The 5 reasons you can’t afford to accept paper-based payments anymore
Eliminate checks and money orders once and for all.
A belated welcome to the digital age
Over the past few decades, the evolution of e-commerce has transformed operations across industries. We’ve witnessed the complete shift from paper invoices fulfilled by hand-written checks, to an entirely digitized payment process. For instance, your barista might ask if you’d like a receipt after you’ve tapped your credit card to pay for your morning cold brew. If you say ‘no thanks,’ the entire transaction was paperless, as most transactions are nowadays. Which begs the question, why has residential real estate lagged other industries in this arena?
In an article published over four years ago, the National Apartment Association stated, “a paperless office — and an entirely paper-free community — might sound like the future, but it’s actually the here and now.” If paperless communities were the “here and now” four years ago, then why do digital payments still only represent 30% of the average multifamily portfolio’s receivables? What can these communities do differently to eliminate paper-based payments once and for all?
Prioritize, re-structure, and profit
Einstein is often quoted saying, “the definition of insanity is doing the same thing over and over again and expecting a different result.” In other words, sometimes you have to slow down to speed up. You’ve got to stop and self-audit your current rent collection procedures by taking stock of inefficiencies and underutilized resources. Streamlining and automating this process frees up your staff to focus on filling vacancies and increasing property revenue. Management companies who prioritize digital payment adoption by following the best practice methodology outlined in our recently published eBook, The Property Manager’s Guide to 100% Digital Payment Adoption, will yield extraordinary long-term results.
What kind of long-term results?
Why are multifamily owners and operators motivated to boost digital payment adoption in their communities? We’ve whittled it down to five principal incentives that drive property management companies to eliminate paper and digitalize their entire resident payment process.
1. It Saves Your Staff Time
You considerably reduce the amount of time spent on manual processes associated with collecting and processing paper-based payments such as checks, cash, and money orders. The NAA revealed that paperless communities see a “65% decrease in the time staff members spend processing payments.” Imagine what your associates could accomplish with over half of their day back, and a stress-free rent week!
Time is our most valuable resource. A 65% decrease in workload means that by automating these processes, you could build over 5 hours back into just one on-site manager’s 8 hour day. If five associates are freed of these manual, payment-related tasks during rent week, they would collectively gain back 26 hours per day. Which adds up to 130 hours per week!
EZR Management was processing payments manually for their 600 unit community. We asked EZR President, Ryan Edwards, to comment on their workload before and after implementing a digital payment solution. He said, “what used to take us 80+ hours to reconcile now takes me under two hours.”
Fire up that calculator; 80 hours of reconciliation per month is equal to 120 business days per year (or in other words, 4 months of work). They were able to reallocate an astounding amount of time to higher priority, revenue-driving tasks.
2. It Increases Security
Have recent data breaches, identity thefts, and cyber crimes discouraged your residents from sharing their banking information online? Remind them that dropping off cash, or a paper check is much riskier. Checks, cash, and money orders are easily lost or stolen while in transit to the bank, or at your office drop box while waiting to be processed.
Franklin Management became a victim to a series of drop box thefts at their community. Thieves used wires to fish checks and money orders out of their drop box and stole $40,000 worth of rent payments. “The whole thing was a logistical nightmare, both for us and our residents,” said Allison Treadwell, Office Manager at Franklin.
Franklin Management suffered the worst case scenario, but not all rent money heists are quite as cunningly perpetrated. Chris Finetto, VP of Atlas Regional Management, has a few residents who insist on paying with cash, and recently Ruby, the landlord’s dog, acquired a taste for crisp hundred dollar bills. This just goes to show how risky paper-based payments are on multiple levels. Don’t become victim to criminal acts or situations adjacent to “my dog ate my rent money.”
By digitizing your rent collection process, you’ll benefit from the following security enhancements:
- The prevention of in-office or in-transit theft
- An added level of accountability with on-site associates
- Easily resolved payment disputes due to accessible, real-time transactional data
- Avoided consumption of funds by innocent furry friends
Rent is typically the largest monthly payment your residents make. So to them, digital security is not just a supplementary benefit, it’s an expectation. You need to be diligent about working with PropTech providers that prioritize security for your sake, and your residents’. Specifically, enterprise-grade security is the key differentiator you should look for.
At Zego, for instance, we have built our technology and internal processes in a way that greatly minimizes security risk. Each year we commission an SSAE18 review from an external security specialist to evaluate our processes and confirm that we have best-in-class controls and procedures in place. We also adhere to a strict set of rules designed to protect and safeguard customer card data (PCI Compliance). And for sensitive data that flows through our system, we use 256-bit encryption, one of the most modern and secure encryption methods available. But enough about us! Moving on.
