Real estate cash flow management is an ongoing burden for agency owners. Real estate is among several industries that have to deal with painfully slow commission payments, but until recently, it’s always been accepted as part and parcel of the real estate business.
Today, more and more real estate agents are getting clever about their real estate cash flow and seeking alternative finance options to solve common real estate problems.
Creating a consistent, steady stream of cash flow is crucial to having the financial freedom to confidentially grow your agency, in a highly competitive market. But how do you go about creating such stability for your agency when times are tough? What strategies can you implement to help you plan and manage real estate cash flow? We think you should first start with this:
Maintain a fluid cash flow forecast
Under the assumption that you’ve already developed a comprehensive cash flow forecast with your accountant, be sure to avoid the common mistake of leaving it in the bottom drawer until financial year end. Cash flow is fluid and something you need to monitor on an ongoing basis. Get into the habit of tracking and comparing your agency’s cash flow situation with your projections on a weekly basis. Use this plan to weigh up the requirement for cash flow support and viability of the diverse range of financing options on offer to you. Here is our top three:
Commission Advance (debtor finance)
A commission advance is a safe and quick way of turning forthcoming commission payments into a handy injection of cash. Unlike traditional forms of finance, a commission advance arrangement is flexible, tailored to your specific needs and accessible to you as and when you need it. At Commission Flow, we pride ourselves on offering a same-day commission advance to help bring stability to your real estate cash flow. There’s only one application process, then you’re qualified and ready for same-day advance commission as soon as you make a sale. If you’d like to read more about advance commission, check out our recent blog post Advance Commission: the why, what and how.
Equipment Finance
Equipment finance is another great way to bring some extra liquidity to your real estate agency, so that you have more freedom to make investments in growing your business. Under an equipment finance arrangement, your equipment (for example IT and office furniture) is valued at an agreed percentage of the market value – then repayment terms are put in place over a 12, 24 or 48 month period. Equipment finance is normally available for both new and old equipment and most lenders will consider anything up to $150,000. To find out more about equipment finance, read our latest blog post: Equipment Finance: get creative with your cash flow.
Bank Lending
Traditional forms of finance are of course always an option in helping with your real estate cash flow. If you have a good, long-standing relationship with your bank, they will hopefully be able to provide a little more flexibility than most overdrafts or bank loans. Whilst bank lending does have some advantages, make sure you’re well aware of the drawbacks when compared to more innovative options that are specifically tailored to address real estate cash flow. Our recent blog post Advance Commission vs the Traditional Overdraft covers some of these points.
We’ve highlighted just some of the options available to assist you with real estate cash flow. Of course, the best-case scenario is to work with a finance partner who can help you get a better handle on your financial situation and minimise the need for ‘reactive’ cash. For further reading, you might want to take a look at some of our other blog posts Real Estate Cost Control, How to Maintain a Steady Cash Flow and 8 Valuable Finance Tips for Real Estate Agencies.
Need some help or advice on managing your real estate cash flow? Call us on 1800 003 569 to find out how we can help with a commission advance.