The most common rent collection service mistakes that hurt your business
Rent collection service mistakes leave revenue vulnerable and drain staff productivity when collecting rent each month. Compare your rent collection process to the mistakes below to find out if there is room for improvement.
What is a rent collection service?
In short, A rent collection service is a third party provider that processes your residents rent payments and integrates the payment data with your accounting software. However, there are several nuances inherent in the rent collection process that a rent payment software must account for. For example, how does it handle non-digital payments? Or, are there any safeguard built in to protect your business from fraud and payment errors?
If you’re an apartment operator, it’s important to continually evaluate your rent collection service. After all, no single operational process is more critical to your business than collecting rent.
Rent collection services impact every aspect of property management – from cash flow to NOI and even resident satisfaction. When rent payments aren’t being collected efficiently, other areas of your business suffer.
All too often, apartment operators make well-intentioned decisions that inadvertently disrupt the rent collection process. When you understand the effects of these common mistakes, you can improve the process. That means a better experience for your associates and your residents. Here are the most common mistakes for collecting rent:
FREE DOWNLOAD Download The Property Manager’s Guide to Common Rent Payment Mistakes to identify ways to improve your rent collection process & get paid faster.
Want a more efficient rent collection process?
Download The Property Manager’s Guide to Common Rent Payment Mistakes to identify ways to improve your rent collection process & get paid faster.
Mistake 1: You aren’t converting all rent payments into digital transactions
The best way to collect rent is online. But even if you’re offering digital rent payment options, you probably still receive checks and money orders. So how do you achieve 100% digital payments if residents still insist on paying with checks, money orders or cash? You need tools for converting all rent payments into digital transactions.
When those paper checks and money orders arrive at your office, what happens to them? Is it up to your on-site teams to manually process them and take them to the bank?
That’s the reality for many companies who still receive paper checks. Unfortunately, this is a common rent collection service mistake.
That’s because processing paper payments is costly. According to Innago, “most researchers estimate the cost of a paper check at $3.00 per transaction. And some believe it to be as high as $10.00!”
According to the Federal Reserve Bank of Boston, 58% of rent payments are still paper based (42% made with a check and 16% made with a money order). We did the math on what it costs for a typical 1,000 unit community to process paper checks. Let’s assume the low-end benchmark of $3 per check. If 50% of the community pays with a check, that’s $18,000 per year spent processing those payments.
Plus, there’s the time your associates spend processing those payments. Those low-value tasks are not helping your property function. And, it keeps your teams away from activities that build resident satisfaction.
Converting paper payments to digital transactions with rent collection services
Checks don’t have to end your dreams of a paperless rent payment utopia. Modern payment solutions tackle paper payment processing for you. Here are a few options:
- Zego Pay Lockbox: Residents mail checks to a secure P.O. box instead of bringing them to your management office. From there, the checks are imaged, processed, and accessible in Zego.
- Mobile Check Scanning: Renters take a picture of their check within their Zego Pay mobile app. Bank information is automatically captured for an immediate payment. From there, it’s stored in their account. That makes it easy to set up future payments or recurring autopays.
Mistake 2: Rent collection services that expose your revenue to chargebacks, fraud, and errors
Sometimes digital rent transactions result in a return. Many times it’s due to an error, like residents entering the wrong bank account or credit card information. Or, there can be instances of fraud. Whatever the reason, it results in significant revenue loss for property management companies.
This isn’t something you want to wait and handle on a case-by-case basis. Taking proactive measures to stop returns, errors, and fraud is a must.
If you aren’t using any of the revenue protection services that your rent collection service offers, you’re risking lost revenue. More than half of property management companies are taking this risk. In fact, NAA reports that 64% of property managers do not use any tools to prevent fraud.
Taking proactive steps to reduce fraud and returns will minimize losses. Plus, it reduces the headaches on-site associates must endure to rectify these problems.
Revenue protection services for property managers
There are a number of ways you can minimize processing hiccups that result in lost revenue and needless work for your associates. Here’s what you need:
- Account Connect: This allows residents to securely link their bank account from their financial institution instead of manually entering the routing and account numbers. It ensures that any account a resident wants to use is valid and active for transacting.
- Balance Verification: Real-time verifications confirm that renters have sufficient funds for transactions to clear. This ensures on-time revenue and reduces manual reconciliation work. Plus, it saves residents from getting dinged with unwanted charges that come from insufficient funds. That’s why Zego’s Balance Verification performs this audit for the benefit of both parties.
- Chargeback Defense: Chargeback Defense services assists with chargeback avoidance, protection, and recovery for all types of payments. From rent to application fees ACH to credit card transactions, Zego’s comprehensive solution gives clients chargeback protection and peace of mind.
Mistake 3: Training your staff about your rent collection service is a one-and-done event
Companies who devote more time and resources around training see better digital payment adoption rates. And, they encounter fewer issues during their rent cycles.
