Article

How REITs can leverage financial analytics and dashboard reporting to drive success

Dec. 9, 2021 · Authored by James Munuhe

Data entry and collection errors can cost a real estate company millions. You’ve heard the horror stories of one small clerical error or miscalculation in Excel resulting in companies reporting up to billion-dollar losses. Not only is manually gathering and analyzing data fraught with potential errors, but it’s cumbersome and time-consuming. Some real estate investment trusts (REITs) are recognizing the need for data transformation and in doing so are leveraging analytic workflows and financial dashboards to make data collection and analyzation easier, while alleviating expensive errors. So, how can you use analytic workflows and dashboard reporting to change the way you approach data?

Efficiency and accessibility

Accessing data in one place is valuable on several levels. By building out workflows of behind-the-scenes logic with your data, you’re enabling high-level reporting. Through these analytic workflows, it allows you to see at-a-glance information at the property, portfolio or transaction level to help draw final conclusions, rather than spending time reviewing and analyzing several reports and spreadsheets for your desired information. Using workflows and dashboards also allows numerous team members to understand the data with little to no training. In addition, streamlining the process of gathering and updating information can trim administrative costs and free up your administrative staff to focus on other organizational needs.

Pictured is a Baker Tilly dashboard comprehensively summarizing a portfolio’s income metrics, property locations and other financial data.

Fraud prevention

Workflows and dashboard reporting can also help prevent potential fraud, a large concern for REITs exchanging sizeable amounts of money regularly across numerous hands and properties via check, electronic transactions and wire transfers. A workflow programmed with a framework and processes to minimize risk will help mitigate fraud. These processes can encompass financial reporting to identify errors that can signal problems, systems to monitor third-party expense and reimbursement patterns, and procedures to promote proper oversight.

Testing and compliance

REITs must adhere to the latest tax rules and meet certain compliance tests — quarterly asset, annual income, di minimis and prohibited transactions. The latter, if not handled properly, can result in a punitive 100% tax on capital gain, something no REIT wants to incur. Nor do REITs want to invite a costly IRS audit. Some REITs may question whether they have too much cash, if selling properties in their portfolio would violate the prohibited transactions test, or if it makes sense to distribute cash to comply with the single REIT’s rule for capital gain. Developing an analytic workflow and dashboard by compiling financial company data can help answer these questions and simplify compliance by highlighting trends and any potential issues with properties all in one place.