Tips for managing cashflow in estate and letting agency businesses

Jun 30, 2023 | Business, Tax

Mastering the art of cashflow management as an estate and letting agency business is no easy task.

Keeping a close eye on it is vital for the security and success of your firm, and will help you stay ahead of financial challenges and ensure long-term success in this dynamic industry.

In this post, we’ll help you with some practical tips and strategies to help you maintain your letting or estate agency cashflow.


The 2023 market

Even though UK house prices stabilised at the start of 2023, there are still countless challenges to be faced by UK estate agents.

The average house price of £281,684 is about £12,500 (-4.2%) below its peak in August 2022, according to the latest Halifax House Price Index.

HMRC’s monthly property transaction data shows home sales decreased in December, with 101,920 sales completed. This is down 2.6% on November.

The bottom line is the industry is still struggling, so cashflow is all the more important.


Our ten top tips 

Here are our top tips for managing your cashflow as an estate and letting agency business .


Create a tracking system

It’s important to track your cashflow, following your revenue as it comes in and out of the agency. This will let you know if you’re making enough money for what you’re spending and help you minimise the risk of spending too much.

Keeping track manually is difficult, and it’s not always easy to understand what you really have in the business at a given time, or how that might change.

For that reason, cashflow tracking software is your best bet. A sound tracking system will be accurate enough to allow you to plan for months and include outflows well in advance.

Whether you’re dealing with mortgage brokers or foreign investors, there are countless factors that could slow down the process and give you anxious moments the closer it gets to paying your staff and bills.

The best way to keep an eye on cashflow and avoid this is to monitor and forecast properly.

That means regularly reviewing financial statements and cashflow forecasts. This should allow you to anticipate any shortfalls and make proactive choices.


Reserve some money

All letting agents should have money saved for any eventuality — the unpredictable nature of the job means you always need a buffer.

Cash doesn’t flow like other businesses in the property market. Sure, the commission is great when you receive it, but you can go for months at a time without a sale. Keep some cash saved for a dry period to ensure you’re not coming up short.

Normally, there is a month of waiting (provided there is no chain) between making a sale and completing the transaction, with the funds being released by the solicitor at the end of the process. Make sure you account for this.


Make a budget

Create a comprehensive budget that includes all income sources and expenses. Make sure you regularly review and update it to stay on track. If you’re an estate agent, this might be looking at your staffing costs or travel expenses to ensure that everyone is on the same page going forwards.

If you need support creating one, talk to an expert like us. Getting started is often the most challenging part of creating a budget, so the sooner you do it, the better.


Monitor rental payments 

Are you struggling to get rent payments from your tenants? You need to set up a rent collection procedure to ensure timely payments – this could be done via cloud platforms or other third-party providers, but the more you can automate, the better.

This should help you promptly follow up on any late payments and take appropriate action if needed.


Negotiate payment terms that suit you

Often, you’ll work with external suppliers and contractors with their own ways of working. That doesn’t mean negotiating with them is impossible, however.

We’d always advise discussing with suppliers and service providers for extended payment terms to improve cashflow. Consider instalment plans or delayed payment arrangements wherever possible.


Optimise rental property occupancy 

To maintain a healthy cashflow, you want to aim for a maximum occupancy of your clients’ rental properties to generate consistent income. In an ideal world, all your properties would be filled, but sometimes there are other circumstances that change this.

If you market your properties effectively, promptly address vacancies, and maintain good tenant relationships, you set yourself up for healthy cashflow from the properties you manage.


Learn your locations

One of the best ways to maintain not just cashflow, but a healthy profit, is to look for desirable areas. These, when paired with high property demand, are your best areas for making a profit and therefore increasing your cashflow.

Easier said than done, of course, but with a mindset shift, you’ll find yourself looking for the best properties rather than just any.


Focus on the service

By making sure you hit key touchpoints with your customers and prospective buyers, you’re likely to get continued business and good reviews.

Selling a property is only as good as the salesmen doing it, so by training your staff adequately and focusing on building stronger relationships, you’ll encourage the right behaviours and increase the likelihood of completing the sale.


Consider financing options

Of course, sometimes you simply don’t have enough cash; that’s an unavoidable part of business.

So maybe it’s time to explore financing options such as business loans or lines of credit to bridge any temporary gaps in cashflow.

Be cautious, though — use them judiciously and ensure that repayments are manageable. You don’t want to cause more issues further down the line.


Seek professional advice

Consult with a financial advisor or accountant specialising in the real estate industry. That’s us.

We can provide expert guidance tailored to your estate agency or property business. We’ve worked with professionals like you for years and know what sticks and what takes more effort to get right.

There’s no magic formula for cashflow, but follow the tips in this blog, and you’ll be halfway there.

Get in touch with us to discuss your estate or letting agency’s cashflow.

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