You can’t just offer a one-time training about your rent collection service and never revisit the topic again. After all, change happens regularly. Features in your rent collection service are constantly being updated. Plus, you probably have a fair share of staff turnover. So it’s worthwhile to regularly revisit the topic.
Continuous product training for your staff is essential, especially if you experience high turnover. Use consistent educational refreshers to combat knowledge gaps and improve customer service.
Training resources for rent collection services
If you aren’t having regular conversations, training and incentives for your on-site teams around digital rent payment collection you’re bound to encounter unnecessary hiccups. Here’s how to keep your teams educated.
- Video tutorials: Tap into your payment provider’s wealth of resources to gather all of your initial training webinars, videos, manuals, and FAQs.Here are some Zego resources we created to help with training on-site staff. Use them for inspiration to create training materials for your team. Or if you’re a Zego customer add these resources to your training library.
Examples of Zego resources for property staff:
- Set and convey goals: Set monthly or quarterly benchmarks for your portfolio and celebrate company-wide achievements. Catering pizza or ice cream to each office is always a good motivator. But the more creative the reward, the better your results.
The metrics you track each month don’t have to be complicated. As they say, “what gets measured, gets improved.” So keep it simple but be diligent about tracking. One idea is to track your digital payment adoption percentage:
Other KPIs you can track:
- Boost digital payment adoption from 20% to 80% by the end of the year
- Increase portfolio-wide adoption by X%
- Increase individual property adoption by X%
- Get X amount of AutoPay sign-ups
Mistake 4: You aren’t thoroughly communicating payment expectations to new residents
Whichever method new residents use to pay their first month’s rent will likely be their go-to for the entirety of their lease term. That’s why it is critical to encourage residents to use digital payments from the get-go. If you don’t steer new residents towards your preferred payment method, you’ll ultimately enable a habit that doesn’t serve you well.
How to promote your rent collection service
It’s important to provide residents with the right information upfront about your online portal and community mobile app – which should offer digital rent payment functionality. The goal is to set clear expectations around when and how payments should be made. The first way to do that is during lease up. Here are a few ways to do that.
Here are a couple more tactics that effectively promote digital payments.
- Offer incentives to enroll in AutoPay: With AutoPay, your residents can “set it and forget it”. And you can count on digital, on-time payments each month. Run an AutoPay contest, offer a small local gift card to residents who pay via AutoPay for three consecutive months.
- Educate residents with videos and more videos: Some are less likely to read a pamphlet or an email (think Millennials or Gen Z). That’s why you need a short explainer video about making a payment. Creating videos doesn’t have to be your responsibility. In fact, most payment providers offer ones you can use. For instance, our clients frequently use What is Zego Pay which gives residents a quick tutorial about paying rent.
- Offer flexible rent payments: Flexible rent payments let residents choose a payment schedule that works for their budget and cash flow. Zego’s partner, Flex, pays your property when rent is due, while renters split their bill into smaller, stress-free payments made to Flex throughout the month.
Mistake 5: You’re offering a poor resident payment experience
A common mistake that property management companies make is neglecting the payment experience itself. It’s incredibly important for the digital payment process to be convenient and seamless for residents. If there are points of friction when your residents pay you, a lot can go wrong.
For one, renters might decide to dust off that checkbook instead of using your rent collection service. Or even worse, their opinion of your company could take a nosedive. Ultimately, this may impact their decision to renew.
If that seems extreme, take a moment to think about paying rent month after month. If paying you is an inconvenience, their satisfaction levels dip every month when the rent is due. That’s why it’s one of the most critical components of the resident experience.
Creating a good resident payment experience
Paying rent doesn’t have to be a dreaded task for residents. There are a few ways to transform the payment experience.
- Offer free ways to pay digitally: Nothing strikes a nerve among residents like being charged a fee to pay rent – which is already their biggest expense. It’s very important to offer a free way to pay digitally. That makes the experience better for renters. Also, it brings you more online payments. Want to see the business case for incurring fees? Our blog provides a good breakdown of digital payment models.
- Report on-time payments to credit bureaus: Credit reporting through your rent collection service rewards renters for on-time payments. This is a feature that not every community offers. So renters are grateful for the opportunity to build their credit score just by paying rent.
- Offer an optimized mobile app with payment functionality: Apps are the new go-to for activities like filing a work order, getting package alerts, and reserving amenities. When residents engage with these apps, they’re much more likely to pay their rent digitally. That’s because they’re already in the app and the button to pay is one click away. Communities with a mobile app also see higher digital payment usage than those without.
Getting your rent collection service on the right track
If you’re making any of these rent payment mistakes, don’t worry. We’re happy to give customized advice about improving your rent collection service. In the meantime, read more about correcting rent payment mistakes in our free ebook. Download The Property Manager’s Guide to Common Rent Payment Mistakes now.
To learn how we can help you implement these best practices, schedule time with a Zego team member for a quick demo of Zego Pay.
Ready to Improve Your Digital Payment Adoption?
To learn how we can help you implement these best practices, schedule time with a Zego team member for a quick demo of Zego Pay.