We hope by now, you understand the benefits of charging residents for their utility usage. It’s great for your NOI and is guaranteed to reduce waste. Leaks will get reported faster, which can reduce the amount of water damage that occurs.
Assuming you’re with us on the value utility billing, now the question turns to how to bill your residents.
What’s Better? It Depends…
If you have a portfolio of between one and twenty units, trained staff to answer utility questions, and you understand all applicable utility regulations, using the utility billing feature within your PM software will help you recover a good portion of your utilities.
In some areas, you’re allowed to pass a service fee on to residents which offsets your staff’s time. You will have the burden to understand and comply with all regulations. You will also have to ensure you don’t bill so much that you turn a profit on utilities.
PM-based billing features are designed so you leave some money on the table because the factors you’re allowed to use to create your bills will be less precise than what a billing company can offer you. This is good because it can save you some regulatory risk, but it will also cost you. For example, you may be limited to square footage when occupancy or the number of water fixtures would be a more accurate way to bill.
If you have twenty or more units…
The bigger your portfolio grows, the more time-consuming utility billing becomes. You may need to factor in regulations in multiple jurisdictions and monitor to ensure you don’t turn a profit on utilities. You will have periodic collection issues, and your on-site staff will spend more time answering questions. The amount of money you leave on the table gets bigger using your vendor’s billing method as your assets grow.
If residents complain to the BBB or PUC, you’ll need to respond to those issues and justify your billing. You’ll need to be able to explain to residents and regulatory authorities how you calculated the bill. At this point, many owners want to offload the utility billing to increase recovery, protect their brand reputation, and alleviate the support and regulatory burdens.
Billing companies have a lot more flexibility in how they calculate your bills, and a good one will work with your team to provide calculation transparency and resident communications. Billing vendors also provide a variety of payment methods that helps residents pay on time, billing reports, collection services, and a support team to answer billing questions and resolve disputes.
A good billing vendor will have in-house regulatory expertise not only to tell you what the regs say but to understand any court cases that could impact your model. In most cases, the fees charged by the billing company are modest and can be passed along to residents.
Hopefully, you have a better understanding of the pros and cons of billing methods. If you want further detail, we’re happy to provide them. Request a quote and our team will reach out to answer your questions.