When Should PMs Invest in Expense Management?

Expense management causes headaches for almost every short-term rental property manager, regardless of size. Perhaps it takes you multiple days to match transactions to properties each month? Or maybe you have to take a deep breath before opening your bookkeeper's invoice, bracing for the impact of a substantial bill? 

Either way, it's clear that expense management is painfully inefficient. But what's less clear is when it's the right time to invest in short-term rental expense management software. After all, no one wants to add yet more software to their tech stack only to find it's not earning its keep. 

So, in this article, I'm going to share some of our customers' insights into the telltale signs that it's time to consider a short-term rental expense management solution. 

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You spend too much time manually tracking expenses — at the cost of growing your business (1-25 properties)

As the owner-operator of a vacation rental management company with a portfolio of 20 - 25 properties, you may be spending multiple days chasing down expenses at the end of each month. 

Riley Goldman of Beachside Vacation Rentals knows this all too well. "I had 20 units, and I was spending two days every month doing all of the accounting. I'd call every single one of my people and say, what is this receipt for? What did we buy? Which cleaning supplies should be billed to this unit?"

The most frustrating thing about this time-consuming process is that it can get in the way of your growth. As Riley puts it, "What if I could have signed up a new property in those two days?"

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Unbilled expenses start eating your profits (20+ properties)

Unbilled expenses can become a thorny issue once you've reached 20 properties. Without a system in place to attribute purchases to units on the go, money falls through the cracks — and all those expenses add up.  

One luxury property manager told us that because they were unable to easily allocate expenses to properties in real-time, they noticed a significant dent in their profit margins: "Our largest expense last year was unbilled expenses".

They're certainly not alone. When Beachside Vacation Rentals only managed around 20 properties, Riley told us, "There had to have been thousands of dollars that were lost each month." 

If left unaddressed, this problem scales with your business. Our data shows that when companies reach 100+ units, poor expense management control results in average annual losses of $70,000 to $140,000. Ouch!

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Bookkeeping starts to become a considerable expense (50+ properties)

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You're growing — congrats! But inevitably, with more properties come more expenses, receipts, and credit cards. 

At this stage, you probably have a team handling day-to-day finance — whether in-house or an hourly paid contractor. In terms of business growth, it's great you've stepped away from the day-to-day. But can the same be said for your gross margins?

The team at Orlando-based Blue Gems describes a common scene before working with Topkey: “[There was a lot of] back-and-forth communication between our bookkeepers and our operations team.”

Without a custom STR expense management solution, your team may be dedicating several days each month to resolving complexities just to close the books on time.  As a result, your employees will be under more strain, and bookkeeping costs can get expensive. Worst of all, these issues will continue to balloon as your portfolio grows.

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You have too many systems that don’t talk to each other (75+ properties)

Now that you're managing 75 units or more, you may be working across several systems that handle financial data. Very often, these tools do not integrate well, or even at all, which can create financial data silos. 

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Where there are silos, there’s process friction and inefficiencies. For example, your team may have to search multiple systems to find transactions when matching expenses, or even duplicate time-consuming reconciliation processes across your PMS and accounting software. 

This doesn't just add time and cost to the process. It also adds extra opportunities for human errors that can creep into owner statements. Our data indicates that the average homeowner will start to look for a new STR manager after catching just two consecutive errors on an owner’s report. Thus, it’s easy to see why disjointed systems can be bad for business. 

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Tax compliance across markets becomes a challenge (100+ properties)

Compliance may have become a huge challenge if you're managing 100-150 properties. 

Adhering to several highly varied sets of local regulations and tax requirements means having multiple process variations. Things can get complicated if you don't have a custom STR expense management solution to help ensure you’re adequately tracking your expenses — which often burdens your team when they are trying to focus on meeting those local reporting requirements.

To avoid dropping the ball, you may have a large team spending 4 -5 days each month on bookkeeping and compliance tasks. If this is the case, you're probably aware that your overheads are surging. 

Yet worse still, no matter how diligent your team is, your current processes are highly prone to human error. If an employee has a bad day and makes a mistake, the consequences could be severe for your business. 

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The difference short-term rental expense management software makes

With expense management software purpose-built for short-term rental PMs, like Topkey, receipts and expense tracking tasks don’t pile up or fall through the cracks. Instead, your employees use an easy mobile app to allocate expenses on the go. 

For example, the Topkey platform sends them a text when they make a purchase, prompting them to upload a receipt and tag the correct property and expense category. From there, our system syncs the transaction data in your PMS (like Track or Guesty) and accounting software (like QBO or Xero), keeping your records consistent and up to date with every transaction.

Saving time

As a result, your bookkeeping can be completed in hours, not days — significantly reducing costs and making the process far more efficient. “With Topkey, it took us less than one hour to reconcile all of our monthly expenses,” said Valerie, the CEO of a 180+ unit property management company.  

Saving money

With Topkey, you can double down on savings by reducing financial waste and eliminating the bloat from support costs.

The leaders at Housepitality started saving on unbilled expenses right away: “My team is finding lots of little expenses that were falling through the cracks, and not being billed to the owners, all thanks to Topkey.” 

And according to Riley at Beachside VR, “Topkey literally replaces the need for a full-time bookkeeper.” 

Supporting great owner experiences

But perhaps the thing leaders love most about Topkey is that it helps them deliver a better owner experience. Since Topkey maintains consistency across all your systems, producing accurate owner statements is far easier.

Plus, thanks to Topkey's integrations with PMS platforms like Guesty and Track, you can ensure you deliver total property-level transparency to your owners. As Riley explains, “We’re very clear about any charge we have. Owners can view every expense through their journal entries in Guesty, allowing them to see receipts for all charges billed to them.'"
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Getting confident in compliance

Lastly, it protects you from compliance risk, too. Topkey's automation means you can more easily collect, record, and report your transaction data according to the local requirements in each property’s location. 

Find out more about Topkey

Learn more about how the Topkey platform can help your company relieve the headaches of expense management — or book a demo to speak with our team today!