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5 Signs that Your Resident Utility Billing Program is Ineffective and Outdated

We probably all know someone who’s obsessed with having the latest technology at their fingertips. You know that friend who always has the latest iPhone the day it’s released. Or who can control every device in their home with a voice command or a smartphone.

But there are a lot of people who use their existing technology devices until something breaks or clearly becomes outdated. This may be fine if you’re talking about a TV or an appliance. But in the business world, not staying up-to-date with the latest technology advancements can slow efficiency and derail profitability.  

Get the scoop on the most modernized utility billing program in the industry.

For multifamily operators, you may think you are keeping with the times by billing residents for their utility consumption. After all, this is a fairly new trend that not all property management companies have gotten on board with yet. But resident utility billing programs have evolved in the past few years. At least some of them. A lot of multifamily property managers are using an ineffective program that can stymie you out of thousands of dollars a year and cause resident frustration. Newer programs are designed to maximize recoupment rates, eliminate inefficiencies and improve resident satisfaction.

Not sure if you are using the most up-to-date resident utility billing program? Here are the top signs that you are using an outdated billing model.

#1: Residents Receive their Utility Bill Months in Arrears

The most modernized utility billing programs generate resident statements upon receipt of the property’s utility bill. But in some billing models, the statement your resident receives reflects their utility usage from several months prior. And that can cause problems.

For instance, let’s say there’s a summer heatwave happening and a resident has the AC cranked around the clock. If they aren’t billed for that consumption until the fall, that’s going to cause some confusion for the resident and they may assume they are being overcharged. Plus, being billed in a timely manner helps them effectively practice conservation.

Then there are residents who have moved out. You don’t want them leaving your community with months of unpaid utility bills hanging in the balance. Once they move out, the likelihood of you getting paid for a months-old utility bill is going to plummet.

It’s a liability to use a billing program that bills so far in arrears. Ideally, you want residents to be billed for their utility consumption no more than 30 days after the property utility bill is generated.

#2: It Takes More than 30 days for Residents’ Utility Payments to Hit your Bank Account

Just as residents should receive their bill in a timely manner, you should also be paid promptly on those charges to keep your property cash flow in good shape. The most effective apartment utility management programs have residents pay your company directly (preferably online), which means you can expect payment in 30 days or less from the time they receive their bill.

Older, outdated models take about 105 days before property management companies receive resident utility payments. This is because residents give their payments directly to the billing provider.  It’s then the responsibility of the utility billing provider to reimburse the property management company. This isn’t exactly a swift process. When all is said and done, you’ll be receiving a payment approximately 105 days after the resident got their bill. I think everyone would prefer to be paid in 30 days versus 105, right?

#3: Residents Pay your Billing Provider Directly and Get Assessed Late Fees for Past-due Payments

This may come as a surprise. Why would charging residents a late fee for delinquent payments be a bad thing? Won’t it encourage residents to pay on time? The answer is no.

First, let’s focus on the beginning half of the statement: residents pay your billing provider directly. When you make residents accountable to a third-party biller instead of your property management company, it lowers the stakes for them to pay late. In newer billing models where residents pay their property management company directly (in the same transaction as their rent payment), there’s more at stake for late/non payments. In this scenario, not paying can eventually result in eviction.  If a late fee is the only recourse, then you’ll see a lot more residents skip out on paying. And, in the end, it means you won’t recover what’s owed to you.

Then there’s the issue of late fees. Late fees are purely profit for the third-party biller. You don’t see a penny of what they collect in late fees. In fact, you may even be penalized for it. Some vendors will subtract the amount they collected in late fees from the amount that is owed to you. If your vendor profits when residents don’t pay on time, it’s not in their interest to help you get on-time or complete payments. If this is how your third-party billing program is structured you need to devise an escape plan.

#4: Your Recoupment Rate is not as High as You Expected

If any of the above warning signs are happening in your utility billing program, then it’s likely you are not fully recouping what you can. A modern utility management solution will enable you to recoup all of your residents’ utility charges minus common area deductions. If there’s a noticeable difference between what you recover from residents and what you owe the utility companies, it’s time to re-examine your billing strategy.

#5 Your Community Managers are Repeatedly Spending Time on Collection Efforts

No matter what billing scenario you use, there are bound to be a few residents who don’t pay by the due date. But if you’re using a vendor who is supposed to collect outstanding payments on your behalf, there’s a good chance they aren’t going to have much success.  As we mentioned above, it doesn’t benefit them financially to collect, so they certainly won’t go to any great lengths to help you out.

Ultimately, it’s going to be on your community managers to recover unpaid utility charges. If your community managers are spending time each month trying to recover utility charges, then it’s a sign that residents are not incentivized to pay a third-party biller. You will have much more success recouping what’s owed if residents are accountable to your property company for utility payments.

Do any of the warning signs above sound familiar to you? If so, our eBook,  Multifamily Utility Bill-and-Collect Schemes Exposed, will give you more insight on the pitfalls that await when you rely on a third-party bill-and-collect vendor. Even if your company is not yet billing residents for utilities, it will help you understand everything you should steer clear of when and if you decide to make this a reality.

Download Multifamily Utility Bill-and-Collect Schemes Exposed: How to Maximize Recovery Rates and Dodge the Pitfalls that Crush Cash Flow now!


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