November 17, 2021
Increase Utility Cost Recovery: Billing Best Practices
Utility cost recovery is critical to maximizing a multifamily property’s NOI. Nonpayments (and late payments) impact cash flow and the landlord or property manager’s ability to properly budget.
Of course, there are any number of factors that impact utility cost recovery. But the (arguably) most important – tenant billing itself – is too often overlooked.
Why does billing matter so much? The answer is a mix of logistical and psychological factors. In this post, we’ll take a deep dive into three core ways that your billing – in-house or outsourced – can improve utility cost recovery.
Utility Billing Best Practices
- Fair, defensible bills
- Predictable timing & cadence
- Positive tenant experience
Best Practice #1: Fair, Defensible Bills
Landlords and property managers seeking to maximize utility cost recovery are faced with a core challenge: Nobody wants to pay a bill. Opening your checkbook or putting down a credit card for a water, electric or gas bill isn’t exactly a pleasant experience. While most of us – and most tenants – do remit payment on time, some avoid it.
That’s why fair, defensible utility billing practices are so important. If a tenant receives a bill they feel is unjustified – “How could I have used that much?” – the likelihood increases that it will go unpaid.
The answer is a well-planned submetering system, or RUBS billing utilizing industry-standard allocation math. Both are designed to capture and bill a tenant’s actual usage as accurately as possible. This creates a sense of ownership on the part of the tenant, as they can see how their actions dictate their expense month to month.
This level of control by the tenant offers an important side benefit (particularly when it comes to true submetering). Studies have shown that individually calculated utility bills cause water, gas and electric usage to drop as much as 35%. That means two things:
- Tenants save money – and have the ability to directly impact their savings. This creates a differentiating factor for properties where billing is perceived as more fair.
- The master utility bill is lower. There will almost always be some percentage of utility costs that can’t be recovered. If that number is 5%, it’s better that it’s 5% of $65,000 than 5% of $100,000.
Best Practice #2: Predictable Timing & Cadence
Resident utility bills should be sent at the same time every month. Ideally, this means the same day of the month. While this might seem trivial, it can be a significant factor in utility cost recovery rates.
Tenants living on a fixed income or budgeting paycheck to paycheck expect certain expenses at certain times. A delay of even a few days can cause them significant hardship, and reduce their ability to remit payment. Establishing this cadence early in the landlord-tenant relationship – and sticking to it – is key.
Best Practice #3: Positive Tenant Experience
Here at Synergy, we’re fond of “TX” – tenant experience.
It’s far easier to retain a tenant than it is to find a new one. The costs of advertising and showing a vacancy – to say nothing of $0 rent when a unit is empty – add up fast. And while paying a utility bill is nobody’s favorite task, you can make it as painless as possible. That means a happier tenant – one having a better experience, and one more likely to renew their lease.
The key is service. That means …
- Offering a variety of bill payment options, like credit card transactions, phone billing and checks
- Having customer service representatives available 24/7 (or at least 9-5) to answer billing questions
- Delivering bills on paper and/or virtually, depending on tenant preference
- Offering digital tools that let tenants view usage, past bills and the like
Tolerance for poor experiences – time on hold with a CSR, having to pay in an unfamiliar way, etc. – is essentially zero. Your tenants are used to an on-demand lifestyle. They can access just about any movie they like in a few seconds. They can buy dog food by simply talking to Alexa. They can pay in a store by tapping their phone. Failing to meet them where they are is a recipe for frustration – and frustration can lead to nonpayment.
Increasing Utility Cost Recovery: Conclusion
While there are many factors that contribute to recovery rates, arguably none matter more than billing itself. If bills don’t come across as fair, aren’t delivered consistently and aren’t backed by solid customer service, recovery will inevitably suffer. And that’s a direct hit on NOI.
Of course, what we’ve outlined in this post doesn’t sound easy. Fact is, it isn’t. A landlord or property manager – even one with several full-time staff members – probably doesn’t have the time to invest in submetering setup, bill QC, online payments and the like.
That’s why firms like Synergy exist. We specialize in handling all aspects of utilities for mid-sized and large owners and property managers across the U.S. We take care of system design, installation, meter reading, monthly billing, customer service and remittance. Best of all, it all comes at effectively zero cost to the landlord.
If your goal is to maximize utility cost recovery, Synergy should be your next call. Learn why owners and property managers of tens of thousands of units trust us every month – connect with us here, or call 800-695-8633.