Webinar Interview: Choosing an AP automation solution with John McTighe
A quick 16 minute read OR listen to the recording
Choosing an AP Automation solution with John McTighe
During a recent webinar hosted by FEI, Goby’s CRO, Helee Lev, interviewed John McTighe from Cagan Management Group about his journey to choose an AP automation solution that fit his company’s needs. Below is a transcript of the interview; you can also click the media player above to listen to a recording.
I am the director of accounting and financial reporting at Cagan Management Group. We have been in business since 1974 as a real estate property management firm and organization. We currently have about 16,000 units that we manage throughout the Chicagoland area as well as about 7,000 units outside the Orlando, Florida area.
Our process is pretty manual; our biggest pain point and reason for needing an AP automation solution is that invoices are coming from everywhere. They’re coming from the mail (we have a mail clerk that does the sorting), we have emails that are coming in with invoices going directly to our accounting staff, some are going to property managers that oversee the properties, or they’re being mailed to the properties themselves, since a lot of time when you’re setting up with vendors, they’re going to bill you at the actual place of service.
Thanks for giving us that background, now let’s dive a little deeper into it. To give us a bit more of the lay of the land, tell us about your team: how it’s structured, what positions and functions you have on there, etc.
Under me I have about 20 property accountants, each of whom is responsible for a portfolio of 5 – 45 properties. Our property accounts really are “A-Z accountants”; they’re in charge of AP and financial reporting, as well as AR. We do have a few AR clerks that handle a majority of our payment processes. And as technology has evolved with online payments, we don’t function too much with the AR.
The main goal of the property accounting staff is accounts payable and financial reporting to our investors. Part of an ideal outcome of that we’re trying to explore is the ability to reallocate the time of our employees so that we spend less time on mundane data entry and more time analyzing the performance of the properties, using different statistics and insights for benchmarking and neighborhood trends, and really diving deeper into the analytics behind the performance.
You mentioned that your company is growing (congrats); as you look to the future, what are some pain points and challenges you foresee and what do you think will the biggest bottleneck in your current process?
Any time we add a new portfolio, usually somewhere between 500 – 1000 units, that involves hiring a new staff member; with that comes the application process, interviews, resumes, etc. to find that ideal candidate. So, as the company continues to grow, because of the current setup of AP and the way we’ve been structured, company growth forces us to hire more staff to accommodate the growth.
If we were able to restructure AP in a more streamlined way, we’d be able to absorb more of that growth without having to add additional team members every time. Staffing is one of the first things we consider when we’re looking at investment groups and taking on new properties. Being able to free up some time and reorganize AP into a solution where that is already done for us is going to remove the need for a new hire every time.
And so, what was it for you that catalyzed your journey to find an AP automation solution? Did you have an “ah-ha!” moment, realizing that what you were doing wasn’t working? Or was it a more gradual realization and process?
It’s been an initiative since I started with the company about 5 years ago to try to find the right solution. When you’re looking at the statistics, like in our industry, we’re processing 200,000 invoices a month. As you can imagine in the property management sector, we have hundreds of thousands of electrical bills for all the units, the common areas, snow removal, a lot of construction and activity going on at the buildings. That type of activity is going to continue to drive the invoicing from a wide array of vendors.
It wasn’t necessarily an “ah-ha!” moment, other than figuring that with rising costs of healthcare and employee benefits and the growth pattern that we’re on, we just can’t sustain the manual AP process the way it is.
When you’re evaluating your AP processes it’s important to go back to the very beginning of the flow to identify all potential areas for delays. When we’re talking about trying to capture discounts and other cost-saving opportunities, you really have to understand where the problems can occur throughout the system. As I said before, we have a mail clerk who sorts all of that mail that comes into the office, then distributes it to the accounting staff; we’ve observed that it can take 1-2 days, depending on the volume of inbound mail. Heaven forbid the mail clerk ever needs to take an extended leave or vacation.
On a day where a ton of mail comes in at once, it can take the clerk 1 or 2 or even 3 days to open all of the mail, sort through everything, then get it to the staff. And that just goes to an inbox on a desk, where it can sit for even longer. The staff can get overwhelmed by other activities and responsibilities and the invoices will just sit in the box. There’s a large opportunity for that invoice to simply sit for a few days. And that’s before we’ve even begun an approvals process. Once the invoice gets entered into the system, it has to go to property managers for approval, which can take 1 or 2 days, similar to your example of sitting in a queue. It takes time to manage it all and make sure the queue is getting approved. And then finally, after it’s approved, you need to talk about the mail process, which is another few days for that bill to be processed out of your accounting department, mailed off, then received and posted to the account. So, it wasn’t an “ah-ha!” moment for us; it was really a matter of evaluating the process and saying, “this is just not sustainable with growth”.
Once you’re fully implemented with an AP automation solution, are there any other business problems you anticipate that it will solve? Or is it really mostly about reducing paper, processing time, keeping headcount lower, etc.?
Having an AP solutions where you’re able to redistribute that required time will allow us to focus back on the analytics and being able to really study our buildings and trends across them. The unique thing of being in the real estate market like Chicago is that you have little neighborhoods like Roger’s Park and Lakeview, where you can have a six-unit building in both neighborhoods that perform completely differently. It would free us up to be able to dive deep into the bare bones of the business and analyze performance. That’s also an obvious plus for investors because they’ll be turning a better profit.
Cost savings are what it really comes down to for us; when you’re talking about not printing anything, you’ll save on paper, ink, toner, electricity and other related costs, all of which adds up a lot. We’ve been in this process for a few years; analyzing those savings and getting a deep understanding of what it costs to, for example, have an envelope printed with our logo, then factoring that into the costs. I think having an AP automation solution will streamline the business as a whole. It will not only benefit the accounting department but the whole management and operations side organization-wide.
How open is your team to this process? Do you have a lot people stuck in their current ways, or will there be easy adoption and embracing of the new process?
Change is not easy for everyone; our staff ranges in age from recent college grads to 25+ year staff members. To really drive adoption and engagement, you have to really outline the benefits that the solution will provide. Obviously, training becomes a big part of that; you can’t really just roll something out without the full training. But you have to meet that skepticism and understand that the decision to automate AP is a strategic decision that needs to be made and will benefit the entire company and know that the profits trickle down. The more efficient and effective we are at automating with a solution, it will work that much better for everyone at the company as a whole.
When you think about decision criteria and selecting a partner, how much do you weigh things like payback period, ROI, integration with your ERP, and other factors like those? What kinds of things are going through your head as you’re in the thick of this process?
One of the recurring issues that comes up is cost. We want to make sure we’ve done all of our analysis, even to the littlest things like a stamp on an envelope, to get an accurate cost figure. Then you need to factor in employee time and efficiency. So cost is a key driving factor in my decision.
But for us and the platform we use for property management, any solution needs to really coexist with our current platform. Because it’s so robust and allows for leasing, accounting, property analytics, and more, any AP solution needs to seamlessly work alongside it. Ensure that it’s a user-friendly system too, because we’ve invested so much in our primary platform that to bring a second one such as Goby onboard, we have to make sure teams are trained enough and it’s easy to use because we’re now expecting them to do that activity in two platforms.
Those were and will be the two biggest factors as we continue to search for our perfect solution. The well-roundedness of the solution is important too. Invoicing is one structure of AP, and data entry is the primary part of any AP program, but you also need to consider payments. As technology evolves on the AI side with AP automation, the ability to electronically make payments is an important part of a solution. You’ll need to make sure the solution that you’re working with or learning about is really a well-rounded program that really fits side-by-side with your current solution, especially if you’re not going to change what you already use.