Late rent payments are an inevitable part of our business, and one of the more uncomfortable to deal with. Slow payment impacts cash flow and chasing rent down wastes your valuable time. But property management software can help you greatly reduce the frequency of sluggish payments.
Before we get into four ways software will help you deal with this problem, however, let’s start with one that has nothing to do with software: how you communicate the importance of paying rent on time, right up front.
Too many property managers simply assume it doesn’t bear mentioning that rent should be paid on time because it goes without saying. The problem with this attitude is that property managers have varying levels of leniency when it comes to timely payment, and many renters will test these limits. It’s not always their fault: sometimes they’re going through a rough patch. But if you begin to make exceptions, you’re asking for rent payment to become a fuzzy area that gives you lots of headaches. If you choose to make exceptions, be sure to limit them to truly exceptional circumstances.
Be Polite But Firm On Expectations
At the time of lease signing, be polite but firm that rent needs to be in on time.
If you’re managing properties for others rather than your own properties, you won’t have as much latitude to show leniency. This can work to your advantage in a way, since when renters know it’s not you being “tough” – that you’re working on behalf someone else with their own rules and accountant – they know there’s not so much you can do about it (“Hey, I just work here!). Some property managers communicate at the point of leasing that the accounting system is rigid and that late charges, penalties and (ultimately) the giving of a notice of eviction are not something that can be played with due to “how things are set up.” There’s no need to get technical. The important thing is that you don’t simply leave it at letting renters know the amount of rent and date due each month. Instead, make it clear in a polite way that the accounting is set up in a way that rent must be paid on time. Later, if there truly is an emergency and you want to make an exception, it’s your choice (or the owner’s).
Tenant Screening: it’s not all created equal
The best way to reduce late rent payments (or rent not being paid at all) is of course not to rent to people who don’t pay their rent! Obviously, you already check applicants out but particularly in single-family property management, there’s a huge range of screening methodologies, from a simple credit check and perhaps a reference or two to a comprehensive tenant screening solution. The relatively low cost of online screening is virtually always worth it since these systems check credit and criminal databases to find data critical to making rental decisions. Since they’re objective, they also give you a level of protection against Fair Housing claims of discrimination.
Propertyware’s screening solution offers something that none of the others does, and it directly reflects the likelihood an applicant will pay their rent. It taps into the rental payment histories of over 20 million tenants nationwide. Why is this so important? Because rental payment history is the #1 indicator of whether someone is likely to pay their rent or not – more accurate even than credit history. The reason is that people place various levels of importance on paying their rent on time (or walking away from a lease). Sometimes people with mediocre credit show perfect records of paying rent on time, demonstrating that they consider it a critical priority. Others might have pretty good credit, but an imperfect record of paying their rent. Don’t let someone who has always paid their rent walk away while accepting another with somewhat better numbers but a history of slow rent payment.
Online portals keep communication clear
Property managers who communicate well and have a good connection with tenants are more likely to be paid on time than those who seem remote (assuming they aren’t too friendly and put themselves in a position to be taken advantage of). Clear communication is where a tenant portal comes in.
Tenant portals deliver an array of benefits but in this case, we’re addressing specifically their impact on timely rent payments. The portal isn’t just a place to communicate with management; it also clearly lists rent, fees, deposits and other amounts due, and on what schedule. It’s also a great place for reminders of overdue rent. So there’s no gray area, and no need for a tenant to dig their lease out of a drawer somewhere or call to check where they stand.
Portals are for payments, too
There’s another aspect of tenant portals that reduce late rent payments: they make paying rent and other fees incredibly easy. Renters can pay online at their convenience, using a credit card, ACH or other means. The inconvenience of writing a check and mailing or dropping it off at an office is a common reason for late payments, and the online payment system eliminates this completely. Renters receiving a rent reminder or late notice via the portal can simply jump right to the payment feature and get it taken care of.
Become more aware of late payments
Your property management software should seamlessly integrate your accounting with your property and tenant information. You see not only the invoices and expenses that come in for a specific property, you also see the accounts receivable. This gives you a heads-up when tenants have neglected to pay their rent, and allows you to easily track what's due and ensure that you follow up, especially if this is a pattern over time – as your software will quickly show you.
These tips will help you keep those payments coming in the way they should, with a minimum of emails, calls, pleas, and threats. Implement them and you’ll find your life and cash flow is markedly improved! Learn more about Propertyware's online rent payment solution in this free demo today.