3. It Improves Your Cash Flow
Collecting rent on-time is arguably the most fundamental aspect of your business. AutoPays and automatic rent reminders help to increase your percentage of on-time payments, creating a domino effect of efficiency and profitability. You’ll also increase cash flow by automating the accounts receivables reconciliation process. One of our clients with a 600 unit portfolio saves approximately $50,000 per year from a reduced administrative workload.
When residents pay digitally, you’re more likely to receive full-balance, on-time payments every month.
4. It Reduces Operating Expense and Increases Portfolio Value
According to an article by Innago, “most researchers estimate the transaction cost of a paper check at $3.00 per transaction. And some believe it to be as high as $10.00!”
In addition to the operating expense reduction, you can increase the value of your portfolio by reducing paper-based payments. To put it in perspective, if a 1,000 unit portfolio receives 500 paper checks and 250 money orders each month, they are spending $36,000+ annually to process those paper-based payments.
Assuming a 6% cap rate, the owner of the illustrative 1K unit portfolio would increase the value of their portfolio by $600K! This expense savings grows linearly with the size of your portfolio. For example, a 2,000 unit portfolio would save over $72K annually by eliminating paper checks and money orders.
5. It Enhances Your Resident Experience
Offering pay-on-the-go flexibility and multiple digital payment options will elevate your residents’ overall experience at your property. Help them help you. Happy residents renew their leases, respect the community, and refer friends. Up resident satisfaction by utilizing the technology they not only want, but have come to expect:
They want mobility
Today’s renters are already on their smartphones, tablets, and laptops all day, every day. Let them pay you while they’re there. Provide each leasing office with a tablet that residents can use to register their account within your payment portal, and (best case scenario) set up a recurring AutoPay on the spot.
Because of the next generation of renters’ high ‘tech’spectations, primitive processes are no longer going to cut it. The current student demographic eats, sleeps, and breathes the internet across devices, literally. 91% of Gen C (a generation defined by mindset instead of age, but consisting mostly of Millennials and Gen Zs) sleeps next to a smartphone. They are accustomed to a personalized, convenient, and technology-enabled level of service. Filling out physical forms is an antiquated concept to them. Steve Hallsey, Managing Director for Wood Partners, noted that “the generation that’s doing our leasing right now has grown up with the tablets we use for leasing… You actually look archaic if you don’t have this technology available for them.”
You also have to steer clear of outdated PropTech platforms. Many PropTech solutions were built in a different era and come with clunky front-end user interfaces. Look and feel is imperative to this new wave of renters, so find a platform that features a modern and highly intuitive user experience. With a mobile-first platform you’ll typically find simple and elegant workflows that allow your residents and staff to complete their tasks quickly and efficiently.
They want convenience
Most residents want to pay on-time. A flexible, digital payment system allows for self-sufficiency. The ability to pay when and how it’s convenient helps them avoid late fees. Also, a digital system lets them log-in and view the status of their transactions online, without bogging down your on-site managers.
Property management companies who eliminate paper checks average a 50% decrease in delinquencies.
Alexis Vance, VP of Sales and Marketing at Alliance Residential Company, says that their site staff’s interaction with current and potential residents significantly improved after switching from paper to tablets. “Now you can truly customize the experience around your customer… understanding the impact a paperless approach has on the customer experience is critical to successfully integrating the initiative into your service strategy.”
They want visibility
With complete transparency into their rental payment history at your property, there is less room for debate or pushback from residents regarding late or returned payments. Digital payments create a timestamp and an audit trail, leaving no room for dispute about when a payment was initiated or returned.
“For a number of years we had posted payments through lockbox files or through manual methods, and we got a lot of feedback from our residents that they wanted to be able to see the payments that they were making appear real-time on their ledgers” said Diane Caton, Executive Vice President of MSC. With digital payments, she continued, “this self-service aspect of residents being able to see their ledgers and make payments at any given time and sort of have that control back in their hands has been a game-changer.” Meaning, no more excuses. “All of these stories about ‘my rent check got lost in the mail,’ ‘you didn’t post it fast enough,’ ‘I know you had it but you just didn’t get it posted.’ All of that stuff is sort of off the table.”
The key to achieving full, digital payment adoption
It’s 2020. Paper-based payments are a thing of the past; it’s time to drive the initiative for your organization and be the digital payment hero for your community!
As we mentioned, the industry average for digitally submitted rent payments is close to 30%. However, the top quartile of our Zego multifamily customers capture well over 60%. We were curious as to what was contributing to their success, so we launched a research study across our top-ranking client base to assemble their strategies. We found that overall, the digitalization of your rent collection process isn’t a colossal undertaking, but it does require initial investments in technology, training, and marketing.
Our latest eBook is a step-by-step guide through these best practices, and demonstrates exactly how to prioritize digital payment adoption, & reap the aforementioned benefits.
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