Collection techniques for property managers are evolving due to technological advances․ Methods besides cash and check payments that property management companies can use to collect rent payments include online and mobile payment options and other technologies‚ such as credit and debit cards and ACH transfers․
The services provide benefits to both landlords and tenants․ There are also negative aspects․ High fees related to payment processing can add up for landlords who receive many rent payments each month․
The strategies for reducing tenant payment costs do not make it harder or more expensive for tenants to pay rent․ Strategies to reduce tenant payment costs are not necessarily ones that reduce the number of payment options available to tenants․ Some strategies for reducing tenant payment costs include improving knowledge about payment processes and adopting new payment practices․
Learn About the Expenses You Have to Pay
The first step in applying for payment processing is to learn about payment processing fees․
Property managers may assume that processing rates are all the costs of payment processing and therefore the total costs they incur for payment processing․ Other costs of payment processing for property managers include the type of payment and other transactions processed‚ fees charged by the payment processor‚ and other charges by the payment processor․
This is particularly true for rentals‚ as each rental may involve a significant amount of money․
A small price variation on a $10 transaction may not matter much to a customer․ A small price variation on a $2‚000 monthly rent payment would be meaningful to a customer․ Across multiple units and 12 months of renting‚ small price variations can add up to significant costs for a business․
Property managers need to track processing statements and assess processing costs‚ in addition to considering published processing rates․
Understand Your Pricing Structure
Another issue to consider is how much the payment processor will charge you․
Pricing varies by processor․ Two common pricing models used by processors are flat-rate and interchange-plus pricing․
Flat fees are easy to adopt because they charge a set rate for each transaction․ Small businesses may find flat fees attractive․
Interchange-plus pricing separates the interchange and processor components of payment processing fees to help merchants better understand their processing costs․
Property managers evaluating current payment processing services should understand interchange-plus and flat-rate payment models to select the right service for the types and volumes of transactions they process․
There is no best pricing model for all property management companies․ Other factors to consider include current pricing structures and costs for property management services․
Encourage Customers to Use Less Expensive Payment Methods
Not all electronic transactions take the same effort to complete․
Bank payments can be cheaper than card payments for expenses such as rent․ Bank payments like ACH can be an alternative payment option for property managers․
However‚ prohibiting card payments can harm existing tenants who make card payments․
A good strategy is to provide both options and let tenants know about alternatives․ Tenants who prefer bank transfers will be able to use them․ Other tenants who prefer to pay by card will have that option in areas where it is allowed․
The purpose is to provide payment methods to property owners that are more convenient and less likely to channel all payments through a single payment method‚ regardless of payment size․
Make Automatic Payments Easy
Automatic rent payment has benefits for renters and landlords․
Benefits of autopay for tenants include the ability to skip paying rent monthly․ Benefits of autopay for property management companies include easier rent collection and other time savings associated with rent collection․
The enrollment process should be simple․
If residents have trouble setting up automatic payments‚ some residents probably won't make automatic payments․ Offering an online resource with information about payments and when they are due could help residents make automatic payments․
Property managers can implement policies and practices to help tenants update their bank and other payment information easily․
Convenience is key․ Offering low-cost payment options won't be useful if customers are unlikely to take advantage of them․
Don't Sacrifice Convenience to Save Money
Cost-saving strategies should not negatively impact tenants․
Suppose a property management firm finds it expensive to provide online rent payment options and requires all renters to pay rent by check․ The firm saves on transaction costs for online payments‚ but other costs are incurred by renters and company employees․
Staff would need to accept and deposit checks․ Residents would need to take steps to deliver checks to staff or mail them․
Possible advantages of this action might include disadvantages in other areas of the company․
Payment decisions should be based on factors other than rate‚ including the best interests of the company․
A payment system that is slightly more expensive but saves employees time and improves rent collection may be a good deal for your business․
Review Convenience Fees Carefully
Some property management companies will charge additional convenience and service fees for certain payment methods․
This issue needs to be handled with care․
Rules about convenience fees for payment processing differ based on the payment method and card network rules and other state and local laws․ Property managers can take steps to make sure any convenience fee arrangement they use complies with applicable state and local laws․
Transparency can benefit landlord-tenant relationships․
Unanticipated fees at payment time are a common annoyance for residents․ Residents using payment methods that involve fees should be informed about these fees to prevent unpleasant surprises at payment time․
The goal is to provide choices during the payment process‚ not to provide choices to residents after the payment process․
Consider Other Indicators in Addition to the Transaction Cost
Processing fees are the most common type of expense for property managers‚ but there are other expenses they should be aware of․
In addition to transaction fees‚ payment providers charge other fees‚ such as monthly fees‚ gateway fees‚ statement fees‚ device fees‚ PCI compliance fees‚ and account fees‚ as well as other fees‚ depending on the specific payment service and contract․
Some of these expenses may be legitimate and serve a purpose for the property manager․ Others are probably not worth much to the property manager․
This is a reason merchants should check their full statement․
Instead of asking‚ “What’s our processing rate?” property managers should ask‚ “What does accepting payments cost us each month?”
