How To Enhance Online Payment Transparency For Landlords?
Online payments offer landlords many benefits. For one thing, they make day-to-day and month-to-month bookkeeping easier for landlords. For another, they make it easier for landlords to grow their business and manage more properties and tenants. Online payments make the collection process simpler and more efficient, saving landlords time and often money.
Some of the simplification and speed that online payment tools provide is a result of the transparency that many of these tools produce. Think about it — how often are the headaches that you endure as a landlord brought on from difficult tenants that pay rent with cash – who insist they put enough cash to cover the rent in the envelope they dropped off or that they paid rent on time, when in fact it came in three days late? What about those tenants that swear they mailed the check and claim it must have been lost by the post office? Online payments prevent tenants from making baseless claims because online payments offer a record that highlights exactly when and even where payments were made.
Such transparency can also go a long way in establishing trust between you and your tenants (which could lead to longer stays from your renters, thereby reducing tenant turnover). The open, indisputable nature of the payment record denies recipients the ability to cheat their tenants (which we know you would never do) and prevents tenants from shimmying out of their obligation to pay on-time and in-full.
SIDEBAR: The Limits of Some Online Payment Tools
If you are completely new to managing rent collection online, you’ll want to carefully consider your options. There are a lot of choices out there. Mobile-payment apps like PayPal and Venmo have become very popular with consumers in recent years, but they are designed for personal transactions and have serious limitations for landlords. Software that is specifically designed for rental collection may be a better fit and is often the choice of most professional landlords.
Here are four ways online payments boost transparency:
1. Online payment tools provide a timestamp.
It’s one thing for a tenant to swear profusely that she dropped off the rent at 3 p.m. to your office on the afternoon it was due. Without video security footage proving it or your presence at the office at the time of payment, there’s no way to confirm the truth of her claims. Online payments provide a timestamp marking when a payment was made. If the tenant claims she paid online at 3 p.m., all you have to do is check your online statements and you’ll know with certainty.
2. Online payment tools track IP addresses and login credentials.
You’ve probably heard of IP addresses before and know, if nothing else, that they pertain to the internet and to computers. As it turns out, IP addresses are what make every internet-enabled device locatable online. To oversimplify a somewhat more complicated system, a device’s IP address is what distinguishes it from the billions of other phones, laptops and computers that are online. These addresses are based on the device itself and where the device is connected to the internet (at a person’s home, job, hotel, etc.). As you browse the internet on a device, your computer broadcasts your IP address to the different platforms with which you interact. It’s publicly available information, but not always easy for the internet layman to access.
Online payment tools track the IP address of the devices from which payments are made. From an IP address, you can easily gather a geographic location, and, when combined with a timestamp, can become a critical piece of information when verifying the validity of a transaction.* What’s more, most online payment tools are not open-ended and instead require a payer to login with a unique email or username. These data points in particular can help resolve any disputes among tenants who can’t agree as to who paid what amount which month. The digital ledger and fingerprinting produced by online payment software will clearly show which tenant owes money.
This information can be helpful to your tenants as well. If your tenants ever feel that you are mishandling their rent payments and other dues (namely by pretending you never got paid when you did), the tenants can point to security features like the IP address and timestamp to confirm that they made their payments. These sorts of features are something you can advertise when you are building a positive rapport with clients and when demonstrating to prospective tenants that you care about them, their rights and doing business properly.
*A quick disclaimer. It is possible for people to mask their IP address, typically through what’s known as a VPN (or Virtual Private Network). We won’t get too far into the weeds of what a VPN is or how it works, but just know that an IP address is not an absolute guarantee of accuracy. Taken with other data points, it can, however, provide a convincing basis.
3. With property management software, both parties get invoices, receipts, and notifications.
It’s important that everyone involved in a payment has access to a detailed record of the transaction that highlights the amount due, the amount paid, when it was paid, and what the payment covered (i.e., June rent + a late fee). Reminders that rent is due are nice, as are notifications that a payment arrived if you are on the other side. Having access to details like the timestamp and payment history are great for you as the landlord, but it’s important to keep your tenants up to speed for their own record-keeping purposes, too.
Quality property management software should also keep an audit log of all changes made to an invoice or a payment. For example, you could see when late fees were added, when they were waived, if the due date was ever changed, any payments that were cancelled by the tenant or failed, etc. This audit log can be invaluable in unraveling payment records when a dispute arises.
4. Online payment tools provide a history of payments.
One advantage of online tools tracking payment details each month is that you will accumulate a record showing the consistency (or lack of consistency) in each tenant’s payment history. If you manage lots of tenants, this information can be helpful. You won’t have to remember off the top of your head whether a tenant usually pays on time, and you can actually check the tenant’s record of payments to be sure. With online payments, you can track to see which tenants are entitled to a late-fee waiver if you have a policy that rewards loyal, reliable renters, and you can do this without keeping a manual log of when payments show up each month.
And again, tenants enjoy these benefits too. They can easily pull up the total they’ve paid on the year. They can look up what they paid for a security deposit, rather than bothering you with a call to find the answer. And of course, they can also see the history as it pertains to their roommates, resolving most disputes before they even happen.
Bonus: Automation Reduces Error
This point has been implied throughout, but we wanted to take a moment to state it explicitly. When it comes to financial transactions, transparency is only as good as the accuracy of your reporting. If your records are manually generated (via data entry, pen and paper, etc.), they’re susceptible to human error. Online payments remove this risk entirely by automatically recording everything you would need to know about a particular payment.
Notifications, late fees, updates, etc. are all included without any manual input required. This automation not only saves you time (which is great), but also increases trust between you and your tenants.
The Bottom Line: Online Payments Are Worth Trying
Ultimately, the context and specificity of detail that online payments provide should help remove the emotion and stress that comes with warring over rent and other payments. This data provides an unbiased record of when and how a payment is made, it provides an audit log to show the payment patterns for each tenant, and it keeps everyone up to speed with invoices, receipts, and notifications.
Certainly, it can be a bit of a hassle transitioning to a new way of doing things, especially if you’ve been using the same methods of collecting payments for a long time. Still, the increased transparency in rent collection online can go a long way in securing your business, facilitating trust between you and your tenants and making things a little easier for everyone involved — a huge plus if you are looking to increase your portfolio, speed things up, and gain more control over the entire process of collecting payments.
