Understanding Management Fees: Collectable vs Collected

When assessing the financial health and value of a real estate business, one of the most important distinctions to understand is the difference between Management Fees Collectable and Management Fees Collected. While they may sound similar, these two figures serve very different purposes and play distinct roles in business valuations and performance analysis.

Management Fees Collectable

Management Fees Collectable refers to the total amount of management fees a business is eligible to collect based on current rental values and agreed fee percentages. This figure is calculated by multiplying the current rent (annualised) on each property by the applicable management fee percentage (excluding GST).

Importantly, this figure represents 100% of the fees that can be collected in an ideal scenario. It does not take into account any historical adjustments for vacancies, arrears, or other interruptions to rent flow. It is a forward-looking figure based on the current state of the rent roll, and it offers a standardised baseline for valuing a business.

In the context of a business valuation, the Management Fees Collectable figure is the one that has the applicable multiplier applied to it. This approach allows for consistency and removes variables that differ from business to business, such as vacancy rates or operational efficiencies.

Management Fees Collected

In contrast, Management Fees Collected represents the actual total fees received over the past 12 months. This backward-looking metric reflects the true financial performance of the property management division during that period.

Variances between the collectable and collected amounts can occur due to several common factors, including:

• Vacant properties where rent – and therefore management fees – were not received
• Lost managements throughout the year
• New managements that haven’t completed a full 12-month cycle
• Rent increases or decreases that occurred during the year (with fees collected at a lower or higher rate for part of the year)

Because of these variables, the Management Fees Collected figure is not used for applying a valuation multiplier. Instead, it plays a key role in understanding the ratio between management fees and ancillary fees, helping to evaluate revenue diversity and operational trends within the business.

Why the Distinction Matters

For real estate business owners, understanding the difference between these two metrics is essential. One reflects your portfolio’s potential (collectable), while the other reveals your past performance (collected). Both are important for strategic decision-making, whether you’re planning for growth, benchmarking efficiency, or preparing for sale.

If you’re unsure how to calculate or interpret these figures within your own business, we’re here to help. At Pendium Advisory, we work closely with real estate business owners to clarify these key metrics and ensure they’re used to their full advantage.