Whether you represent a commercial real estate business or are an owner who self-manages commercial property, looking for the best commercial property management software can be a daunting process. This article will help you navigate some important considerations to make the best decision for your business.
1. On-premises (server-based) vs cloud-based
There has been a large move into cloud-based software in the past few years. The below gives compelling reasons why it should be the obvious choice.
On-premises software requires the property management software to be purchased and a server to install the property management program on, the operating system software for the server itself and database management software such as Microsoft SQL.
Thus, on-premises software is costly up-front. However, it is the ongoing costs that require closer scrutiny. The server requires constant maintenance by IT professionals to perform operations such as windows upgrades or security patch installations. The property management software might require upgrading or patch installations from time to time. Correctly managed, the server and database should be backed up offsite regularly, and you should have a disaster recovery plan. Factor in the costs of electricity, rent for the space the server occupies, the above maintenance costs, annual licensing costs and depreciation of the upfront costs, and you will come close to the full ongoing cost for server-based software.
Cloud-based software normally does not come with any upfront cost associated with the software use. This is because the software provider has incurred all these infrastructure costs up-front and covers those costs through a monthly subscription fee. Additionally, as you will be relying on the cloud-based software provider to host the hardware and perform maintenance, upgrades, backups etc., they wrap all these services up into the monthly subscription fee.
As the infrastructure costs are only incurred once by the cloud-based software provider and are effectively amortised over a large client base, the cloud-based monthly subscription fee is invariably considerably lower than the equivalent comparable on-premises cost.
Cloud-based clients often experience much higher levels of protection over their data, and better systems reliability as the cloud-service provider manages this function considerably better than the average client opting for the server-based solution.
The cloud solution is more scalable and allows for more flexible working arrangements as it is accessible from any location with an internet connection. On the other hand, the server-based solution is only available on the local area network or more widely with additional expensive software such as Citrix.
The cloud-based solution also allows the provider to seamlessly add new features without clients having to install upgrades, which is required with the server-based option.
Cloud-based software has become the norm as businesses get used to the idea of their data being stored in the cloud and better protected than the on-premises option.
Note there is a separate cost of migrating the data, but this would need to be incurred whether moving to a server-based or cloud-based solution.
In summary, server-based solution costs include:
- Server operating system
- Server database software
- Commercial property management software
- Backup software
- Server maintenance
- Commercial property management software maintenance/upgrades
- Maintaining backup and disaster recovery systems
- Electricity for server
- Rent for server space occupied
- Annual licensing costs for software
Cloud-based solution costs include:
- Monthly subscription fee
In conclusion, the cloud-based solution is the obvious choice as its benefits far outweigh the server-based option.
2. Core functionality
Early on in your investigation into software options, you need to confirm that the providers you have short-listed will meet your core functionality and reporting requirements.
Before having a demonstration, you should compile a full list of required core functionality and tick these off in the demonstration when you see the software caters for it.
Speaking to existing clients can corroborate the above evidence and is highly recommended. This will give extra comfort required to make this important decision. The software provider should be able to provide a list of businesses similar to yours (in size and operations) using the software you can talk to.
Finally, you might want to take it a step further and use the software on a trial basis to confirm that it works as you have demonstrated. This step, however, normally requires some paid training before testing, which is normally a small price to pay to ensure you make the correct decision.
3. Type of commercial properties being managed
Many different types of properties fall into the broad ‘commercial’ category. This includes retail, industrial, commercial strata, commercial (single tenanted), and multi-story commercial. These different property types might have specific operating and reporting requirements, e.g. retail requires foot traffic or sales figures to be captured and reported.
Ask the software provider specific questions about your requirements and get them to show you how the software handles them.
4. Owner report requirements
Many different owner types should be considered, as each owner type may have different reporting requirements. For example, retirees, sophisticated high net wealth individuals (investors), syndicates, and real estate investment trusts (REITs) are listed or unlisted.
Reporting requirements vary with each type of owner; e.g., there might be a requirement to do accruals-based reporting, so you should ensure the software being reviewed has this capability.
Reports should be tailored to the audience receiving them. Sophisticated owners will expect more detailed reports, while some landlords will want very simple reports showing cash in and cash out only. Make sure the software chosen is flexible enough to meet your different reporting requirements and that you don’t end up stuck with one option that does not support your clients’ needs. It is also worth asking if it is possible to develop custom reports.
Ask whether the software being reviewed has a general ledger (on a cash and accruals basis) built into it, as this will be important from a reporting perspective. The “accounting grunt” of the software is an important factor for audit and reporting.
5. Software support
Software support is an important buying consideration because the quality of the support can determine whether your team can operate a successful business using the software in question.
It would be best to find out how support is delivered, for example, in person on the client site, through telephone support, online knowledge base, by email, from Australia or overseas. Ask for some details on the support team's experience, as inexperienced support operatives often cannot provide meaningful support. You should find out how big the client support team is as many software companies do not resource this department sufficiently as it is not revenue-producing.
Find out the support hours, contracted (minimum SLAs) and actual response times, as well as enquiring whether any additional costs are associated with the support. Ask the provider if they have any industry awards for service excellence and review client comments for evidence that support is well managed.
Another key question is whether there are any special arrangements during the first few months, e.g. on-site support.
Other important support questions include:
- Is there onboarding training/support and follow-up training/support after launching?
- Is there further on-demand training available?
- Can you quickly log a support request if you can't locate the answer in the knowledge base?
- How big is the support team?
- Are support staff trained and experienced and able to facilitate a quick answer?
