Knowing capital needs on a construction project is critical to ensure proper cash reserves and interest reserves. Rabbet users can forecast what funding sources are going to be drawn during which months on the project then ensure sufficient interest reserves remain available.
Why Rabbet Integrates with AP and Accounting Systems
Why is Rabbet building integrations with every major accounting software?
Development management and accounting are distinct and important activities for any real estate developer. Like drywall and paint, both are important and can sometimes be done by one contractor or two. But it is critical that they work closely as the quality of the paint job is dependent on the quality of the drywall installation. Just like the quality of the development outcomes is dependent on the quality of the accounting.
Right now, development management and accounting collaborate in clunky, outdated, and painful ways. That’s why Rabbet built integrations with every major accounting software.
Roles & Responsibilities
Before we dig too far in, let’s generalize the key management, finance and accounting activities:
- Development Management: Ensuring that individual projects are completed on time and on budget.
- Accounts Payable: Ensuring that the company meets financial obligations and pays invoices while responsibly managing available cash.
- Accounting: Ensuring that the company properly records transactions to both meet regulatory requirements, and to inform management as to the financial health of the company.
To even further simplify it, the development team manages individual project outcomes and the accounting team manages and records transactions for the company.
Areas of Overlap
These responsibilities require overlapping information to get the job done. However, how each team uses the information is different.
|Key Information||Development Use||Accounts Payable Use||Accounting Use|
|Contracts & Change Orders||
|Draw Requests & Owners Reports||
|Do I have enough money to complete the project?||Should I pay this invoice?||Has this transaction been accounted for?|
This table shows uses of information by activity, but there is a lot of variability in the industry of which team is responsible for these applications. For example, some development companies have the accounting team manage everything related to draw requests and owners reports, but others put the responsibility of creating the draw request on the development team.
Another lack of standardization is who is responsible for managing contracts and change orders. Some real estate companies see this as an accounting responsibility and others place responsibility with the development team.
When Rabbet talks with development companies we aren’t working with yet, we commonly hear that accounting teams have all the information they need, and it’s the development teams who are keeping spreadsheets on the side to manage information. It’s not different information that development teams need, it’s a different use of that information.
The Current Process
Currently, most developers handle invoices in a manual, cumbersome process that involves a number of painful steps:
- Accounting receives the invoice (or it gets forwarded to accounting)
- Accounting sends the invoice to the development team for approval
- Development approves invoices, hopefully after comparing to the budget and contracts
- Development manually updates their spreadsheets for tracking the budget
- Accounting logs invoices in the AP and accounting software
- Accounting software pushes invoice for payment
- Accounting & development teams reconcile costs at some regular interval
In the best of cases, accounting and development teams meet regularly to agree on how to treat costs; development teams proactively monitor for budget changes and update the accounting team; and capital partners are happy with the information provided and fund draws quickly.
In the worst of cases, development teams are making decisions about the project without all available information, accounting teams are frustrated that the development team doesn’t update the budget, and capital partners scrutinize the information they receive. Everyone wastes time separately tracking, reconciling, and second-guessing information.
The Rabbet Integration
With Rabbet’s integration into various accounting systems, the new process is simplified and automated:
- Rabbet receives and logs invoice
- The development team approves the invoice
- Rabbet pushes invoice to accounting software
- Accounting team processes payment
Redundant work is eliminated and the status of both the approval and the payment is always known.
We are often asked whether the accounting team needs to be involved in evaluating Rabbet. If the accounting team is responsible for any of the activities in the “Development Uses” column in the table above, we encourage their involvement. If not, there is no need to involve the accounting team. Thanks to our integrations with AP and accounting systems, the development team can use Rabbet without disrupting the needs of the accounting team.
Rabbet has always cared about paying invoices faster and by helping development and accounting more seamlessly connect we have not only helped eliminate burdensome and error-prone tasks from the process but taken a huge step in making payments move faster in the construction industry.
To revisit my analogy, everyone wants a great-looking wall and fast payments. When paint and drywall work together, you get a great wall – level 5. Rabbet brings development and accounting together, resulting in faster payments and less frustration for everyone.