The commercial real estate industry comes with unique financial challenges, and requires balancing profitability, cash reserves, and risk. CFO services can help commercial real estate companies proactively manage those pain points to effectively scale their operations.
Commercial Real Estate Industry Pain Points
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- Understanding the profitability of each property and the whole portfolio. Due to ownership of numerous properties, it can be difficult to track and manage individual properties while understanding the overall financial performance of the whole portfolio.
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- Maintaining adequate cash for operations and reserves. Managing cash reserves requires a delicate balance of preparing for unexpected events, maximizing investor & owner distributions, and avoiding capital calls.
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- Understanding ROI. Strong, accurate financials and forecasts are required to obtain capital for new investments.
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- Maintaining accurate reporting and tax compliance. The commercial real estate industry requires specialized knowledge to correctly record financial transactions and events such as refinances.
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- Managing risk. It is important to balance the use of leverage against the risk of default.
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- Managing changing costs due to economic factors. Factors such as interest rates and supply quickly influence acquisition costs and operational costs, which affects cash flow and cash reserves.
How The Commercial Real Estate Industry Benefits from CFO Services
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- Consolidated financials for multiple properties. CFOs provide uniform consolidated financial reports to facilitate understanding of expenses and overall profitability.
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- Planning for future operations. CFOs provide cash flow reporting, budgeting, and forecasting to help maintain liquidity and allocate resources for future investments.
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- KPI reporting. KPIs such as operating expenses, net operating income, ROI, and revenue growth allow commercial real estate companies to make data-informed decisions and easily present data to investors.
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- Clean and accurate financials. Properly maintained books and clean balance sheets ensure tax compliance, efficient tax filings, and accurate reporting of equity positions.
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- Risk analysis & mitigation. CFOs provide reporting with information such as debt to equity ratios to make recommendations about risk. Additionally, financial modeling is utilized to analyze profitability and mitigate risk due to changing economic factors.
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- Implementation of financial systems. Strong accounting and financial systems contribute to a commercial real estate company’s ability to scale and maintain effective oversight.
Sentinel Finance Group provides financial leadership to help our commercial real estate clients successfully navigate industry challenges and effectively grow their companies.
Sentinel Finance Group is a fractional CFO firm in Kansas City and provides outsourced CFO services and controller services to local businesses.
