Utility billing for multifamily explained
Learn the advantages of outsourcing utility billing for multifamily operations from alleviating manual workflows to on-time and complete resident payments.
People have a tendency to be lax with spending when someone else is picking up the tab. When it comes to utility usage in multifamily communities, the same concept applies. But with utility billing software, apartment communities have lower utility consumption, lowering their utility expenses.
Why should I consider utility billing for my multifamily communities?
Not billing residents for their utility consumption, or paying for utility bills by including it in the price of rent, leads to higher usage. It’s been proven. A survey conducted by Fannie Mae found that when owners paid for all energy costs, the median annual energy use was 26% higher than when residents were responsible for paying the energy costs. The same is true for companies who charge renters a flat fee every month.
Higher usage means you’re paying higher utility expenses. And without a utility billing program or software, you’re not recouping enough money to match your expenses.
This is dangerous territory. It means you’re either losing money or overcharging. Losing money obviously means you’re lowering NOI. And if you are overcharging residents, this can be a liability. Because in many states, overcharging for utilities is illegal.
For these reasons, your best bet is to use a multifamily utility billing solution to recoup those growing utility costs and promote conservation.
In-house multifamily utility billing is tedious
Charging residents for their utility consumption is arguably the most important component of a successful utility management program. But, it’s not the easiest process to do in-house. For one, understanding the applicable state and local regulations is confusing. And it’s tedious for your staff to determine what each unit owes and produce utility invoices or bills that detail those charges. This is especially true if your apartment community does not have submeters. These communities must use a Ratio Utility Billing System (RUBS) to determine what each unit owes for utility expenses.
How does a Ratio Utility Billing System (aka RUBS) work?
RUBS divides the utility expense among your residents based on certain criteria. For instance, you might use number of occupants per unit or square footage as factors. Either someone at your company or a third-party billing company performs the RUBS calculations and bills the corresponding charges to residents.
But it’s important to note that using RUBS isn’t for everyone. A handful of states prohibit RUBS. If your communities are in one of these states, you’ll have to defer to submetering.
How do you bill renters for utility charges?
Finding out what a resident owes for utilities is just one piece of the puzzle. If you are performing utility billing in-house, you’ll need someone to handle the following tasks:
- Understand and stay on top of utility billing regulations
- Perform submeter readings (if applicable)
- Calculate monthly charges
- Prepare and deliver comprehensive resident statements
- Track resident utility bill payments
READ THE GUIDE
9 Common Multifamily Utility Management Mistakes and How to Fix Them
Find out how you can save money and boost NOI through utility management including: recouping utility costs from residents, identifying and ending utility theft, and more!
Over 50% of multifamily firms are outsourcing utility billing
Luckily, there’s a way to avoid the headaches associated with the billing process and still recover utility charges from residents. By outsourcing this high-value task to a utility billing software or partner, property management companies save time, stay in compliance with all regulations, and gain valuable insight about usage within their communities.
The benefits of outsourcing utility billing are so plentiful that it’s becoming a popular trend among multifamily companies. A 2017 survey conducted for Zego found that of multifamily companies who bill residents for utilities, 53% choose to outsource the process.
What do multifamily companies gain from outsourcing utility billing?
Multifamily utility billing partners make sure that the cost recovery process is a seamless experience for both residents and apartment operators. If you are considering outsourcing the process, here are the advantages.
Time savings from outsourcing utility billing for residents
From start to finish, the process of billing residents for utilities is particularly time-consuming. Because there are so many complicated steps involved, it can be overwhelming for some companies. This is especially true if you have limited staff resources. A utility billing partner runs point on everything involved in the process. Because they are experts in resident utility billing, the process is smoother and keeps your team from being overwhelmed by the task.
Accurate and easy-to-understand resident statements
Your billing partner takes on the responsibility of determining what each resident owes. Some companies find this to be the biggest relief of having a utility billing partner. Depending on your circumstances, they will perform RUBS calculations or take reads from your submeters.
Once they determine the charges for each unit, they generate individual statements. Each statement will include your residents’ rent, utility charges, and any other applicable monthly fees (trash, parking, pet rent, etc). Each line item is clearly labeled, giving residents complete insight into their monthly charges.
Complete and on-time resident utility and rent payments
This is one of the biggest advantages of using a mulitfamily utility billing solution. Because residents receive one consolidated statement for all their charges, they pay everything at once. This saves your staff from collecting multiple payments throughout the month. It also benefits cash flow because residents pay for everything when their rent is normally due.
Peace of mind about regulatory compliance
It’s extremely important to follow all the state and local regulations about utility billing. But, the regulations change frequently. If you aren’t regularly paying attention to regulatory laws, it’s easy to fall out of compliance. Multifamily utility billing partners have a dedicated team of regulatory experts who actively monitor these laws. When you begin your utility management program, they’ll advise you of the billing structure you need to adhere to. And if there are regulatory updates, they inform you right away so you can act accordingly.
Resident and staff support
From time to time, residents will have questions about their utility charges. Or they might need assistance making a payment on their utility bill. Instead of taking up their community manager’s time, your utility billing partner can help. Most offer 24/7 assistance dedicated to helping residents. Help isn’t limited to residents, either. Multifamily utility billing partners also offer comprehensive support for community staff too.
Better visibility into utility data
A billing partner will regularly provide business intelligence tools about utility usage, recoupment rates, trends, and potential leaks. This is a big deal. When you have this data in a clear and easy-to-understand format, you can use the information in many ways. For instance, you can discover and fix any anomalies that require maintenance. It also helps you benchmark your portfolio’s utility performance so install retrofits, or qualify for green loans.
Scale and specialization
Resident billing partners have the benefits of scale and specialization. No matter the size of your organization, you can expect fewer errors and a lower overall cost per bill.
Ability to bill service fees to residents
In some states, you are able to bill the vendor cost back to the resident as a service fee. This offsets any vendor fees, meaning the program pays for itself. Being able to fully recover resident utility charges without the hassle (or any out of pocket expenses) is worth its weight in gold to many property management companies!
Our utility billing system integrates seamlessly with your management software. You’ll increase operational efficiency, promote conservation, save time for your staff and gain insight into your portfolio’s performance through business intelligence. We offer step-by-step guidance on all aspects of a multifamily utility management strategy.
A comprehensive utility management solution built for multifamily
Utilities are the 3rd largest expense for most property management companies. Zego Utility helps you boost recovery rates, increase accuracy, improve resident experience, and enhance portfolio-wide visibility and insights. Schedule a demo to see how we can help you boost NOI.