This article isn't just about rental income: it uses the predicament that landlords are in to illustrate the problem that any business faces with late payments. It then uses this example to give you some pointers to make things a whole lot easier.
So, let's start by asking whether you, or your company, are a landlord who's tired of dealing with late payments? Well, if not, keep the faith and read on because the lessons to be learned are pretty well universal.
Do you know late payers can
cost you thousands of dollars in lost income?
Of course, you do, and the solution to this financial problem is to take a similarly financial view of how to fix it. In other words, don't get caught up in operational issues, unnecessary disputes or court actions: avoid all these distractions by being ahead of the curve. Let's face it: it's always better to prevent a problem than to have to fix it!
If you'd like to learn how to minimize late payments in your business – and supercharge your income – with the minimum of effort, then this article is for you!
Here, we'll share some proven strategies for minimizing late payments.
The first step for landlords is to consider tenants as customers you are giving credit terms.  This enables you to apply commonsense principles and safeguards in the same way as any business would.
And as we say, if you're not a landlord, you can spot the practices that can be adapted and used to boost any business's income and financial stability.
Cash is king whatever business you're in, and if you're interested, our
Maintaining A Healthy Cash Flow course shows you, clearly and simply, how to feed your business with the cash that will help it to thrive.
So let's go!
Digital Tools to Streamline Rent Collection and Reminders
There are many digital tools that can help you to streamline this process as follows. If you're not a landlord, there will almost certainly be similar tools offered in your industry or market.
- Simplify: Online payment platforms make it easy for tenants to pay rent online. This can save you time and hassle. You will no longer have to collect in person or by mail.
- Send timely notifications: Automated reminders can be used to ensure that they never miss a payment.
- Streamline accounting and tracking income: Software solutions for financial management do this, enabling you to keep track of finances and make sure that you're collecting everything that's due.
Screen Tenants Carefully
Getting a
landlord's reference check is the first, most basic, yet often underused way to ensure the business is financially successful.
Evaluate financial stability: Identify reliable tenants
Begin by requesting applicants to provide financial documents. Request their bank statements, wage stubs, or
proof of employment. Analyze these to assess their income stability, debt-to-income ratio, and ability to afford the rent. The same if you're in any business that's selling to people on credit terms. Verify who they are, and then their creditworthiness.
Verify rental history: Assess reliability and payment track record
This is an effective way to predict their future behavior. Contact their previous landlord to gain insights into their reliability and payment track record. Inquire whether they consistently paid on time. Also, ask if there were any issues during their tenancy.
And again, it's often a good idea - especially if the sums of money justify it - to contact previous suppliers and get an "off the record" opinion.
Conduct thorough reference checks
Reach out to the personal and professional references they've given to gather information about their behavior, responsibility, and overall suitability. And don't just relay on written references: jumping on the phone and speaking directly with their references lets you gauge their professionalism and attitude toward fulfilling obligations.
Document Everything!
There are a few reasons why we'd strongly advise you to document everything to do with your relationship:
- It can help protect you in a dispute.
- It assists in tracking your income and expenses. This is crucial for tax purposes, but also for understanding your overall financial performance.
- It will improve your communication with tenants, who'll know what's expected from them.
- It can help you to enforce your late payment policy, which can help to deter them from paying late in the first place!
And you can create an explicit lease agreement and late payment policy quite easily:
- Make sure the terms are clear and concise. Tenants should be able to understand their rights and obligations without legal jargon.
- Be specific. For instance, specify the rent due, the late payment fees, and the consequences.
- Ensure that both parties sign the documents. This will help to make sure that everyone is on the same page.
Effective Communication and Relationship Management
There are several ways that effective communication and relationship management can help you, too:
- First, you can identify tenants who are struggling financially.
- Second, you can work with them to develop a payment plan.
- Third, you can build trust, making them more likely to pay on time.
And always remember to:
- Use simple language (no jargon or obscure words) which is easy to understand.
- Be respectful of privacy: Don't be invasive unnecessarily. Treat them carefully, even if you disagree, and respect their boundaries.
- Be responsive: Respond to tenants' questions and concerns promptly.
- Be proactive: Take the initiative to communicate with them: don't wait for a problem to arise.
Ongoing Monitoring and Evaluation
Ongoing monitoring and evaluation are crucial for several reasons:
- You'll identify problems early on so that you can take action to resolve them.
- You'll track your progress over time so that you can see what's working and what isn't.
- You'll identify improvement opportunities so you can supercharge your income.
Final Takeaway
Following the tips above, landlords can create a positive rental experience for their tenants and minimize late payments. And non-landlords can adapt the above to their own situation, by taking on the same strong, clear and consistent mindset.
In all cases, this will lead to higher ROI for your business, which is, after all, its primary objective!
