Imagine a pile of bills lying on a kitchen table. Buried somewhere below the mortgage bill, car note and utilities lies the storage invoice. It is not necessarily the highest on the list of priority bills, especially in a time like this where funds are tight and bills are stacking up. How can you move your invoice to the top of that list? Are there sure-fire steps to make sure your invoices are at the top of the pile? Although there is no magic formula, the following outlines best practices that are sure to help keep your collections down during these unprecedented times.
The first thing to remember is that your collections process starts at the time of the rental. Whether moving a tenant in online or in-person, managers need to train tenants about expectations when the lease is signed. The easiest way to complete this is to review the tenant due date, late fees and lien process when the tenant first moves in. This is also a fantastic opportunity to encourage auto-pay options.
There are many automated collections programs that will email and text tenants on behalf of the property. These are wonderful complements to a property’s collections process; however, they are not replacements. A combination of email, text and phone calls to tenants is recommended to keep receivables as low as possible.
By pairing emails and text messages with the recommendations below, the property is supplying top-notch customer service and elevated levels of communication to their tenants. Remember to document all communication or agreed on “Promise to Pay” or “Payment Plans” in the tenant’s account.
Here are some tips on how to stay on top of your collections and keep accounts receivables down:
- Call the day before rent is due. This supplies a friendly reminder to the tenant and in most cases a payment is made. This type of call also creates “goodwill” towards the property.
- Call the day before any late fee is applied to a tenant account. This call furthers the “goodwill” towards the property and alerts the tenant of the effects of not paying their rent promptly. Since this call alerts the tenants of the upcoming late fee, this helps reduce the need to waive a fee due to lack of communication.
- Call at least every three days after late fee(s) are applied. At this point, the goal is to take a payment and keep the tenant out of the time-consuming auction process. During these calls, the tenant might make a “Promise to Pay” in which they are unable to pay at the time the collection call is made but will be able to pay at a later date (the “Promise to Pay” date).
- Call the day before a “Promise to Pay” date. Supplying another gentle reminder before the “Promise to Pay” date is an effective way to remind the tenant of the commitment.
- Make an urgent call the day before lien processes begin. The purpose of this call is to capture a payment prior to another fee. The likelihood of recovering the total amount due past this point diminishes. One should consider offering a “Payment Plan” to tenants at this point.
- Make an urgent call the day before an auction completes. In most cases, an auction unit will sell for 50% less that what is owed on that unit. At this stage in the process, the property has a sense of how much the unit’s value is from an auction site. Geared with that information, this call is an opportunity to offer a payment plan for the tenant to reap more than what would be won in the auction.
- Through this entire process, call alternative contacts. If a tenant has supplied alternative or secondary contacts for their account, those contacts can be reached out to get in-touch with the leasee.
- Utilize any added resources for cross collections. If you have been following this process, a tenant that is 60+ days overdue knows their account is past due and might choose to ignore any phone call coming from the office phone number. To help get in-touch with that tenant, have a “sister property” call on your behalf or use an alternative phone number to call.
As always, remember these collection “no-nos”:
- Do not auction military tenants
- Do not auction bankruptcy units or call to collect any rent due after their bankruptcy date
- Do remember to follow state lien laws when handling vehicles
Consistency is the largest factor of collections; it takes daily commitment from managers and staff and should not go un-noticed. Make sure to take time to review collection reports and celebrate consistency, payments made, reduction in waived fees and any other “win” you can identify.
