Two weeks ago, at BOMA International, Genea CEO Michael Wong moderated a panel about what many consider a four letter word in commercial real estate — submetering. The panel focused on ways to improve submeter billback (i.e., how to recapture expenses excess utility consumption). Michael and the expert panelists, Kelly Kirwan (Director of Management at The Dilweg Companies), Michael Wojdag (Vice President of Res Operations at The RMR Group), and Melanie Colbert (Principal of Operations at LBA Realty), explored various pitfalls of submeter reading and billing, offered insights gleaned from their own experiences, and reviewed several solutions. Let’s dive into six of the panel’s key takeaways.
1. Current Industry Standard Submetering Practices are Manual and Inefficient
The status quo, industry-wide submeter billback process is a manual one. Luckily, there are several ways to improve submeter billback. Traditionally, the process starts with a building engineer who walks around to each submeter in the building and writes down the readings on a clipboard. The engineer passes the readings off to someone on the property team to interpret (i.e. make sense of the handwritten numbers) and type in. After inputting the numbers, someone on the property management team uses a spreadsheet to create utility invoices. Building teams often manually input tenant billing information into the building’s accounting software. In turn, this information generates individual invoices for each tenant. Typically, a process like this happens once a month to keep up with billing cycles. Teams find the process incredibly time-intensive, and it contains a multitude of opportunities for human error.
2. The Manual Process: More People, More Problems
Michael Wojdag noted the inherently problematic nature of a multi-step, multi-person process, “If more than two to three people have to touch something, it’s just not the way we want to manage our portfolio.” Aside from obvious potential errors of recording data, submetering consists of several nuanced factors. Each of these factors may contribute to major billing inaccuracies.
Meter multipliers are one pain point. Addressing these multipliers will help improve submeter billback processes. As mentioned by Melanie Colbert, “Nearly every meter has a multiplier, and too often a team won’t understand how to deal with the multiplier. Maybe one engineer or member of the property team understands the multipliers, but turnover is so high, that the next person who comes into their position might not and will throw your numbers off.” Wojdag agreed, saying, “This is an industry where there’s turnover all the time. When things change hands, the new people assume what they’re given is correct. It’s not always.”
When any building process requires action from multiple people (especially in different departments), the risk of incomplete processes goes up. For example, when someone leaves a job or goes on vacation, missing steps may occur. Consequently, this may lead to the termination of the billing cycle and lost billback revenue. Since billing cycles are monthly and date-specific, if the property team doesn’t have the time or resources to take the reads, generate the spreadsheet, and create invoices by the billing date they’ll likely wind up losing the revenue. Colbert explained the ease with which a building might lose submeter billing revenue, especially when missing deadlines. “Time goes by without the tenants being billed, and property management doesn’t want to bill back the tenant several months, so they just don’t bill at all.”
3. Audit Trails are Imperative
One of the less obvious (but just as costly) issues with the manual clipboard/spreadsheet process is its lack of audit trail. Fine-tuning the audit trail ultimately will improve submeter billback. Tenants want proof; they want to know that they have an audit trail that they can see to validate the readings and invoices. The manual process doesn’t provide the concrete historical data required to satisfy tenants. Additionally, it does not prevent the legal and financial ramifications of incorrectly billing tenants.
Kelly Kirwan described her property team becoming irreversibly fatigued by the disjointed and unreliable manual process. “We just got to the point where we needed it automated. We needed the invoices done professionally — we couldn’t keep sending out copies of utility bills with manual calculations on them. And we reached a point where we needed to find a solution to eliminate all of the human error.”
4. Not All Solutions Solve the Real Problems
The panel discussed three different approaches to easing the pain of the submeter reading and billing process: third-party vendors, networked meters, and hybrid-model solutions.
Many property teams choose to outsource their submeter reading and billback process to a third-party vendor. These vendors are responsible for sending personnel out to the site each month to record submeter values and then calculate the tenant invoices. While third-party help certainly cuts down the time-intensity for property teams, it raises other concerns in the building, like providing access to sensitive tenant areas and territorial engineers. Wojdag summed that issue up by saying, “If you know your engineers, you know that they don’t want anyone touching anything that they touch.”
Another potential solution, replacing all analog submeters with networked meters that record and report all the read information digitally, is very expensive. This solution isn’t realistic for most properties, as it requires a huge amount of capital and doesn’t guarantee ROI. Kirwan said, “We needed something that would be really cost effective to get the approval. That was our biggest thing — cost effectiveness.” Replacing analog meters with networked just isn’t cost-effective.
5. There’s a Better Way
The third potential solution, a hybrid model, makes your submeter reading and billing process more accurate and efficient without bringing outside help into your building or draining your budget. A hybrid application streamlines the manual collection process and generates professional invoices. Genea’s cloud-based submeter reading and billing solution is an example of a hybrid model — and the process is simple.
Genea sends property teams QR code stickers for each of their building’s submeters. Each reading and billing cycle, the building engineer walks around the building with the Genea app. They scan QR codes on the meter and record meter values. All QR codes are placed on the meter so that a single image, taken when the QR code is scanned, captures both the QR code and the read value. In essence, this creates a photo audit trail.
The engineer inputs the meter read number. Then, based on historical data provided to Genea by the property team, our software determines the accuracy. If a number doesn’t make sense, the app flags it. Once a valid number is entered, the meter read data gets uploaded to Genea’s cloud platform. After that, we generate professional invoices that for importing into your accounting software.
6. The Right Partner Can Make All the Difference
All the panelists agreed that when implementing new technology, you must trust that technology and the people behind it. When you are partnered with the right technology provider, everyone comes together to work for the best process and best results.
Colbert offered insight into what those “best results” actually look like as a partner of Genea.
“Our biggest challenge was the meters themselves. A lot of them were analog meters that don’t have communication ability. With Genea, you take a picture of the meter — getting evidence and an audit trail. And it’s a consistent platform that we could roll out to the whole portfolio. We have almost 500 submeters across our portfolio. Last year, through Genea, we’ve billed 3.4 million dollars over standard usage. It drives ROI, and it makes it easy for your teams to stay on top of submeter billing.”
Kirwan, equally enthusiastic, wishes her company had partnered with Genea a long time ago. She said, “We wish we’d have done this sooner. We rolled it out in a couple of buildings just to see how it would go, and we realized, wow — we’ve been losing so much money in these buildings for so long, and we wished we had just pulled the trigger on the whole portfolio at once, because we really were losing a ton of money.” Wojdag echoed that sentiment, adding, “We wasted a lot of time before Genea.”
With the right partner and right technology, it is possible to reimagine inefficient building operations work. At Genea, our goal is to support customers and make their lives easier. We’re thrilled to hear how we’ve helped these panelists.