As the entire sector seeks to steady itself after five rocky years, commercial real estate (CRE) payment processes are undergoing notable change.
While the pandemic years hurt many businesses, commercial real estate sustained a triple whammy: no workers coming to their offices; no workers shopping in the retail spaces on the ground floor; and the same litany of security issues, including check fraud. That’s starting to turn around now, and more efficient payments are one factor in CRE’s recovery.
Bringing more of a digital presence to bear on the payments part of CRE’s challenges is one way of ensuring that commercial real estate will emerge stronger from this chapter.
Automation: The Key to Efficiency
One of the primary challenges facing the CRE sector is the need for automation, particularly in accounts payable (AP) processes. Monica Brucks, VP of Product Management, CRE at Bottomline, emphasized the importance of streamlining AP operations, saying, "Automating the AP process, especially invoice coding and approvals, is crucial for efficiency in today's fast-paced real estate environment."
This push towards automation isn't just about speed; it's about accuracy and resource allocation. By implementing intelligent systems, Brucks said, CRE firms can redirect their human capital to more strategic tasks, enhancing overall productivity.
The Rise of Fraud and the Need for Vigilance
Even as the industry becomes more welcoming of digital solutions, the specter of fraud looms large. Bottomline Senior Director of CRE Ryan Clayton highlighted this growing concern: "Fraud is becoming increasingly prevalent in commercial real estate payments. It's not just about efficiency anymore; it's about protecting your corporate reputation."
For example, he explained that the construction space has become a favorite target for fraudsters within the larger CRE sector, given its large number of subcontractors and often manual payment processes.
"The manual nature of processes in construction makes it easier for bad actors to impersonate vendors and trick companies into making payments," Clayton said. This vulnerability underscores the urgent need for robust security measures in payment systems.
Embracing Electronic Payments
The shift towards electronic payments in CRE is more than a trend; it's becoming a necessity. Both experts agreed that moving away from manual processes and adopting electronic payment methods is crucial for combating fraud and improving efficiency.
For example, Brucks noted the accelerated adoption of electronic payments during the COVID-19 pandemic. "The pandemic expedited the shift for real estate companies to digitize their payments, leading to a more efficient and reliable system,” she said. “This shift has continued post-pandemic, with companies embracing modern approaches to AP."
CRE Leans into Gen AI
Generative Artificial Intelligence (Gen AI) is playing an increasingly significant role in invoice automation and fraud prevention.
As Brucks explained, "Gen AI is transforming invoice automation by digitizing the upstream process, reducing human error, and minimizing the need for robust approval processes. AI will greatly improve capabilities to identify discrepancies and highlight only those invoices that need review, significantly reducing the workload on staff."
This AI-driven approach not only enhances accuracy but also allows for more strategic allocation of human resources. By automating routine tasks, she added, CRE firms can focus on higher-value activities that require human insight and decision-making.
The Power of B2B Payment Networks
Business-to-business (B2B) payment networks are emerging as a game-changer in CRE payments. Clayton elaborated, saying, "B2B payment networks offer an additional layer of security by protecting bank information and detecting fraud early. They handle vendor vetting and fraud detection, freeing up resources for real estate companies."
These networks not only enhance security but also improve efficiency by streamlining the payment process and ensuring accurate vendor information. As Clayton put it, "The network model offers protection for both payers and vendors, making it a more efficient and secure option."
Making It Easier for Vendors
In the diverse CRE landscape, it's crucial to accommodate various payment preferences.
"It's important to meet vendors where they are, offering multiple payment types to prevent fraud and improve corporate reputation," Clayton said. This flexibility in payment options, from ACH transfers to more sophisticated electronic methods, ensures that all parties in the CRE ecosystem can participate in secure, efficient transactions.
The Impact of Remote Work
Before the pandemic, CRE companies were already challenged by a decentralized workforce. The pandemic exacerbated that challenge by forcing centralized employees into remote work arrangements. "The remote workforce made it challenging for AP teams to process checks, leading to a surge in electronic payments,” Brucks said.
“This shift has continued, with companies recognizing the benefits of digital processes."
This transition has not only improved efficiency but also demonstrated the resilience and adaptability of the CRE sector in the face of unprecedented challenges.
The Future of CRE Payments
Despite major uncertainties in commercial real estate, both experts are optimistic about the continued growth and adoption of modern payment solutions in the CRE sector.
"We've seen significant strides in real estate last year, with many companies moving away from manual processes," Clayton said. Brucks added, "The industry is still shifting towards modernized practices, with companies increasingly adopting more efficient methods."
This is all by way of saying that commercial real estate payment processes are at a critical juncture. The challenges of fraud, inefficiency, and outdated methods are being met with innovative solutions like AI-driven automation, B2B payment networks, and a shift toward electronic payments. Embracing these technologies and practices will be crucial for CRE firms looking to stay competitive, secure, and efficient.
For CRE professionals, staying ahead of these trends and adopting modern technologies will be key to success this year, and after. As we navigate a changing landscape, one thing is clear: the future of CRE payments is digital, secure, and more efficient than ever before.