Overcoming Financial Growing Pains in Vacation Rental Property Management
Founder & CEO
Since 2015, vacation rentals have increasingly become a staple in the global travel and hospitality industry, carving out a new business niche against the behemoth hotel industry. As the industry has professionalized, entrepreneurs and investors have taken up the lucrative opportunity to not only perform housekeeping and security services for owners, but to also manage the income and expenses of the properties on behalf of the owners themselves. To make sure that your business has what it takes to scale, we've put together this article to help you identify the growing pains vacation rental managers need to overcome.
Growing pains are a natural part of a vacation rental management company’s life cycle, but that doesn’t mean you should ignore them. In fact, these signals exist to help you identify when your internal processes are failing, so that you can make corrections and keep the organization running smoothly. In this article, we’ve outlined five growing pains that vacation rental managers experience who are beginning to outgrow their accounting systems.
- Spending too much time finding & correcting errors
- Late payments to vendors, owners
- Limited visibility
- Held back by disconnected systems and processes
- Can’t keep up with growth
Infographic: 5 Growing Pains for Vacation Rental Managers
1. Growing Pains for Vacation Rentals #1: Spending too much time finding & correcting errors
- To keep up with customer demands and expectations and to continue to be nimble in the constantly changing economy, many hospitality organizations are experimenting with operational changes, such as alternative business models and new technology. Having sound reporting and insight into accurate financials is a critical component of implementing any new business process or model.
The Solution: Increase productivity with automation
- If your accounting system is limited on reporting functionalities, it will become a time-consuming and error-prone task to gather the right information to support making any changes. To keep financial information up to date across the organization 24/7 when your business is running full steam ahead, that’s where automation comes in handy. Through automation, you can potentially cut hours down to minutes. Your team can dedicate the additional time in their schedules to helping the business reach its larger goals and planning for the future.
2. Growing Pains for Vacation Rentals #2:Late payments to vendors & owners
- Accounts Payable is a relatively straight-forward process, but when you add up all the different components of vacation rental management, it can get overwhelming. The biggest challenges in this area of the business are data entry, invoice matching, and solving for lost and duplicate invoices. As your business grows, the AP inbox will start overflowing, and you risk creating bottlenecks that slow everything down and put your company on shaky ground.
The Solution: Use the right apps for the job
- Understanding that you are not limited to one software is crucial if you want to scale your business. When you are limited by the capabilities of one software, your competitive advantage will only go as far as it can take you. So for business owners and entrepreneurs with big goals, you’ll need to look at your business as an ecosystem, rather than an organism. By selecting the best apps to perform key functions like billing, payouts, tax compliance, and even reporting, HR or project management, you can control when functionality in one area needs to grow and to what extent. At Ximplifi, we call this a “best in class approach”, which you can read more about in this article.
3. Growing Pains for Vacation Rentals #3: Limited visibility
- One of the most prominent impacts of the rise of vacation rental management as a profession is the increase of hospitality organizations using many third-party applications across a vast and expanding digital landscape. Offering new and digitally-enabled services has helped many companies survive or even thrive during the pandemic, but it has also placed new demands on visibility into the business, technology, operations, and managing the finances, making reporting limitations a one of the most noticeable growing pains for vacation rental managers.
The Solution: Gain visibility with better reporting
- To avoid financial data silos and keep the front and back office of your operations in sync, make sure you have the ability to produce drilldowns and rollups you need based on categories like location, customer, and entity. Look for solutions that offer flexibility to track rich dimensions, customize statistical accounts, and analyze different cuts of data in real time. When all the transactional data your organization needs flows in a choreographed manner, getting an accurate picture of company cash flows and using KPIs to lead the direction of the company becomes feasible at a large scale, even for small teams.
4. Growing Pains for Vacation Rentals#4: Held back by disconnected systems and processes
- Finance works best when there is seamless collaboration with other departments and functions. Unfortunately, legacy accounting systems often aren’t well-integrated with other enterprise tools and systems—including commercial applications and custom-developed software. That often leaves you trapped in manual processes, spreadsheets, cumbersome workarounds, and slower workflows as you manage conflicting formats and rekey the same data in multiple systems.
The Solution: Streamline processes and integrate your front and back office
- We’ve already mentioned the best-in-class approach, and this is another reason why selecting the right apps to support your organization is important. Ideally, the solutions you choose will have flexible APIs to connect with other business systems. Using software that integrates well in general will eliminate many time-consuming, manual workarounds that otherwise hamstring your vacation rental management company at scale. Make sure you are evaluating your tech stack on an ongoing basis – whether it’s monthly, quarterly, or annually – and keep a scorecard of how well each solution is meeting your business needs today and in the future.
5. Growing Pains for Vacation Rentals#5: Can’t keep up with new complexities
- With so many pressing responsibilities, it’s no surprise that many vacation rental finance managers aren’t necessarily laser-focused on the state of their software infrastructure. In fact, it’s not uncommon to find organizations that haven’t touched their accounting systems for years. Hospitality organizations that are saddled with outdated accounting systems find that upgrading their legacy software is too difficult, costly, and time intensive. However, an outdated—perhaps even unsupported—software platform can translate into reliability and downtime problems and security vulnerabilities. And the costs of maintaining a legacy system quickly increase.
The Solution: Future-proof your systems
- To overcome this barrier to growth, choose providers that are both proven to understand the needs of your market and are continually releasing improvements to the software. You can find out how frequently a software releases new versions and manages upgrades by looking at company press releases, terms and conditions, or customer support documentation on the website. Additionally, creating a roadmap for what your business will look like over the next 3-5 years can be a helpful exercise towards understanding if and when you’ll need additional functionality or capacity.
Today, vacation rental management company operations and finance have much more added complexity. No matter how you slice it, manual processes are error-prone and time-consuming, and it makes it difficult to gain an integrated, real-time financial view of a company’s end-to-end processes.
Plus, the visibility into your financials when you’ve added multiple vendors, revenue structures, and owners into the equation can be questionable. Are your numbers trustworthy? How is your business performance changing from week to week? Losing visibility into your financials is not a place you want to be.
If you’re experiencing these growing pains of vacation rental management, it’s probably time to re-evaluate your accounting and financial software. For many property managers who have started their businesses on QuickBooks Online, taking the step to upgrade your financial ecosystem can be a lot to do on your own.
Reach out to Ximplifi for help
As accountants dedicated to helping vacation rental property managers full-time, we understand the complexities that come with scaling your business. Contact our team to get a professional recommendation for the best accounting system to help you reach your goals. Whether you are just looking for assistance with implementation or need help with ongoing accounting tasks, we have the expertise to help you unlock efficiencies of scale and achieve your financial goals sooner.
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