New residents, expiring and renewing leases, employee vacations, an increase in HVAC repairs and pool season are just a few of the stressors that come with the late summer and fall months, making it the busiest season for multifamily housing owners and operators. On top of all that, it is also time to start working on your budget.
Budgeting can be stressful, especially when you aren't really sure what the year may bring for your community. Adding a group purchasing organization (GPO) to your strategy enhances your team by providing more buying power and resources than before, while also assisting you with decision- making and industry trends.
Follow along as we outline best practices for optimizing your budget and how to create an effective procurement compliance strategy.
Before building out your budget, evaluating current spend and purchasing trends within your organization is key. Once you identify where you can improve your process, you can now begin optimizing your spend by evaluating your organization's current compliance strategy. When we refer to compliance, we are talking about being consistent, efficient, and finding ways to purchase goods and services with an intelligent and cost-effective process.
Follow this 3-step action plan to start saving your community time and money.
1. Determine and identify what non-compliance is currently adding extra cost
Conduct an analysis of your portfolio’s current spend patterns over the past 12 months. We recommend keeping it simple by starting with maintenance, repairs and operations (MRO) expenditures. You will most likely find that your portfolio is purchasing numerous different makes, models, quantities, etc., of the same product types. By standardizing products and processes you can save significantly on an annual basis. This exercise will take some time but upon completion you will have concrete and compelling data to create a realistic budget.2. Share the data with your team
Providing empirical data showing potential savings that can be realized through collective action will help to gain the support you need. In addition to hard dollar savings, there are other significant benefits associated with standardization.
- Access to a catalog with fewer choices to streamline decision making for staff, saving execution time and effort
- Opportunities to coordinate bulk orders, lowering per unit cost and reducing paperwork
- Standardization of R&M products, reducing the cost and complexities associated with future maintenance
3. Build out your plan
Start by creating a team to help with designing the program, communicating the merits of the initiative(s), defining how reporting will be set up, and determining the best way to employ technology.
Building an effective procurement compliance strategy is high stakes, but it will help create an environment where reporting is improved, employees are more productive, and lasting savings for your company are realized.
Now that you have defined what compliance means for your organization, let's take a look at how to optimize your budget while utilizing your findings from above.
Quality vs Price
You have probably heard the saying, “you get what you pay for,” but that isn’t always true. Just because you pay more for a product or service, it may not be the best quality. Nor does it mean a low-cost product is always low quality. Ultimately you want to select quality products from reputable suppliers because in the long run, you will pay less towards repairs and replacements.
GPOs work to help members make the best decisions when it comes to quality and pricing to ensure your team is making the best possible investment for years to come.
Only Purchasing What You Need
Usually, having a surplus of product is a comforting feeling, but other times it causes an excess of spend and you risk wasting time and money on a product that can't be returned or refunded. It is vital to do reviews and forecasting so you know exactly what you need, when you need it, and how much it will cost you.
Being well-informed about which suppliers provide the best service, price, and quality will help you determine what products best suits your budget. GPOs become a part of your team to offer insightful analytics to monitor spend habits and help you select the suppliers that best fit your needs.
It is a great idea to conduct an annual or bi-annual unit-by-unit walk of your property. This is especially important for properties 10 years or older. Unit-by-unit walks can help teams plan for preventative maintenance, forecast turnkey expenses, plan large capital projects, and identify any hazards that may not have been reported.
Your GPO’s extensive experience and market knowledge helps you maximize line-item discounts, contract pricing, and savings with industry leading supplier partners. Members minimize costs through process efficiency, maximize ROI and become more proactive with product management. We add a competitive advantage to your tool kit that will help win more acquisitions and fee management opportunities, as well as greater NOI and lower total cost of ownership (TCO).
Leverage your GPO’s subject matter experts for tools and resources to support your budgeting, so you and your team can focus on growing loyalty and retention, while continuing the core business of leasing, collections, and service.