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4 utility expense management strategies that boost NOI

Implement these practices to cut unnecessary multifamily utility costs and improve utility accounts payable.

We’re optimists here at Zego (Powered by PayLease). And even in the midst of a global pandemic, we’re looking for a silver lining. There’s no doubt that COVID-19 threw a wrench into everyone’s 2020 business plans.  Forced to pivot their plans for success, many multifamily firms are focusing on different priorities than they originally anticipated. And in one case, the shift is positively impacting NOI.

Revenue growth is stalled right now in the multifamily industry. So instead, multifamily firms are prioritizing ways to cut operational expenses – specifically utilities. Utilities are one of the biggest property expenses. Plus, they have more leeway for reduction than any other property expense. With residents home all the time and running up high utility bills, there’s never been a better time to devise a utility management strategy. This helps you curb usage, cut costs, and become more efficient.

This summer, we’ve been on a mission to help property managers lower their utility costs. The last blog we wrote shared the biggest utility accounts payable mistakes. And now that you know what leads to wasteful spending, you can find better solutions for your business. Here are our tips for improving your utility accounts payable process and lower costs.


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#1 Digitize invoice receipt and payments

Does your company still receive paper utility invoices? Or do you pay for invoices with a paper check? If you have yet to move to a digital invoice and payment process, you need to catch up to the times!

Going digital can greatly improve utility accounts payable for a few reasons. First, it buys you more processing time in an already-short payment cycle. And you want as much processing time as possible so you can avoid those hefty late fees.

With paperless statements, you receive your bill by email when it’s ready. That shaves off days of waiting for it to arrive in the mail. Not only that, but it lets you skip the step of scanning the invoice since it’s already in a digital format.

The same concept applies to paying digitally. When you pay your utility provider digitally, your payment is received instantly instead of days after it’s been mailed. Again, this gives you more processing time so you won’t get a late fee.

#2 Devote resources to vacant unit cost recovery and chargeback offenders

Utility theft severely damages NOI. That’s why it’s so important to regularly perform vacant unit cost recovery. Regularly performing these audits helps you avoid paying utility costs that do not belong to you. Here are a couple of ways to make sure vacant unit cost recovery is handled properly.

Repeated audits are key

The sooner you know your resident still needs to move utilities into their name, the sooner the situation gets resolved. Assign someone on your team the task of performing these audits. Typically, apartment operators conduct audits on specified days of the month or a certain number of times per month. You want a consistent and standardized process so there aren’t any opportunities for loss.

If you outsource utility accounts payable, some vendors will notify you about delinquent utility account transfers. This happens within a day– versus weeks or months – of each utility’s new billing cycle. With expedited notifications, apartment operators can minimize instances (and the financial impacts) of utility theft.

Charge a penalty fee to any offenders

If there are no consequences for failing to transfer utilities, then residents are more likely to put it off. That’s why utility theft penalty fees are becoming standard at multifamily communities. Typically, penalty fees are around $50. This sufficiently reimburses your company for administrative and operational costs that result from the issue. Before residents move in, make it clear that a penalty fee will be assessed if they don’t move utilities into their name by a certain date.

#3 Centralizing utility AP reduces errors

Are property invoices sent directly to the property and paid by someone onsite? If so, you are using a decentralized accounts payable model. Sometimes this structure leads to costly mistakes with utility accounts payable. The biggest problems include inconsistencies with audits, payment timelines, and reporting.

Another way to improve utility accounts payable is to centralize this process. In this instance, all utility invoices for your entire portfolio go to one central location. Usually, they are sent to the company’s headquarters and are paid by a single team. The advantage is that you have employees who are uniquely suited to manage this task. Also, processes are followed in a more consistent and coordinated manner. It also helps companies gain visibility into the workflow and identify errors and discrepancies.

#4 Outsourcing utility AP saves money and resources

Your company may already use a centralized accounting model. But what if your team still struggles to process and audit each invoice in a timely manner? If this is the case, you should strongly consider outsourcing to a third party. It helps tame AP costs and makes the overall process of paying utility bills more efficient. More and more companies outsource this function rather than doing it in-house.

Companies who offer this service refer to it as Utility Expense Management (UEM). With UEM, your provider receives all of your invoices. Their team checks each invoice for accuracy. And if needed, they dispute any errors on your behalf. Then, they pay every invoice in a timely manner. From there, the details of each invoice integrate into your property management software. This frees up considerable time for your staff.

You also eliminate unnecessary costs like overcharges or late fees. Plus, you gain more visibility into utility expenses at each of your properties. Another bonus? They usually conduct vacant unit cost recovery on your behalf.

More Utility Strategies that Boost NOI

Improving utility accounts payable is just one way to lower your costs. Want more utility management strategies? Then take advantage of our eBook. The Ultimate Guide to Utility Management for Property Managers, shows you how to tighten up these expenses so you can improve NOI.

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