- Is there a help desk, or do you have to rely on the community forums?
6. How efficient is the software to use?
Many property management tasks are repetitive, so it is important to assess how the software handles those tasks and what efficiency benefits can be derived. Whilst automation is good as it helps increase efficiency, over-automation can be counter-productive, as users lose some of the control and visibility required to perform their functions well.
Some of the typical repetitive tasks and questions to ask include:
- Supplier invoice processing – ask about the automated processing
- Tenant receipting – ask about banking integrations and automatic matching
- Payments - ask how they occur and how property managers can retain control over what is paid yet still use the system to do online calculations
- Tenant invoicing – ask about the steps involved and how Property Managers can still maintain some control over what is charged
- Arrears management – ask how the process is performed in the system
- Work orders – check how these integrate with the system and become transactions without double handling
- Month end – ask how efficient monthly reporting to owners is and any other month-end tasks
- Management reporting – ask whether the system facilitates monthly management reporting, which reduces the manual production of reports
Software that has been designed around typical property management tasks or accounting operations is normally more logical and efficient to use. Please enquire about the origins of the software and how the software design came about, as this will give good insights into its useability and efficiency.
7. Is the interface easy to use?
Easy-to-use software makes it easier to train existing and new staff, which in turn facilitates a smoother, more successful transition and successful ongoing use. This will make it more readily embraced. One caution, though, the simpler it is, the less functionality it will possess, so you need to look beyond the initial looks and consider the detailed functionality mentioned above.
You need to recognise that there is a lot that a good commercial property management system needs to do, and learning all the functionality will invariably take time and training. A simple interface could mean that the system itself is simple and does not contain the functionality required leading to manual “workarounds”, which is an undesirable outcome.
A user-friendly interface with easy-to-navigate menus is an essential component that you should be looking for. Ultimately, you want your property managers and trust accountants to enjoy using the software.
A web-based graphical user interface is one that most users today are more familiar with as opposed to the old server-based interface with menus that are inefficient to navigate.
8. Migration or Onboarding
Migration or onboarding refers to moving the data from your incumbent system to the new one. For commercial property management, this is not a simple task because of the large amount of data involved, the variable nature of it and the fact that different systems hold the data differently. Unfortunately, there is no one-to-one data mapping of fields of any two systems.
Enquire about the onboarding process making sure the software provider has sufficient skills and experience to onboard you successfully. Enquire as to other migrations off the same incumbent software platform and how long the migration process takes.
Ensure you clearly understand the software providers’ and your responsibilities throughout the process and when time needs to be allotted to your functions so as not to cause any delays in the migration.
Some other relevant questions to ask about migration include:
- How long is the entire migration process?
- Who manages the migration?
- What are the critical dates and milestones for a successful migration?
- How many days will you be “down” or unable to transact?
- How are take-on balances transferred?
- How do we keep tabs on how the migration is progressing?
The migration is highly important in installing confidence in the new software users. A badly managed migration could severely hamper the successful ongoing use of the software.
9. Security over data
As many property management data could be classified as sensitive, it is important to know that there is sufficient protection over unauthorised access to the data. As mentioned above, cloud-based providers will normally always provide better protection and security over data than businesses opting for the on-premises solution.
Here are some pointers as to what should be asked to assess security over sensitive data:
- What user access controls exist, including multi-factor authentication?
- Where is the data stored? For e.g., tier4 data centre has the highest level of protection
- Is data encrypted?
- What are the backup procedures (frequency of backups, offsite backups)?
- What other redundancy features are built in?
- Are there any SLAs for percentage guaranteed uptime?
10. SaaS pricing models and contracts
The "per user" model is the most common pricing structure used in the SaaS business model. This is an easy model for understanding and provides a predictable monthly subscription for the business. It also scales with your business as you increase or decrease staff numbers.
The “per usage” model is based on how many leases or properties are being managed or the total lettable area of properties being managed.
You will need to understand how the applicable pricing model translates into your business. With both models, you need to determine the minimum period you are contacted for, i.e., is it monthly or 12 months or even longer?
Contract or no contract?
It is being stuck with software that doesn’t do what you thought would be demotivating for your team and have wider and long-ranging business implications beyond the immediate cost of the software. Thus, it is vitally important not to make a contractual mistake that negatively impacts your business long-term.
If you lock into a long-term contract, getting out early can be difficult and potentially costly. If the incumbent software does not function as it was represented, it may be possible to end the contract early through “non-performance”, but you will need to take legal advice on this.
Be wary of software providers who need to contact you for a long period, such as 12 months or even longer, as that might indicate a lack of confidence in their product.
In contrast, however, you can feel much more confident with software providers who are confident in their products and do not feel the need to lock you in for any period.
Additional pricing questions include:
- Do you pay monthly, annually, or in one lump sum?
- Is there a contracted period, e.g. 12 months or is it month to month?
- Will there be any future increases?
- What is the cost of setup or onboarding?
- Are there any additional fees or charges for add-on features?
- Where is the legal jurisdiction of the contract, i.e. is it Australia or overseas?
- Is the contracting party legally registered in Australia?
Be wary of long-term contracts.
That’s a lot of information to digest, but remember, this decision is an important one you don’t want to repeat in the short term, so it is worth investing the time to get it right. You will need to weigh up all the answers obtained from your enquiries. However, one overriding factor can give you the comfort to proceed with your decision.
THE SOFTWARE's EXISTING CLIENT’S OPINIONS.
Good luck in making the best decision for your business.