Research carried out by Reapit showed 68 per cent of landlords choose the services of lettings agents because they manage the collection of rent. Therefore, choosing the right payment method to suit tenants and business needs can be key to helping tenants pay rent on time.
Tenant payment methods
Tenants can of course be subject to human error, whether it's forgetting to pay the right amount, missing their rent due date, or adding an incorrect payment reference – all making life more difficult for finance teams. The key is to incentivise tenants to pay on time, rather than become good at chasing late payments.
Consider moving away from payments that take up a lot of time, like cash. Cards can be useful to get tenants to pay immediately (in person or on the phone) but can cost you a lot in fees. Open banking is one of the new technologies that help make this process easier for everyone.
Remind tenants to pay
A simple reminder before the rent is due can make a lot of difference. There are many ways to set this up, whether in the form of an SMS, email, or just a recurring calendar event. You can even outsource this type of service to a rent collection provider, like Goodlord’s Rent Collection service. It sends regular automated reminders to tenants to help cut down the chasing while encouraging tenants to pay on time. It will also help finance teams save time on reconciliation, with unique bank account numbers.
Recurring payment methods
Standing orders are a good way to collect rent, however, that still relies on the tenant setting it up, and data collected from Goodlord's research suggests that at least 65 per cent of tenants do not set up standing orders despite it being in their tenancy agreement.
Another option is to use direct debits. These provide a much better experience, as they can be set up within ten seconds via a link or an app, and they can give your agency complete visibility on who has set one up or even cancelled it.
Incentivise timely payments
Vouchers are an effective way to incentivise, but it is of course an extra cost. Alternatively, tenants could sign up for a service that reports their rental payments to enhance their credit score – rewarding those tenants that pay on time.
Have a safety net in place
Rent protection insurance is a great backup for when rent arrears become a problem, but staying on top of arrears from the moment they become overdue to make sure you can kick off the process as soon as possible and keep the rent flowing for your landlords is key.