That other question is a better indicator of the organization's overall compensation expenses․
Reduce Failed Payments
A payment plan can reduce transaction fees and increase other payments received for rent․
Failed payments require more office time․
Employees may need to interact with the tenant over the disagreement and request that the tenant pay in a way other than cash․ Employees may also need to update company records․
Property managers need to monitor unpaid rents for patterns․
For instance‚ inaccuracies in payment information can stop customer payments under automatic payment programs․ Inaccuracies in an online payment portal can also cause customers to make unnecessary failed payments․
Awareness of these trends can help improve and speed up payment processes and reduce time employees spend resolving other issues․
Use Payment Data to Enhance Collection Processes
Digital payment tools can provide information about your tenants' preferences for paying rent․
Property managers can use data to understand how residents pay‚ including which payment methods are most popular with residents‚ when residents pay‚ the proportion of residents who enroll in autopay‚ and other information․
This information can help managers make decisions․
If many renters choose to pay in a certain way‚ it could be cost-effective to provide a good experience for those renters․ If only a few renters choose expensive payment features‚ property managers might decide to stop offering those features․
Payment data can be used by property managers to evaluate other programs․
Management can collect information about use of a new payment portal and autopay to monitor usage trends before and after launching a new payment portal and encouraging enrollment in autopay․
Connect Payment Services with Property Management Software
Payment processing can involve additional administrative costs when used separately from other software․
If workers have to enter rent payments for multiple properties into separate property management and accounting software programs‚ company time and resources are wasted․ Workers can be assigned other work instead of entering rent payments․
Integration can reduce their workload․
If payment and asset management systems are linked‚ it may be easier to monitor and audit payments that have been made․
This is critical for a property management company looking to expand its operations․
Manual accounting for payments might work for 20 units․ Manual accounting wouldn't work for hundreds or thousands of units․
Reducing administrative expenses may be as profitable as reducing processing fees․
Consider the Tenant Experience
Property managers should ask themselves how they can make it easier for tenants to pay․
Is the website easy to use? Can tenants access information about payments they need to make? Is information about available payment options and methods provided? Is it easy for tenants to make payments from a mobile device? Is it easy for tenants to enroll in automatic payments? Is payment information displayed before payment?
A payment system that works technically may not offer a good user experience․
Rent is one of the largest recurring expenses for homeowners and other residents․ Homeowners and other residents benefit from knowing details about their rent payments and having easy ways to pay rent․
Convenience can improve collections․ Reducing technological obstacles to paying rent can avoid delays in collecting rent when it's convenient for tenants to pay․
Review Payment Terms Yearly
Payment processing is not a service that a property management company should provide and then stop offering․
The company may change significantly over time․
A business can expand by adding many new properties and locations‚ adopt new property management software‚ and face changes in tenant payment habits․
Payment options and costs are additional factors that can vary․
The annual review gives management information on number of transactions processed‚ methods and amounts of payments‚ reasons for declined payments‚ integrations‚ settlement times‚ customer service‚ and tenant feedback․
The goal is not to upgrade processors annually․ There are drawbacks to upgrading processors often․
Instead of renewing the lease‚ the board should evaluate the benefits to the company and lessees of continuing the relationship․
Consider Purchase Price in Relation to Other Benefits․
The cheapest payment method is not necessarily the best payment method․
Property managers should consider cost and other factors‚ such as reliability and safety‚ compatibility with other systems‚ reporting capabilities‚ customer support‚ payment processing times‚ and tenant convenience․
The small benefits of the new system for individual transactions may not outweigh other costs to residents and employees of the new system․
On the other hand‚ companies should stop paying fees to service providers despite long histories of doing so․
The best payment method has a balance of convenience and lower cost․
Final Thoughts
Payment processing is an important concern for property managers because rental payments are typically large and recurring․ For property managers overseeing several properties‚ the potential cost benefits and drawbacks of various payment processing methods are significant․
Low prices do not necessarily reduce tenants' ability to pay rental costs․
Property managers can use a number of strategies to increase revenue‚ such as reviewing the payment plan offered to residents‚ evaluating total payment processing costs‚ offering multiple payment methods‚ offering discounts or other incentives for faster payments‚ streamlining autopay options‚ documenting missed payments‚ and integrating payment software with other property management tools․
Most important advice: Base your payment choices on business considerations․
The goal is not only to reduce costs associated with rent collection․ It is to establish a rent-collection process that reduces rent-collection costs but is easy and convenient for tenants who want to pay their rent․
