How to Manage the Entire Rent Collection Process with Property Management Software
June 22, 2022
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Managing The Rent Collection Process With Property Management Software
Your tenant mails you a check.
The check gets lost in the mail.
You reach out to your tenant about the late rent payment.
Your tenant insists they put it in the mail on time.
Does any of this sound familiar?
Even if you haven’t been through quite the ordeal outlined above, property management software will still improve your rent collection process.
Online rent collection is simply a better way to collect rent than old-fashioned mail. It’s easier. It’s quicker. And it’s more reliable.
And you don’t have to be the bad guy if someone isn’t paying on time. Automated notifications take care of reminding tenants for you.
Property management software is one of the best tools to help you manage the entire rent collection process. So, how does it work?
Step 1: Add Tenants and Detail Rent Requirements
The first step for online rent collection with property management software is adding your tenants to the system. Make sure the information you input is accurate, and you add everyone who needs to be added into the system.
Once your tenants are in the system, customize their rent requirements. This is important because property management software can enforce late fees and send out automated reminders. These will be based on your rental agreements and lease terms. It will benefit you tenfold to leverage all the capabilities of property management software. The more intentional you are when setting up online rent collection, the more useful it will be over time.
It’s also vital to include clearly stated special conditions in the lease contract. It will be almost impossible to hold tenants accountable for things not expressly stated in the agreement. Lease payment policies must detail the amount due, frequency, due date, grace period conditions, late fees, and penalties.
Step 2: Choosing the Type of Payment Method
Next, you’ll want to figure out what types of payment methods are acceptable. Different payment methods may work better for different people, so take some time to figure out what suits your business best. It’s important to state that property management makes it easy to adopt electronic payments and is our recommendation because of how efficient and effective it makes the entire process.
Automated Clearing House (ACH) Payments: An ACH payment is an automated transfer of funds facilitated by the Automated Clearing House, which is a regulated technology representing the partnership between banks and financial institutions across America. Debits and credits are collected in large groups and transferred between bank accounts simultaneously. Also known as eChecks, ACH payments are an efficient and cost-effective way to send money.
To accept ACH rent payments, your tenant must approve the transaction. This requires their name, bank name, account number, routing number, and transfer amount. Tenants’ bank accounts must then be authorized before the funds can be moved from their account to yours, which is done through the ACH Network.
Credit Card Payments: Credit cards — or debit cards — are a popular method of rent payment today and will only continue to get more popular over time. Most people already have a card in their name and make purchases with it. They are convenient and easy to use.
The traditional way to collect card payments directly from your tenants is to set up merchant services — which can be done through your bank. This method grants you access to a merchant account shared by you and the bank that sponsors the credit card, enabling you to accept credit card payments securely. The payments occur through your account, and then the merchant services provider processes the payment and transfers the money to your business banking account.
Money Orders: Money orders are simple for tenants to obtain and provide the benefits of a check without a checking account. However, this method runs the risk of getting lost in the mail, so proceed with caution. Electronic payments are probably a better option for landlords in most cases, but there may be rare instances where money orders work fine.
Personal Checks: We don’t recommend personal checks because they can get lost in the mail, and you run the risk of banks not honoring checks. Personal checks can often absorb precious time and effort as you try to track down money owed to you. Our recommendation is to embrace one of the other methods listed here, if possible.
Cash: Avoid this method unless you absolutely cannot. And, even then, you may want to think twice. Cash is the least reliable way to receive rent because it is easily misplaced, lost, and it isn’t automatically tracked the way credit card transactions are.
Property management software helps simplify the payment process exponentially. Do your best to get tenants to adopt electronic payments. This will allow you to take full advantage of the software, saving you valuable time and effort.
Step 3: Collecting Rent
Property management software is designed for landlords. Management platforms tend to offer all of the collection features that landlords might want or need to set up an effective and efficient rent collection process. Features like allowing landlords to customize the payment requirements to match the terms of your lease agreements make a massive difference in collecting rent with ease and accuracy.
Property management software also makes it simple to conduct business through your phone. Research shows that 81% of American adults own a smartphone, and 96% of those are aged 18-29. Smartphones allow for streamlined communication, make it easy to surf the web on the go, and ensure online payments are simpler than ever.
As a landlord, using your mobile phone for rent collection may be a great option. You can track notifications from anywhere. You can receive rent on the move. You can automate messages, records, and payments with a few clicks. Simply put, you can run your business from anywhere with phone service.
Advanced support is another advantage of property management software that you should leverage. Most platforms provide support that can make your life exponentially easier. No need to try to figure the rent collection set-up process out on your own if you’re having issues. If you get confused, simply reach out to support and ask questions until you feel comfortable.
Gone are the days when mailing checks or in-person drop-offs were the only ways to pay rent. We live in an age where online rent payments continue to increase in popularity. Those who don’t embrace these changes will struggle to run a successful operation. The ultimate form of this for rental businesses is property management software, which simplifies the entire rent collection process.
Property management software allows you to manage the rent collection process in one place. From the early stages of inputting rent requirements and choosing a payment method to collecting the rent, it’s a one-stop shop. And that’s going to make your life much, much easier.