Cash Flow is Critical
If you are managing properties, you know how critical cash flow is to your business. Without steady revenue provided by rental payments, you cannot pay your administrative staff, perform necessary maintenance, pay property taxes, or set aside funds for new property acquisition.
In fact, cash flow issues are the number one headache for landlords. If you are a smaller operation where rent payments are vital to meeting mortgage demands, cash flow problems can easily cascade into other areas such as maintenance and foreclosures.
The situation is serious. According to one source, it is possible that tenants currently owe as much as $70 billion in overdue rent payments in the United States. As the COVID-19 pandemic drags on, the situation is only growing more complicated.
Why Paper Transactions Don’t Make the Grade
In the “good old days”, your tenants could pay you by cash or check. In today’s world, this is no longer the best option. Why?
First, when tenants pay by cash, there is no verifiable paper trail. Sure, you can provide tenants with receipts, but what if they get lost? There’s no way to identify those funds once they’re comingled with other cash. Also, the act of issuing one-off paper receipts is time-consuming and harder to manage over time.
Second, accepting cash payments requires you to secure those funds in a safe place until they can be deposited.
Third, accepting paper checks will cause additional delays in cash flow due to the deposit and clearing process.
Finally, given that some checks may be lost or be returned for insufficient funds, accepting checks as a standard form of payment has become far more work than necessary.
How Online Rent Payment Solves Cash Flow Problems
Allowing tenants to pay rent online instead of by cash or paper check will dramatically improve cash flow in several ways, including:
Shifting demographics: Most adults are becoming far more comfortable paying rent online because they are already paying for many other living expenses this way. This shift is even affecting every age group: Money Magazine recently determined that millennials (those born between 1981-1996) pay over 60% of their bills using an online method, while seniors pay over 40% of their bills this way.
Convenience: An online rent payment platform makes it much easier for tenants to pay in a timely manner because you can provide several payment options. Credit card or debit cards can be used though some may prefer to pay by electronic check (eCheck), which allows them to submit bank account information for an ACH transaction.
Tenants can also make online payments any time, from anywhere. They no longer have to wait for your office to be open, nor do they have to be in town to personally deliver cash or a check. Some tenants may also receive financial assistance from out-of-town relatives to pay their rent. Offering a simple way to pay someone else’s rent this way can help secure both their and your interests.
Recurring Revenue: An essential feature of any online rent payment platform is the ability to remain current through an auto-pay schedule to submit a transaction on the same day each month. Their payment information would be securely stored in the ePayment system so that tenants will not have to log in every month to pay.
Help reduce fraud and NSF: With an online payment system, you begin to reduce the risk of the many issues of traditional payment methods. With online credit card payments, transactions are processed immediately. If issues arise, the transaction is declined instantly so the tenant can handle the situation themselves. eChecks are also submitted to the Federal Clearing House instantly. This vastly accelerates clearing time. If an eCheck is returned, you’ll typically be notified by email to handle the situation promptly.
Fingertip management: Because your payment platform can integrate with 3rd Party systems such as QuickBooks Online, you can eventually have access to real-time reporting data. You will know which of your tenants are paying on time, and which need attention.
Receive More Than Just Rent Payments
The really great thing about an online payment solution is that it can do more for you than simply receiving payments from tenants. Here are just a few other ways you can leverage this technology to help secure your interests:
Application fees: If you currently charge a fee for processing rental applications, this type of payment can easily be processed online rather than manually. This is especially helpful when working with prospective tenants that don’t live in the area. When someone wishes to relocate promptly, secure their business by streamlining the process.
Security deposits: When engaging new tenants, you can accept their security deposit and advance rent quickly and easily with an online payment option. As you already know, waiting on these deposits can hold up commitment and possession so the faster the funds clear, the better the experience will be for everyone.
Repairs and maintenance: Over time, repairs are inevitable when renting. Giving renters a faster way to pay for any issues means they will benefit from the work sooner.
Miscellaneous fees and charges: Want to reclaim the costs associated with running credit checks? Does your tenant need additional entrance keys? Are you handling a difficult lockout situation, and tenants need to pay? All these situations may require you to secure additional funds from your tenant. Online payment processing can help you to get the funds you need and remove administrative bottlenecks.
Enhanced Tenant Acquisition & Retention
As an astute property management professional, you realize that it is in your business’ long-term interest to retain quality tenants.
Providing your clients with the most relevant and convenient ways to manage their finances is a simple yet powerful way to both attract renters and keep them longer.
This will inevitably translate into higher occupancy rates, lowered associated costs (advertising, credit references, lease negotiations, etc.), and more stable cash flow. Pretty great, right?
But What About the Payment Processing Fees?
Yes, there are payment processing fees associated with accepting ePayments and they can add up quickly. This is especially true since they are charged against your top-line revenue.
However, there are tools available to help you offset these costs. With Xpress-pay, our payment portal is unique in that we become your 3rd party bill delivery service. This means we can charge tenants a separate, nominal “Site Fee” during payment. This powerful tool has helped our clients across several industries recover a substantial amount of revenue over the years. From single dwelling operations to national franchises, every dollar matters.
As you can see from the above discussion, the reasons for adopting an online and mobile payment solution in your business are plentiful and there are virtually no drawbacks. It’s time to take that next step. Connect with us to discuss your thoughts on everything above and give us the opportunity to answer any questions you may have.
About the Author
Thomas is a 16-year payments industry veteran. He’s helped hundreds of SMBs expand their understanding of how digital payments work, and how to use them to grow their organizations.
As the Director of Marketing for Systems East, Inc. & Xpress-pay, Thomas hopes to show organizations that with the right approach to business, anyone can remove barriers, and have a lasting impact on those around them.