The ultimate artificial intelligence for real estate accounting guide
Artificial intelligence for real estate accounting is a solution designed to reduce or eliminate the need for human intervention throughout the invoice processing workflow. Whether you’re processing utility bills or work order payments to general contractors, AI for real estate can streamline the Accounts Payable Process.
May 4, 2023
10 min read
The Real Estate industry is currently undergoing a massive digital transformation. New players are entering the market and shaking things up. From AirBnB creating new opportunities for short-term rentals to property management companies using AI for tenant screening. Companies like Realty Mogul have made it possible for anyone to invest in institutional quality Real Estate Investment Trusts (“REITs”).
In order to stay competitive and scale, real estate companies can't operate according to business as usual, and technology will play a major role in the upcoming changes. With smart technology, processes can be automated, and better decisions can be made, improving the experience for everyone — buyers, sellers, tenants, landlords, and investors.
This commercial real estate accounting guide will provide finance and accounting leaders with tools to navigate technological transformation and help you push the boundaries to improve business operations. You'll learn strategies for higher efficiency to reduce back-office costs and reach high-efficiency levels.
HOA property management accounting team leverages AI for real estate accounting
Watch the full AP intelligence recording: How to simplify AP with 5X productivity
Continue reading to learn more about this property manager’s success with accounting AI for real estate.
The History of real estate accounting and AP Automation
Real estate accounting software has a long history, dating back to the 1950s when mainframe computers were first used for financial calculations. At that time, financial statements and accounting records were kept on paper, which made accounting tasks slow and tedious.
Before PCs came along, MRI Real Estate Software was launched to focus on residential real estate clients. They processed client paperwork and turned it into professional printed reports with an IBM 360-20 Mainframe.
In the 1980s, the first property management software was born when Anant Yardi built "Basic Property Management" software to help him manage the few properties he owned in Santa Barbara. This 1984 invention started as a personal project, now Yardi Systems, a solution that has evolved into a leading real estate ERP system.
As the 1990s rolled around, Enterprise Resource Planning (ERP) systems emerged, integrating accounting with other business functions such as human resources, inventory management, and customer relationship management. These systems were costly and clunky.
In the early 2000s, cloud-based accounting software became popular, and AP Automation was on the rise. Fast forward to the 2010s, when innovation has taken off and artificial intelligence was introduced to the accounts payable software world.
Artificial intelligence for real estate accounting
Autonomous accounts payable software for real estate (AP Autonomy) is a solution designed to reduce or eliminate the need for human intervention throughout the invoice processing workflow. This type of accounts payable software uses artificial intelligence and machine learning algorithms to automatically capture, process, and approve invoices, payments, and other financial transactions. Whether you’re processing utility bills or work order payments to your general contractors, AI for real estate can streamline property management accounting.
Real estate accounting: The difference between AP automation and Accounts Payable Software with AI
AP automation is a rule-based process that extracts data from an invoice and uses it to populate all the required information into the accounts payable system.
Accounts payable software with AI goes a step further by incorporating artificial intelligence (AI) to perform accounts payable tasks that traditionally require human intervention, such as invoice classification and data entry. Autonomous invoice processing uses AI to run the accounting process from beginning to end. This includes invoice entry, classification, matching, and approvals. With AI technology, it can extract the number on an invoice, understand and classify the cost, send it to the right person for approval, or automatically approve it if it meets all the criteria.
The limitations of AP automation software for real estate
A property management company that manages 8,600 properties implemented the leading AP Automation tool for invoice processing. Even with this tool, they experienced limitations that caused costly issues. When manually entering data into their invoice processing system, there is always a possibility of human error and potentially entering the wrong information. For example, a controller at this property management company found a large, wrongly allocated amount of client money when they audited their customer accounts and process. She found that for over a year, there was more than $40,000 worth of invoices paid to the wrong client’s community.
Due to the clunkiness of their multi-entity environment in the property management’s legacy AP Automation software, humans and the automated workflows did not catch this error and routed invoices and payments to a client because of similar names. One customer managed a property named City Park View in Charlotte, NC, but the AP Automation routed the invoices to another customer’s property named City Park View in Miami, Florida. The Controller was responsible for restoring the client’s trust and communicating the error to them. This major error could have been avoided if the property management accounting team was not relying on the rules and templates that legacy AP automation software for real estate requires.
Why does legacy AP automation software for real estate struggle to match the correct invoice to the correct property?
Why are legacy AP automation and Robotic processing automation (RPA) software unable to determine which property an invoice should be allocated to in the AP automation system to begin the invoice processing? Even before the invoice coding, approvals, and payments can begin, real estate accounting teams must manually sort paper invoices and upload them to the correct property’s accounting system.
To wrestle with this issue our customers gave a unique ID to each property, but rules-based automation can only look for and understand invoice data that it has been programmed to read. One challenge these solutions face is the ability to detect the property or entity name, whereas accounting AI is able to detect the property or entity automatically by reading the property name of a unique ID. This vital property information is often not present on the invoice.
Preparing legacy accounting tools to process this property-level information requires extensive template setup, training, and exception handling. If a new invoice template or vendor is introduced, the process has to be started all over again.
