Understanding Purchasing Efficiency through PEPP Ratings

The drop in the nation’s effective asking rental rates is putting pressure on multifamily housing operators to look more closely at how they are spending money. When rents fall, such as they have amid the COVID-19 pandemic, saving on necessary expenses becomes more important. Rent prices dropped an average of 1% in the second quarter, the first such decline for the first time in nearly a decade. Now south of the line for the same period as last year, asking rents are being cut in Class A and B apartments with only marginal growth in Class C units. The reductions, combined with a dip in rent payments starting in the third quarter, signal that less money is coming in. The trends are favoring strategies to reduce money going out of portfolios, but operators don’t necessarily have to make wholesale cuts. Applying proven spend management practices that utilize buying networks and accounting efficiencies can help companies improve their bottom lines. “A tendency for apartment operators may be to go without certain things or take risks to save on operational expenses,” said Sara Jones, SVP of Spend Management and Accounting. “Realistically, just improving spend management processes can save thousands of dollars without having to give up much.” A powerful spend management ecosystem reduces operating expenses and drives purchasing power through pre-negotiated catalog purchasing and efficiencies gleaned from linking accounting functions. To save money, says Jones, a property or portfolio must first understand the efficiencies or inefficiencies within its spending processes. Benchmarking expenses is helping operators understand the purchasing efficiency of the property. How to measure spend Purchasing efficiency is determined by the amount of time and money an organization saves by automating as many processes as possible through spend management solutions. A property is measured against the portfolio performance of properties nationw...