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Guide

Successful debt management: technology and workflow integration

Summary

Implementing a technology solution requires commitment across the organization and regular communication with your implementation team. Understanding existing internal workflows and business requirements is crucial in determining the appropriate system for managing and maintaining a debt portfolio.

Key takeaways

  • Technology innovation in the real estate industry presents an opportunity for investors to centralize debt management data, streamline internal operations, and scale the growth of their business
  • Firms need to audit internal workflows to identify key business requirements to be used during the evaluation process of new technology solutions
  • Given the ubiquity of specialized technology platforms, firms should contemplate integration capabilities in order to eliminate redundant operations

Increased complexity and competition in the commercial real estate (CRE) industry has heightened the need to consider technology solutions to gain operational effectiveness, automate processes, and facilitate scalability. Investing in in a proven technology solution provides workflow efficiencies and insights into real estate debt metrics and nuances by:

  • Establishing a comprehensive, single-platform system, eliminating redundant internal processes
  • Automating recurring reporting functions to provide historical results and future projections
  • Capturing current debt obligations, balances, and interest rate data through a dynamic system providing real-time calculations
  • Reducing risk of human input error

Streamlining these actions allows your team to focus on high-impact business priorities to increase the growth of your firm and improve business relationships.

The key question when considering a debt management solution is how will this platform integrate, complement, supplement, or even replace existing business processes? Below are a few recommendations to consider when assessing a potential debt management solution.

Define key stakeholders

Every business unit in a firm will assess a technology solution through the lens of their business requirements. Accounting teams may focus on capabilities such as dynamic schedules and live rates while investor reporting teams will target reporting functionality. Asset managers will focus on key loan date notifications, while technology teams will ensure security requirements are appropriately employed in the solution. Given the varying interests across different roles, one component in the evaluation process will be designating decision makers and key stakeholders. Incorporating broad input in the decision making process establishes buy-in across the firm and ensures all primary business requirements are addressed prior to onboarding a new platform.

Audit internal processes

When contemplating an investment in a technology solution, a CRE firm should audit its existing workflows. Documenting current business functions and their associated workflows revolving around the placement, management, and disposition of debt in the portfolio helps identify key requirements to measure platform capabilities against. While performing this exercise, a few common examples of processes to consider across a typical firm include key loan term abstraction, lender statement reconciliation, periodic balance updates, maturity and extension tracking, investor reporting, financial reporting, and budget forecasting. Once the primary processes are identified, the next step would be defining critical inputs and outputs to each internal process. This enables an evaluation team to conduct a robust assessment of a vendor’s system capabilities.

Common questions considered by firms in the market for a debt management solution include:

  • How often are principal balance updates required?
  • How are teams notified of key loan dates such as maturities, extension notifications, and amortization?
  • What are the typical reports we generate internally?
  • What types of reports do we create for our lender relationships? For our investors?
  • What accounting information is required to manage our debt portfolio?

Outline and prioritize operational workflow

Once existing workflows are identified, the next consideration is understanding how each process is performed, who are the stakeholders, and at what frequency is the activity operated. Answering these questions inevitably creates business requirements around each process that could be used during the evaluation process of market solutions. Applying a prioritization to each operational workflow then allows the evaluation team to resolve potential concerns during the assessment journey.

Consider integration capabilities

Given the innovation of technology in the industry, another important consideration when exploring a solution is the ability to integrate with other systems. Many solutions offer specialized services in solving a crucial problem but lack functionality to integrate with other platforms resulting in continued efforts to maintain data integrity and can even require duplicative processes such as double entry of data. Important system integration questions should include:

  • Is the solution’s data output in a format that can be easily uploaded and consumed by another system?
  • Is there an API functionality that would allow your technology team to pull data periodically into an internal data warehouse?

Ultimately, a technology solution should provide answers to real estate debt management challenges your company is facing today as well as enable the ability and flexibility to grow with your portfolio.

How can Chatham help?

The Chatham Debt Management solution combines the power of our technology platform with a team of experienced consultants to provide insight into industry best practices, along with ongoing service, support, and training.

With 250 active clients, 45,000+ loans, and decades of commercial real estate experience, Chatham is the leading supplier of debt management solutions for commercial real estate.

Ready to learn more about debt management implementation with Chatham?

Schedule an introductory call with one of our advisors to find out how Chatham's debt management system can integrate with your workflows and systems.


Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.

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