You have a lot of choice as a letting agent or landlord as to which method of payment you wish to accept for rent collection. Some are better than others, but these alternative methods are not commonly adopted by all letting agents.
Below, we take a look at each method of rent collection, and give you a breakdown of the pros and cons of each of them. You can then decide which of these amalgamates with your business model.
Rent Collection By Cash
The most basic choice of rent collection is through cash.
The positive effect of collecting cash from the tenant’s home is that you can use this as an opportunity to check in on the property and make sure everything is okay.
There is one glaring fact with cash collections, which is the anonymous nature of cash. Cash does not leave a footprint, so this means you will have to manually print receipts and invoices in order to have proof if there is ever a dispute. Due to the anonymous nature of cash, it also raises the question of what kind of tenant wants to pay in cash in the first place. It could be perfectly innocent, however, the reasons behind paying with cash can be less than desirable.
Rent Collection By Cheque
Many landlords and agents still accept cheques as a form of rental payment. There are few positives to this method; first and foremost, there is still a degree of manual activity in the collection process.
First of all, the cheque has to be sent and delivered to you; it then needs to be deposited into the bank; once this has happened you then need to wait 3-5 working days before it clears. Rent payments made by cheque are slow! There is a common consequence of this manual process, which is tenants will often use this as an excuse for late or non-payment.
“I have already sent the cheque, it should be in the post, maybe it got lost?”
There is also the classic example of downright fraud which everyone is aware of and that is the “bouncing cheque”. The tenant will send a cheque for the correct value amount without actually having the correct funds within their bank account, the result of which is that the cheque will “bounce” and you will be left with the task of chasing up the tenant to find out what has happened with the missed rent payment.
Rent Collection By Standing Order
Standing orders are a much more reliable solution than both cash and cheque. They are very fast and easy to setup. The second point being that unlike the anonymous nature of cash, a standing order is an electronic payment. It leaves a digital footprint as proof, which will offer insurmountable evidence should any future disputes over rent payments made.
The amount which can be taken is a fixed amount, unlike Direct Debit (standing orders are often confused with Direct Debit), in which payment amounts can vary from month to month. This puts the tenant firmly in control of the payments made to their Letting Agent, but is this necessarily a good thing?
From the tenant’s point of view, having a set amount which they pay each and every month will be welcomed. However, what if you want to alter the amount that you charge for rent? In this scenario, the current standing order will need to be completely cancelled. The tenant will then need to set up a new standing order for the new amount of rent.
Rent Collection By Direct Debit
Direct Debit is the most sensible solution for collecting rent. First of all, it contains all of the positive aspects of collecting rent via a standing order. Setting up a monthly Direct Debit payment is very fast and easy to do. It takes 10 minutes through PAID & CO.
As with a standing order, payments made through Direct Debit carry an electronic footprint, allowing you to track, manage and protect yourself in any payment disputes.
However, Direct Debit payments go even further; not only can you change the amount of money a tenant pays each month, without having them cancel the current payment and setting up a new one, but you can also know if a tenant does not have the correct funds within their account to pay the upcoming rent.
This is a great feature of Direct Debit rent payments as it allows you to be aware of any upcoming rent payment issues before they take place. PAID & CO take this a step further, alerting both the tenant and letting agent/landlord that a missed payment could be about to happen.
But what happens if the tenant doesn’t have enough funds the cover the rent payment? PAID & CO’s unique retry system will kick in, attempting to collect payment after the first failed payment due to insufficient funds.
If you add in the fact that all payment history is shared with credit rating agencies, the tenant will be aware of the fact that missing payments may harm their credit rating, meaning they will be less likely to miss a payment again.
In our opinion, it is easy to see that collecting rent through Direct Debit is the informed choice. There are many convincing and valid arguments as to why you should choose Direct Debit for processing rent payments. With PAID & CO this method is enhanced with:
Early warning system (cancelled regular payment).
SMS text and email alerts and reminders.
Unique retry system for failed payments.
Easily change rent rate.
Dashboard for managing and tracking payments.
Electronic payment as proof in case of disputes.
Automatic and taken care of for you (minimal admin).