Accounting is tricky enough as it is. Throw late payments into the mix, and accounting can become really challenging for landlords, property managers, and HOAs. If payments don't come in on time, it makes it harder for you to pay your vendors--and yourself. You might need to put off repairs. You might inadvertently overdraft your bank account. Late payments can create a vicious cycle.
This year, make it a priority to start collecting payments on time. Depending on your role, that might be collecting rent payments from residents, or it might be collecting HOA dues. Whatever the case may be, now is the time to halt late payments once and for all.
"Easier said than done," you might be thinking. Well, we never said it would be easy--but there are some strategies to make it easier.
Here's how to reduce late rent payments and dues in 7 steps.
If you rely on certain payments to pay your own bills--for instance, to pay the mortgage on your rental property--adjust the payment due date to at least a week before they're due. This gives you more wiggle room in case payments come in a day or two late. Of course, be sure to give residents plenty of notice before you implement this policy so that they have time to adjust accordingly.
Implement a payment reminder system to ensure that residents are aware of upcoming payments. As a general rule of thumb, we like reminding people 3 days before a payment is due, the day that a payment is due, and then a day after the payment is due telling them that their payment is now late. There are all sorts of sophisticated web tools you can use to do this, but even a rudimentary email blast will do the trick.
If you have a resident who is routinely late in submitting payments, reach out to that person directly. Try to figure out if there's a special circumstance that prevents that person from paying on time. For instance, they might not receive the paycheck or child support payments that they use to pay their rent until after the rent is due. In circumstances like these, you may propose an agreement where that resident pays you on a slightly different timeline than others.
Many leases and HOA agreements stipulate that overdue payments will be subject to a late fee. However, some landlords, property managers, and HOAs are lenient when it comes to enforcing these fees. Start implementing your late fee policy and collecting fines. Late fees might come as a jolt to some--but can be exactly what's needed to get people to pay you on time.
A few notes on implementing late fee policies:
We're a big fan of software that allows residents to make payments online, such as many property management software solutions. In this day and age, we're all busy. Having to physically write a check, track down a stamp, and trek to the post office to mail a payment is a hassle. Some will certainly prefer to make payments that way; but if you want to collect payments on time, leveraging electronic payments will make it easier for you to do so.
There will always be one-off cases of residents paying late. However, if you find that multiple residents are making late payments more often than not, it could mean that your tenant screening process is in need of a few tweaks. Be sure that you're calling landlord references, confirming proof of employment, setting guidelines for minimum income required to lease, etc. This should help to ensure that you're choosing high-quality residents who can afford to make their payments each month.
If you're struggling to collect rent payments and dues, or you simply don't have the time or energy to track down late payments, consider hiring a property manager.
Hiring an experienced property manager can help you to implement a stronger payment system to ensure consistent cash flow moving forward, and can provide valuable expertise on these kinds of situations in the future.
Don't shrug off late payments. If you start allowing residents to make late payments, a few days late here or there could soon turn into weeks. It's important that you treat the operation like a business, no matter how friendly you've personally become with your residents. Late payments can be seriously detrimental to your bottom line--so we hope that these tips help you to figure out how to reduce late rent payments and dues from hereon out.