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Tips to Prepare for 2020

At this year’s MBA Accounting and Financial Management conference, there was a lot of talk around what to expect in 2020. With the upcoming election and talks of a trade war, many in the industry are wondering if we will see a rise in interest rates or if this election year will be similar to 3 of the past 4, with rates staying low. [1] Even though forecasts are predicting rates will stay in a 3.6-3.9% range[2], it’s better to be prepared for all eventualities.

 

Part of the reason it’s important to be prepared is that forecasts over time become less reliable. Your projections for this week or next are going to be as solid as ice, with minimal inaccuracy. However, the further you get out, your ice begins to melt, turning into a sludge. Outside of 9-12 months, you are treading water. Yes, you have the data from previous years to support your forecast, but that’s all you can really count on. Because of this uncertainty, you should be taking steps to be sure you can operate with compressed margins.

 

Evaluating what is affecting your bottom line is the first step in preparing because knowing what is impacting profitability will help guide you to where you should put in cost controls. It was mentioned during one of the sessions at the MBA AFM conference that you should have a “cut list” in the event that the industry goes through a rough patch. However, if proper cost controls are in place, this practice should be a very last resort. Firing and rehiring is not a sustainable business model. There are much better ways to cut and control costs that are sustainable and more efficient, such as:

 

  1. Going Paperless 
    • With the range of technological advances in the mortgage industry during recent years, there are plenty of ways for an IMB to go paperless. From the front end, with digital mortgage and underwriting platforms, to the back-end accounting systems, it’s possible to avoid shuffling paperwork around. With many banks are focusing in on the Millennial demographic, an additional benefit to this practice is they are more likely to choose a company that is making an effort to reduce their footprint over one that isn’t.
  2. Taking advantage of remote employees
    • Work-from-home employees are on the rise and there’s a reason. Not only do they reduce costs (upwards of $11,000 per employee per year[3]) , over 60% of employers saw an increase in productivity for remote workers compared to in-office workers [4]. Not only are you saving on overhead, but your employees are happier and providing better work.
  3. Properly Leveraging technology
    • There is a very high chance that an IMB has deployed multiple new technologies in the past few years, but there is an equally high chance that they are not utilizing these tools as well as they can. Educating yourself on how these technologies could save both time and money is possibly the most important way to control costs. Through leveraging the system properly, many Loan Vision customers have been able to reduce the headcount in their accounting departments, as well as their manual processes, controlling costs not only in the department, but throughout the entire company.

At the end of the day, no one has a crystal ball to tell them the future and there is a small chance that you will be prepared for all that comes your way. However, with a proper understanding of forecasting and a grasp on steps you can take now to alleviate the pressures of changes in the industry, you can be as prepared as possible.

 

 

Refernces:

[1] https://www.businessinsider.com/if-history-is-any-indication-us-interest-rates-are-going-up-2016-9

[2] https://www.forbes.com/sites/alyyale/2019/11/15/2020-housing-outlook-expert-predictions-for-mortgage-rates-home-prices-tech-and-more/#40c7c5922935

[3] https://globalworkplaceanalytics.com/telecommuting-statistics

[4] https://www.tecla.io/blog/2019-remote-it-workers-stats-companies-should-know/

 

 

About the Author


Martin Kerr

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