Whether you are a complete rookie in the property management game or a seasoned vet looking to update and bring your business into the 21st century, it is important to learn the ins and outs of autopay. Even if you don’t decide to utilize it in your business right away, it’s helpful to understand what tools are out there and what options you have as a business-owner. Your location, management style, and tenant demographics are all factors that will play a role in deciding if autopay is right for you.

What is Autopay?

Autopay is a feature that is becoming increasingly available to customers anywhere a recurring bill is paid. It allows users to automate their payments and landlords to automate the acceptance of those payments. In most cases this is a win-win scenario, where both parties benefit from the convenience and simplicity of automatic transactions. Autopay cuts down on the occurrence of late fees, does away with the nuisance of checks and stamps, and minimizes payment processing fees for the landlord.

Autopay Versus Online Bill Pay

The main difference between autopay and online bill pay comes down to who’s in the driver’s seat when a transaction is being made. In the instance of online bill pay, you are essentially giving instruction to your bank or credit union to make a payment in your name from your personal account. Your bank is driving the transaction in this scenario, pushing the funds from their institution to the vendor.

On the other hand, in the case of autopay, the vendor, or in this situation, the landlord, would be the entity in control. The tenant would have to authorize the debit, or pull, of the funds out of the account on a recurring basis.

This is an important distinction, as the arrangement for autopay would require tenants to provide access to their personal banking information. Many savvy renters are aware of the pitfalls of security breaches and may be wary of taking on that risk.

Set-up and Maintenance

The first and really only step to setup a tenant with Autopay is getting the appropriate financial information. In the U.S., the primary system for electronic funds transfers is the Automated Clearing House, or ACH. Think “direct deposit”, “direct pay”, or “electronic check”. These are all ACH payments.

Completion of an ACH form is required to get a renter set up for auto-payment. Necessary information includes the tenant’s name, bank information, account number, routing number, and payment amount. You can see why some tenant’s may be wary of this process as it deals with their sensitive identity information.

One great workaround that is sure to put client’s minds at ease is the use of rental management software. Most programs offer autopay to users, giving them the power to manage their information securely and on their own terms. This puts an added layer of protection into the process, not only for the tenant’s information, but also for the liability of the landlord. To read more about the legal implications of utilizing autopay, check out this list of potential pitfalls.

Another perk of utilizing rental management software as it pertains to autopay is the increased communication. While the payment itself might be “out of sight, out of mind”, it’s reassuring for tenants to be able to review confirmation and tracking of the payment in the system.

Putting it in the Lease

It’s important to be up front and transparent with your tenants from day one, and this starts with their leasing agreement. The acceptable methods of payment for rent are something that should be articulated from the beginning. If you have existing renters who will need to adopt this new policy, it’s a good rule of thumb to update the lease and have them review and sign then renewal time comes around. You could consider updating the lease mid-term; however, that is something your tenants must unanimously approve.

Regardless of where you are in your property management career, using autopay for rent collection is a great way to help streamline your business and reduce management headaches. An understanding of the alternatives, the setup, and maintenance will help ensure the successful deployment of this new process. This type of simplified payment will soon become standard, and your business will continue to have that competitive edge.