In part two of the Efficiency series, I am going to discuss rent payments; specifically the most efficient way to receive payments that can "kill two birds with one stone" for your rental business. First let's discuss the most common ways rent is paid.
- Cash - This method is a bit antiquated but still acceptable. Lends itself to being spent before being deposited into the rental checking account and understates the income received. Aside from that, proper handling isn't always completed. When receiving cash payments for rent, AMH recommends that a receipt, signed by the property manager or landlord, be given to the tenant, that the payment gets recorded into the accounting system, and a deposit slip is immediately made for that payment listing the address and tenant the payment came from. Multiple cash payments can go on one deposit slip.
- Check - Another acceptable and somewhat antiquated method of payment. There are benefits for the tenant in being able to pay rent via check not for the landlord or property manager. For tenants, particularly if they are using a checkbook with the carbon copy feature, have written proof that a check was written for their rent. For the landlord there is the risk of the check bouncing, being a fraudulent check to begin with, and that means you are out of rent. This isn't always the case but it does happen. When receiving a check, AMH recommends the same procedures for handling a check as we do cash. In addition with mobile deposit being available a most banks, you can skip the deposit slip step and deposit that check via the mobile deposit capabilities at your bank, if applicable.
- Money Orders - Like checks but are more secure in terms of they do not bounce. To obtain a money order, the purchaser MUST have the money on hand for the amount of the money order they are purchasing. Money orders can be deposited via mobile deposit just like checks. Again, AMH recommends following the aforementioned handling methods aside from the deposit slip. Use the mobile deposit feature to deposit the money order just like you would with a check.
Now for some new ways rent is being paid.
- Tenant Cloud
All of the above are methods to pay or send money to someone effortlessly. The aps above make it so tenants don't have to leave their homes to get their rent paid. The apps are made available for smartphones and with a few simple touches to the screen, the rent is paid. AMH is not familiar with the process involved with the apps listed above and cannot give any advice other than to immediately record the payment and issue a signed receipt to the tenant.
Lastly, the method we HIGHLY recommend for receiving rent payments is ACH transfers from the tenant's bank account to the landlord's or property management company's bank account. Often run a few days before the 1st, this method all but guarantees no late fees AND acts as a great pre-screening qualifier for obtaining your ideal tenants.
Although some of the apps mentioned above can deliver funds much more quickly, ACH has more advantages for the overall performance of your business. Efficiency is key here and ACH allows for that much more so than the other payment methods discussed above.
For more information on ACH payments, schedule a consultation HERE.
AMH Bookkeeping, LLC. The Landlord's Bookkeeper.