It Might Be Time to Switch to a Digital Payment Method
Accepting cash for rent sounds great, and it makes sense that a cash method would tempt many landlords. After all, cash is convenient — you don’t have to worry about checks bouncing, and you don’t have to wait (sometimes for days) for your payments to clear. You also don’t have to bother with bank delays. These, however, are only the upsides of accepting cash.
It may seem like cash is king because it’s hassle-free and easy to collect. But you can run into several problems when accepting rent in cash, and the worst among them can tangle you in a legal battle. Take a minute to read about these dangers so you can understand and prepare for the risks before it is too late.
It may seem like cash is king because it’s hassle-free and easy to collect. But, you can run into several problems when accepting rent in cash, and the worst among them can tangle you in a legal battle.
The Dangers of Accepting Cash Payments Include:
- Recording cash payments can be inconvenient. You have to write up a receipt for the transaction every time you accept a rent payment in cash. Cash does not leave any electronic or paper trail, which means you need to provide your tenants with some form of legal proof that they made the payment and that you accepted it.
- Some states legally require the landlord or property manager to provide a receipt to the tenant immediately if the tenant pays the rent in cash, which means you can’t produce all of the month’s receipts all at once but must produce them one at a time. It is always a good idea to provide receipts, even if the law does not require it. Receipts also help you keep track of the rent payments that your tenants have made along with the exact dates of the payments. If nothing else, receipts give your tenants the impression that you conduct your business in a professional fashion.
- With cash, you must manually input the data for every payment your tenants make into your accounting software. This is time-consuming and you could make mistakes entering the information by hand. If you accept rent through debit cards, credit cards or eChecks, you can arrange to have your accounting software automatically upload information from the transactions.
It is always a good idea to provide receipts, even if the law does not require it. Receipts also help you keep track of the rent payments that your tenants have made along with the exact dates of the payments. If nothing else, receipts give your tenants the impression that you conduct your business in a professional fashion.
- If you’re a landlord with just a few units, you can easily stash your rent cash anywhere at home. However, if you are a property manager who oversees a large portfolio of units, keeping cash lying around at your home or office likely isn’t a realistic option.
- Cash is tangible making it very easy to lose or mishandle. You will have to find a way to secure this money, either in a locker or in a cabinet, until you get the chance to deposit it in your bank account.
- Cash is vulnerable to robbery as well. If someone has been tracking your whereabouts and knows that you only make your deposits on a certain day of the week, you are left exposed to theft. Or, an employee could steal from you. With cash, it just takes one swipe and it all could be gone. There is no way to recover it or track it once it disappears.
- Besides, you will have to figure out how and when you can securely deposit this money into a bank account, which is a routine process that you will have to execute every month.
- Cash makes it difficult to pinpoint who is responsible when the rent is short and often leads to several issues during the collection process.
- Most landlords assume that a drop box will be a simple yet effective cash-collection method. But, your tenant could skimp a little on the rent before dropping off that envelope. When you receive the rent and it’s $50 short, there won’t be much that you can do. Your tenant will most likely deny shorting you, which will lead to a “he said/she said” battle.
- To negate this, you will need to have one person physically counting the money right in front of your tenant’s eyes before you accept the payment. For larger unit counts, you might need additional help. Trust could then become an issue as well in case any of your rent money goes missing.
Unnecessary Drags on Your Schedule
- If you are a landlord with a few units, cash payments might mean driving up to each of your rentals to collect. If you’re a property manager with a large number of units, then you will need to assign someone to your office to count and collect the money when tenants drop it off (see above about needing to count rent dollars in front of the tenant to confirm that the amount is correct).
- With cash payments, you also have to make routine trips to the bank to deposit your money. This is a laborious process to deal with every month. Even with less tech-savvy collection methods like checks, you can deposit the money right from the comfort of your home.
- Again, you will need to manually input cash transactions into your accounting software, which is time-consuming and completely unnecessary.
At Innago, we believe that accepting cash as a form of rent payment is a risky move, and we hope that the factors we have outlined here give you enough reason to believe so, too. There are several alternative rent payment methods available, such as checks, ACH, credit cards or debit cards.
At Innago, we believe that accepting cash as a form of rent payment is a risky move, and we hope that the factors we have outlined here give you enough reason to believe so, too.
Online is the payment method that most landlords use these days. Your competitors might accept rent online and if they do not, they will soon. Stay one step ahead of the game, and transition to online payments. Accepting rent payments online gives you an electronic trail. Your payments get recorded automatically too, saving you time and sparing you from the need to track every tenant’s payment manually. What’s more, tenants automatically receive a receipt upon their submission of an online rental payment.
It’s time to make the switch from accepting rent payments by cash to accepting payments online. It’s more efficient, and it’s safer.
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