The property management industry’s dependence on paper checks may lead to disruptions apart from issues with Covid-19.
As of October 1, 2021, USPS started new service standards for First-Class Mail. USPS is opting to use their own trucks for cross-country deliveries to counter reliance on air transportation. Not only will it cost more to send mail, but delivery will take longer too – up to five days instead of the usual two to three for First Class Mail. This could be problematic for industries that still depend on paper check payments, particularly property management companies (PMCs).
What Slow Mail Means for the Property Management Industry
Whether onsite or in a separate location, 42% of millennials pay their rent and association payments using paper checks, per PYMNTS, possibly sending them to the property manager by mail. While PMCs wait for payments that sometimes include fees and utilities, slower delivery from USPS may extend the wait time.
Since, according to PYMNTS, 34% of the real estate industry still relies on paper check payments from renters and owners, there could be a slowdown in cash flow. At the same time, PMCs make payments using paper checks which could result in even more problems for the property and its residents.
Property management companies run the day-to-day operations to maintain the owner’s property. Their main functions involve taking care of the residents and taking care of the property. Handling tenants’ responsibilities require doing background checks to screen new tenants, drawing up the contracts, collecting rent, following up on late payments, evictions for lack of payment, and arranging to have the unit cleaned once a tenant moves out.
The other part requires working with the many suppliers that help take care of the property – maintenance and repairs, landscaping, and painters. It also involves paying the vendors and the property taxes and utilities. And since the popular form of payment for most property management companies is paper checks, there could be consequences.
On the supplier’s end, overdue payments are especially detrimental. They disrupt workflow, hurt cash availability, and put a strain on business relationships. But there are also consequences for companies that consistently make past due payments.
- Late fees
- Delayed receipt of goods
- An unfavorable business reputation
- Reduced negotiating power
PMCs also get charged hefty late fees. Utility companies will issue disconnect notices or cut the power to a residential or commercial property the same way they would for a homeowner who has neglected to pay the bill. A building with dozens or even hundreds of tenants with no power would be difficult to rectify.
But the possibility is there considering the slower times for postal service deliveries and the property management industry’s reliance on paper checks.
The average cost of printing a single check is $6. That does not include the time and labor involved in invoicing, routing for signature, and mailing. There is also the cost associated with errors, lost checks, fraud, and processing fees. The delays in mail delivery times make paper checks even more difficult for property management companies to sustain.
The 2020 NMHC Renter Preferences Report stated that 81% of millennial and baby boomer renters would prefer to make rent payments online. Perhaps the property management industry will take a cue from tenants and consider automating their payment process.
Virtual Cards Have No Delays
While checks in some industries are the way payment has always been done, it doesn’t mean it’s the best way. And it’s certainly not the only way. Virtual cards are a much better alternative.
Electronic credit cards, or virtual cards, are one of the safest ways to make payments. Virtual cards reduce costs, provide increased accuracy, and cut down on time. They are highly secure, eliminating problems such as check fraud or theft. And because they are not physical cards, property managers would not have to worry about payments getting lost or delayed in the mail.
Convincing property management suppliers to accept virtual cards may not be as difficult as you’d imagine. Many suppliers and vendors already accept virtual card payments even while they continue to accept paper checks.
However, some vendors may not accept card payments and may not be ready to make the change to virtual cards. ACH is an alternative form of payment that is safer than paper checks. Funds are pushed directly into the vendor’s bank account and are usually received within one business week.
Electronic payments, whether by virtual card or ACH, would mean vendors receive payment faster, which they would appreciate while check payments continue to be delayed.
Corporate Spending Innovations (CSI) is a FinTech leader providing innovative payment solutions to world-leading brands across all industries. CSI automates and digitizes B2B payments with a safe and highly secure cloud-based payments platform. For a more efficient way to manage payables, including virtual credit card, B2B Payments Network, ACH, and check, please visit www.corporatespending.com.
CSI is an Edenred Company, the global leader in payment solutions for the working world.