With 55 offices and revenue in excess of $65 million, Berkshire Hathaway Home Services Michigan Real Estate (BHHS) is among the largest of the BHHS franchises in North America. If the vagaries of the housing market are not hard enough to negotiate, imagine what it's like living in spreadsheet hell. To that end, I spoke with Jessica Karsies, financial analyst with BHHS to learn how they tamed the spreadsheet, achieving a much better budgeting process along the way.
Apart from the main real estate brokerage business we have several other lines of business we're affiliated with, including property management, title insurance and home owners insurance companies, which we also try to analyze against the real estate brokerage because the brokerage income affects the income of the other businesses. In total we were trying to work with some 80 spreadsheets. It was unmanageable.
BHHS uses DPN, a specialist back end systems developed for real estate from Lone Wolf Technologies.
We have almost a thousand real estate agents and PDN houses all of their information. Each of them have different contracts with us and associated commission structures. A lot of them are on scales so that when they reach a certain volume their commission goes higher. It generates all the commission checks and integrates to our general ledger because it is all in one system. It's old but it serves our needs perfectly. We are unusual among real estate brokers because we account for a number of different entities. There's a lot of inter-company bookings or allocations and it's really nice that we have one system to handle it all.
She says that while they've talked to others who have used the Windows version, they have not been so happy. Ms Karsies raises an interesting point. Back end accounting is not going away anytime soon. So while we often see calls for modernizing systems, in a number of cases, the 'green screen' versions are just as suited for their purpose today as they were 20-30 years ago. Much of that is down to the fact that tabbing through a green screen for data input is a lot faster than trying to do the same thing on a Windows screen. That same argument cannot be made for other functions like reporting where 'green screen' style applications were never really built with an 'analytics first' mindset. It is understandable because that was not the development priority of the time.
One of the limitations of the DPN system is that reporting is extremely limited as is report consolidation and there isn't a budgeting solution but we could get a CSV for import to a spreadsheet. Vena comes in, takes our data, puts it into the cloud and then we can report on it anyway we choose. Sometimes we had to take a printed report and rekey it and all of that has gone.
Ms Karsies told me that it would often take a week or more just to assemble the financial statements and the data integrity wasn't there.
Management would sometimes notice that figures didn't always agree. This was down to rounding errors but it meant that we had to spend time both rechecking our work and I think it just gave them a lack of faith in the accounting information.
That's understandable and reflects a common complaint among business managers. Explaining rounding errors chewed up as much as half a day so knowing that the reports are referentially accurate made a considerable difference.
Drilling for the purpose of understanding variances into any account was difficult because we would have to print for one month and then go back for the comparative and print again but now you can click on any data cell and Vena will bring up the supporting line items. It's much faster and again, automated.
I can see how those benefits translate back into time saved and accuracy ensured but why was Vena chosen in the first place? Despite being in spreadsheet hell before the move, the spreadsheet metaphor was well understood in the business and it was thought that trying to move off that way of showing information would not be acceptable to the business.
We gave the spreadsheet a makeover but Vena was able to take our existing templates and map those. We were unsure Vena would be able to do that but they assured us we would get what we want. With other companies there was a big question mark over them getting the DPN data. When Vena came in for initial training we were still skeptical but when we saw what Vena delivered we were ecstatic.
It's not often that you here that level of praise coming from a finance professional. Executives were happy too.
Prior to Vena the executives would get a monthly total and a year to date. If they wanted to do a comparison thy'd have to get an old financial package. If they're logged into Vena, there's a 'choose' function so they can look at any date and within 3-5 seconds they get the information they need on a self service basis. They don't have to come back to accounting to ask for information. It has allowed us to concentrate on the budgeting process.
But it is on the budgeting process itself where the team has seen the greatest progress..
Budgeting was really difficult, we were really limited to running budgets at a company level, rather than the detail of each entity. Now we run the budgets at the cost center level and the sales managers can for example enter their projected sales volumes. We have a workflow process so then we see those for review and raise questions where the values don't make sense on a first look. There are expenses that managers can control so we get their help on those numbers as well. The difference it has made is amazing. Prior to, by this time of the year we'd be way off the budget and having to do a reforecast exercise but I'd say that business wide, we're only off by a small number.
Ms Karsies said that results coming from the Vena solution have materially helped them manage cash. There is much more business done during the summer months so the company overall is flush with cash but in that regino, the winter months are very slow. Being able to not only manage but accurately project cash requirements makes overall business management for the full year much easier.
For the future, Ms Karsies is looking forward to doing more such as management of the contracts with agents inside the budgeting process.
Attending the customer event this year was a real eye opener, I learned such a lot. There are so many things we could do that it's almost like we've come a very long way but have many opportunities in front of us that will help us be a better service to the business.