Part VI of the free eBook: The Key Metrics for Workspace Success
Very often shared workspaces operate on a limited budget which means the center manager ends up wearing multiple hats and has few tools or resources at his or her disposal. When it comes to the finances, if you’re not an experienced CFO, financial controller or bookkeeper, the task can become daunting. In this article, we referenced the top tips for workspace financial management: automation, integration, real-time information, data integrity and tracking services and payments.
While technology can certainly make your life easier, an operator must still know what metrics and reports they need at their fingertips to sustain and grow a profitable one business. However, as we touched upon in Part I, the financial aspect of a shared workspace goes beyond pure revenue generation. By nature of the flexibility of our industry and the dynamics of the business model, there are myriad of metrics to follow and reports to run to keep your center in tip-top financial shape.
Contracted vs. Actual Revenue
Run reports of revenue that you or your sales team have contracted out in license agreements and membership fees and compare it against the actual revenue you’re bringing in on a monthly basis. If the two numbers don’t match, you’re leaking revenue from somewhere. In these cases, check your discounts and make sure you’re not giving the farm away. If your sales team are lowering the price your offices just to get them rented, you may be losing more revenue potential than if you hold out until the market improves or a prospect comes along who is willing to pay the full price value of the space.
Aged Debtors Report
This report will give you a detailed view of the outstanding balance owed to you by customers and how far back their debt extends. Ideally, your customers will always be paid up, but now and then one or two may be overdue, and their debt may slip through the cracks. Knowing who owes you and exactly how much they owe you will help you to keep your members responsible. Be sure to set a limit to your grace periods to how long you’re willing to wait for payment.
Deferred Income Report
When you bill for rent in advance and services in arrears, deferred income reports will help to keep income aligned to products or services rendered during or after the current billing period. They are a huge time-saver for your bookkeeper because gives you visibility into all of the billing, showing the income that needs to be posted in the current month, and the amount of income that will post in future months.
Accounting gurus know that deferred income sits as a liability on the books until the delivery of a service, then it becomes revenue. Tracking and running frequent deferred income reports to see what money you’ve received for services not yet delivered will make life easier on you and your tax accountant. A global and accurate view of your tax liability is helpful when income is spread across multiple periods. Your reporting system should integrate with your financial system to track this in real time.
To accurately track account discounts, each promotion must be linked to a campaign or code. Keep on top of your reports to see which services you frequently discount, for whom and how long. Establish clear parameters for your staff (or within your booking system) and be consistent about how many discounts can be used within a particular period (i.e. billing, monthly, quarterly, etc.) to avoid abuse by customers. When the same customers receive a discount for too long, you may need to evaluate whether it’s worth allowing them to renew their license in your space. Operators should be charging full value of their space, especially when the market is up.
Debt Exposure Report
Exposure reports give operators a view to an aged debt of a client and compare the debt against the deposit being held. Seeing this value enables you to calculate whether or not you are holding enough deposit to cover your losses if the client were to default on payment. It also helps prioritize which debts to collect.
Monthly Client Billing
A key job of an operator is to know their tenants and members and encourage their inclusion in the community. Another aspect to nurturing your customer base is to be familiar with their monthly spend in your workspace. Doing a consistent spot-check every month will show you what you’re billing your customers and give you an idea of who is spending the most or least amount of money with your business, and allow you to recognize any stark changes in billing activity. It could mean salvaging income from a customer who is consuming fewer services or catching and mitigating an issue that you might not have been made aware of otherwise.
Product Group Analysis
Keep a keen eye on total spend from your various product groups. From private office tenants and meeting rooms to virtual and resident members, you must have a view of how your product offerings are performing over time. This valuable insight into products that are generating more or less cash can provide evidence that it’s time to repurpose a space during a time of year in which it doesn’t perform well. From a bigger picture perspective, when you analyze your product groups over time, you may be encouraged to adjust your offering longer term to maintain profit levels and even drive more income.
This is a non-exhaustive summary of metrics and KPIs that workspace operators should keep their eye on. Executing business decisions based on information from data and numbers will guide you to perform better, retain more customers, safeguard your business from a constantly fluctuating commercial real estate market and help you allocate your budget more intelligently.
Collecting data doesn’t need to be a headache, nor should it be. Investing in a comprehensive software platform that not only performs daily administrative tasks but also underpins the core levels of your business – sales and marketing, operations, finance – enables you to run your workspace with confidence and project your success into the future. Easy reporting on both the 360-degree view of your operation and the granular, nitty-gritty numbers otherwise difficult to calculate, help operators to make intelligent business decisions that result in slick-running and profitable shared workspaces.