A rules-based AP Automation tool might be able to detect the property information if it’s on the invoice, but the real estate accounting team would need to create thousands of templates to capture the property or entity on the invoice. Imagine a company that manages 8,600 communities, which would have thousands of vendors that need template creation and training. Even after creating thousands of templates, a legacy AP automation tool would not detect the property information if it is not present on the invoice. That’s where Artificial Intelligence for Real Estate is different.
How does Artificial Intelligence for Real Estate Accounting teams work?
Before accounting AI, our real estate customers— whether they are HOA property managers, multifamily property managers, or real estate agencies— have felt the pain of late fees or missed payments because of errors caused by AP automation or manual work.
The solution to the challenge real estate accounting teams face is Vic.ai Company Detection Logic. This is a breakthrough technology that leverages a set of machine learning algorithms that learns which HOA, entity, or property an invoice belongs to. The Vic.ai Accounts Payable Software provides artificial intelligence for real estate that can look for, read, and understand the property ID or leverage other unique identifiers (like an address) to seamlessly allocate the invoice to the correct property or entity’s accounts payable system, without the need for a human to make this extremely manual determination. Rather than the mailroom team sorting through the invoices, then looking through fine print or matching property codes to determine if an invoice should be processed for City Park View Charlotte vs City Park View Miami, they just need to upload the paper invoice to Vic.ai and the artificial intelligence for real estate will do the rest of the work more accurately and efficiently. If the invoice is sent electronically, the invoice will be automatically uploaded to Vic.ai and coded in the correct entity or property’s system.
The benefits of accounting AI for real estate
While these challenges may seem insurmountable, the good news is that they can be overcome with the right tools and strategies. One such tool is AP Automation with AI, or Autonomous accounts payable software (Autonomous AP), which can streamline the accounts payable process and reduce operational expenses. Here are some ways accounting AI can help:
(1) Autonomy: Self-driving Invoice Processing
Accounting AI can automate the invoice processing workflow, from data capture to coding and approvals. This reduces the need for manual data entry and minimizes the risk of errors, such as duplicate payments or incorrect coding. By automating the accounts payable process, real estate accounting teams can reduce processing times and improve accuracy.
(2) Improve Visibility and Control
Autonomous AP can also improve visibility and control over the accounts payable process. With a centralized platform for invoice processing, real estate accounting teams can easily track the status of invoices and approvals, as well as identify bottlenecks in the workflow. This enables teams to make data-driven decisions and optimize the accounts payable process.
(3) Reduce Costs
By automating the accounts payable process, real estate accounting teams can reduce back-office costs, such as labor and material costs. This enables teams to focus on higher-value tasks, such as analyzing financial data and developing growth strategies. In addition, accounting AI can reduce the risk of financial mismanagement, which can result in costly errors and fines.
(4) Increase Accounting Efficiency
Autonomous AP can increase efficiency by eliminating manual data entry and reducing processing times. This enables real estate accounting teams to process invoices more quickly and accurately, which in turn improves the overall efficiency of the accounts payable process.
(5) Enhance Security
Accounting AI can also enhance security by using advanced algorithms to detect and prevent fraudulent activity. The technology can flag suspicious activity, such as duplicate invoices or invoices from unknown vendors, and alert real estate accounting teams to potential fraud. This can reduce the risk of financial loss and protect real estate companies from reputational damage.
(6) Improve data insights
Accounting AI can also provide real estate accounting teams with valuable insights into their financial data. By analyzing invoice data, real estate companies can identify areas where they can reduce costs and improve efficiency. For example, they may identify trends in utility bills across properties and implement cost-saving measures, such as energy-efficient upgrades. These insights can help real estate companies make data-driven decisions and optimize their operations.
(7) Integrates with your real estate accounting software or ERP system
Autonomous AP layers over your existing tech stack for optimal efficiency. If you manage your properties with Yardi, MRI, RealPage, Appfolio, or other property management software, the Vic.ai platform can integrate with your chosen system. Once the invoice is processed, Vic.ai will push the relevant invoice, GL, and property data over to your real estate software.
HOA property management giant reduces time per invoice by 83% with Artificial intelligence for real estate accounting
SCOPE: With about 1.5M invoices each year, HSB wanted to leverage autonomous AP to reduce their employees’ time spent on tasks.
CURRENT STATE & CHALLENGES: Their existing AP software required employees to double-code and classify every invoice manually with no automation. With over 300 accountants, any staff turnover meant new individuals had to be trained on several technologies.
FUTURE STATE OBJECTIVES: HSB needed a solution that had the ability to scale, avoid double coding required by multiple AP software, and manage processing without relying on drastically increasing headcount. This meant finding a solution with deep invoice automation expertise and the ability to future-proof the organization.
WHY VIC.AI: HSB found that Vic.ai was the only platform with true AI that grows smarter over time. They were able to reduce time spent on reporting, reduce errors, enhance financial control, improve their bottom line, and access financial data in real time. Vic.ai’s Autopilot feature is increasing efficiency and productivity, and transforming HSB’s accounting department into reviewers instead of data processors.
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Build resilience in CRE with the Accounting AI Guide
In today's fast-paced business landscape, resilience is more important than ever. The real estate industry is rapidly undergoing digital transformation while facing unique macroeconomic challenges. As a finance leader, you must navigate these changes, increase efficiency, and reduce costs nimbly.