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How to reduce arrears rates through communication, consistency, and a little automation

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There isn’t a property manager in the world that doesn’t have to deal with arrears occasionally. After all, even the perfect tenant can forget a change in bank details or miss the cut-off for transferring their funds. But, unfortunately, for many property managers, dealing with arrears is also one of the least pleasant parts of the job – so how do you reduce arrears?

Not only does it require chasing people for payments, which in itself tends to be awkward, it also sucks up time that could be best spent elsewhere. And with everything else the modern property manager has on their plate, that time is a truly valuable resource. Missed rent also means missed income for owners, and that can quickly lead to deteriorating relationships and eventually losing properties to the competition.

Of course, there are plenty of ways to try and cut down the amount of time your tenants spend in arrears, as well as methods of ensuring they never end up behind in the first place. Here are our top tips to keep the rent rolling in.

Select the right tenants
One of the most straightforward ways to reduce the rate of rental arrears across your portfolio is appropriately screening tenants before they ever move in. That means thoroughly checking their rental references and paying close attention to if they’ve been in arrears previously. While anyone can slip up and miss a payment occasionally, there’s little reason to believe that serial arrears offenders aren’t going to strike again sooner or later.

Stay on top of it

As every experienced property manager knows, letting arrears get out of control is a big no-no when it comes to effectively managing a rental portfolio. Ideally, that should involve setting clear expectations from the outset and preventing tenants from getting into arrears in the first place.

Make sure your tenants are clear about when their rent is due and are aware of any public holidays—particularly around the Christmas period—which will affect when their cash hits your account.

Make it easy to pay
While the days of cash payments are mostly behind us, there are still more and less convenient ways to collect rental payments from your tenants. The most helpful when it comes to reducing arrears rates is generally direct debit, as this allows rent to be automatically taken out of your tenants’ accounts. For this to work, you’ll need your tenants to sign up to a direct debit system, and they’ll need to ensure the correct amount of money is in the account on the day.

Intervene early

If tenants do end up in arrears, make sure you get in touch quickly. If it’s simply a missed payment due to forgetfulness or banking error, you’ll likely be able to sort out the problem immediately, and if the tenant is having difficulty paying, you can discuss a solution that works for everyone.

Have a system

As well as acting early to rectify arrears, you should also try to act consistently and systematically. The easiest way to do this is by establishing a clear set of steps to follow once a tenant misses a payment. What these steps are will differ between agencies, but all will generally involve some series of paper, email, SMS, and phone contacts over a number of days. Establish what works best for you and your tenants, then ensure that process is followed across your portfolio.

Send clear reminders

When you do send out reminders, make sure they’re clear and to the point. Not only will this reduce the risk of confusion or miscommunication, it will also ensure your reminders are useful as evidence if the situation deteriorates and going to tribunal is necessary.

How automation powers efficient arrears management

While all of these methods can be effective, there’s another even more powerful way of reducing the amount of time your tenants spend in arrears: an automated arrears workflow.

It’s important to note here that automation doesn’t have to mean losing control of the arrears process. Instead, introducing automation gives you more control of how you handle arrears by allowing you to ensure your agency’s arrears recovery process is implemented quickly and consistently whenever it is required.

When it comes to arrears management, a high-quality, automated workflow has several key benefits.

Reduces effort

The most obvious benefit of an automated arrears system is clear in the name—it reduces manual effort. A well-designed automated arrears workflow will immediately alert you as soon as a rent payment is missed and then send off a templated email or SMS to the tenant. From there, the workflow will continue to send automated reminders at predefined intervals.

Ensures consistency

By using templated communications, it’s much easier to ensure your arrears recovery system is applied consistently across your entire portfolio. That means complete confidence that every tenant in arrears is being tracked and followed up appropriately, with no risk of reminder emails and SMS going unsent or missed payments slipping through the cracks.

Captures transparency

Any quality arrears workflow will keep a timeline and record of all communications sent to tenants during the arrears recovery process. Some will even tell you if a particular email has been opened and how many times.

The main advantage here is that if you do eventually need to go to tribunal, you already have a full log of every event in the arrears process and can easily demonstrate your efforts to recover the rent.

Enables optimisation

Because all of the parts of a quality automated arrears workflow are fully customisable, including the templates, methods of communication, and timings, it’s possible to optimise the process to return better results.

If your tenants respond better to SMS instead of email or require frequent reminders instead of the occasional gentle push, you can account for this and adjust your workflow to suit. If you have tenants that are sometimes late by a day or two but always pay soon after, you may also be able to change their individual reminder schedule to avoid unnecessary messages being sent out.

An automated arrears workflow in practice

Many agencies across Australia and New Zealand are discovering the power of automated arrears workflows. By drastically reducing the time they spend on everyday, routine tasks, these agencies are finding more and more opportunities to grow their business and boost their revenue.

Harcourts Astute Paddington in Brisbane, Queensland, headed by Principal PJ Salami, is one such agency. Since moving to Console Cloud, PJ estimates that they’ve reduced the time spent on manual tasks by up to 40-45%, and the arrears process is no exception.

Unlike their old method of manual landline calls or text messages, an automated arrears workflow has given the agency access to set-and-forget reminders that cut out all the awkward phone conversations, potential arguments, and excuses.

In his own words, “Arrears are down, and so is the time spent managing them. Arrears manages itself.”

Want to find out more about Console Cloud’s other industry-leading workflows or discover how it’s helping other agencies succeed?

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