Choosing a Utility Billing Provider for Multifamily

How to select the best utility billing provider for your business

Utilities are one of the largest multifamily operating expenses. Recouping these costs from residents is the best way to protect and increase your Net Operating Income (NOI). Plus, outsourcing utility recoupment frees up your staff to focus on running and growing the business.

Whether you currently rely on a utility billing company or are interested in implementing a program, it’s important to recognize there’s more than meets the eye when it comes to utility billing partners. Before committing to a solution, it’s imperative to recognize the traps that can befall property managers who undertake a utility billing program.

Deciding on a utility billing program

If you’re interested in using a RUBS calculation or a submetering program to recoup utility costs, it’s important to understand the different billing models providers use. Too many billing programs seem clear-cut on the surface but hide fees and complexities that end up costing multifamily operators thousands of dollars each year.

There are two types of billing models you could work with if you’re thinking about implementing a billing program:

Utility bill-and-collect model

This traditional billing model seems great in theory, but has many potential variables and pitfalls.

How the utility bill-and-collect model works:

• The vendor calculates utility charges and bills the resident directly
• Residents pay vendor for utility charges
• The vendor reimburses you (minus service fees and resident late fees)

The pitfalls of a utility bill-and-collect model:

• Invoices are sent to residents months in arrears, causing confusion and frustration
• Significant reimbursement delays negatively impact cash flow. The vendor collects resident payments, removes their service fees and all resident late fees and then reimburses you with the remaining balance.
• Utility Bill-and-collect vendors profit when residents don’t pay. All late fees go directly to the vendor, drastically reducing their incentive to collect.

Resident Billing model

What most property managers are moving towards is a Full-Service Partner.

How the Resident Billing model works:

• Billing partner performs utility calculations
• Billing partner pulls all the open charges from the resident ledger including rent, and all ancillary property charges (trash, pet rent, etc.)
• Billing partner generates a single itemized statement and sends it directly to your residents
• Your residents make 1 payment, for all charges, directly to you.

The benefits of a Resident Billing model:

• Your residents receive one comprehensive, itemized bill that includes rent, utilities and all other property-related charges
• Cash-flow improves when residents make one payment (usually online) for all charges. Your dollars flow straight to you, no intermediaries
• If a resident fails to pay, you have several recourse options available, including eviction

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