fifth Third can recommend solutions based on clients’ needs by first understanding their current processes and identifying and analyzing inefficiencies. As the client’s needs change over time, Fifth Third will continue to grow and evolve those solutions.

Embarking on a wholesale change to a payables process can be a significant undertaking. Here are some steps to help a company navigate the process:

  1. Determine which decision-makers need to be involved in the discussion.
  2. Analyze the deficiencies and inefficiencies in the current payables process.
  3. Clearly identify what it is that the company wants to achieve.
  4. Establish a timeline with a "go date" and steps needed to achieve that target.
  5. Identify what resources are needed to achieve those objectives.
  6. Consider the change management needed within the organization and with other stakeholders to communicate and smoothly transition to a new process.

To learn more about how Fifth Third can help your firm simplify the payables process, improve engagement with suppliers, increase workforce satisfaction and gain transparency into the entire payables picture, contact your relationship manager or find a banker.

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