Do you want to spend less money getting paid?
Did you begin work this week with the new reality of having to figure out how to operate with fewer employees? Chances are this is the case. In the haste to cut costs and stave off disaster, your company may not have realized the extent of work actually being done by those laid off and are struggling to keep up. This theme would be ever present when it comes to administrative processes of landlords and property management companies. No process is more critical than rent collection. For many, this involves completing a long series of simple operations to process transactions as they collect rent, and record those payments in their accounting systems. In some cases, employees may even need to record these transactions in multiple places. If this has not yet been automated, it is undoubtedly a lot of work. If you are one of these people, and you are asking yourself if you can get paid and record all of this with less work, the answer is a simple and resounding YES!!!. The real question that you need to ask is HOW? Depending on how procedurally inclined you are, and how extensive your awareness is of the progress Proptech has made in recent years, the solution may actually be quite a bit easier than you think.
Thus, the transaction processing companies, or their delivery partners like the many rent collection and property management platforms, must come to realization that they need to charge not for moving money from the tenant's bank account into the landlord's, but for the action of updating the landlord's records that they have been paid, so the landlord does not need to continue to pay someone to do this.
Before we jump into this, we need to break down the two major cost components we will discuss. When we talk about the cost of rent collection, there are essentially two cost categories. We have transaction fees, which are the external costs of processing the payment, and administrative costs, which are the internal cost of updating your records to reflect the payment received after it has been processed.
The first category is very easy to understand and quantify. Examples include wire transfer fees, card processing fees, EFT fees or otherwise. These are often on a price list from a 3rd party transaction processing company. These fees are also, in many cases, a major barrier for real estate companies not moving to electronic payments. Unlike retail, where customers are anonymous and merchants have essentially no choice but accept this as a standard cost of doing business, real estate companies know their customers very well. A landlord knows where their customers live or operate their business, has them under a long term contract, typically between 1-20 years depending on whether they are residential or commercial tenants, and thus the customer must pay, and cannot easily stop being customer and go across the street and buy from someone else. Thus, real estate fundamentally does not need to accept these transaction fees and will still get paid. They also do not want to give 3% of their gross revenue to one of the credit card companies given how little value landlords receive.
The second category is a little more difficult to quantify. This is the internal administrative cost of updating internal records to reflect payments received, or not received and ultimately manage the process of getting paid. It also presents the area of the business where quite a bit of value can be delivered. This process is typically quite manual and expensive. Landlords are still receiving checks, depositing them, doing manual entries into the accounting system and cross referencing to complete bank reconciliations.
I believe one of the fundamental reasons payment processors, despite all of their progress into the real estate industry, have not achieved complete adoption, is that they have not provided a universal solution to eliminate the labour cost associated with record keeping. While I understand there is a legitimate cost to processing electronic transactions, from the landlord's perspective, there is not much value in paying for it because they are already getting paid, mostly on time. Thus, the transaction processing companies, or their delivery partners like the many rent collection and property management platforms, must come to realization that they need to charge not for moving money from the tenant's bank account into the landlord's, but for the action of updating the landlord's records that they have been paid, so the landlord does not need to continue to pay someone to do this.
For the landlords and property managers, what is the answer for you. This is actually very simple. If you are looking to spend less money getting paid, which I am pretty sure you are, the first task is to make sure your accounting system has an online payments tool where tenants manage their own payments. If it doesn't, change to one that does, or take on a separate system that provides this and that bi-directionally integrates with your accounting system so your accounting system will tell the payments system how much money to collect each month from each tenant, and the payments system then tells the accounting system how much it collected from each tenant. Contact information should also sync in both directions so we always link the collection info correctly, and do not need to create and update tenant profiles in each one separately. By doing this, you are essentially getting tenants to take on and complete all the admin work you were previously paying someone to do. Doesn't that sounds like a great idea; I think it does.