Self-Storage Rent Collection: A Guide for Facility Managers
|Copyright 2014 by Virgo Publishing.|
|Posted on: 08/22/2011|
By M. Anne Ballard and Stacie Maxwell
Delinquencies and collections are a challenge for all self-storage operators. The keys to managing these tasks and minimizing problems with non-paying tenants are prevention, consistency, communication, courtesy and persistence. The following tips will help facility managers succeed in mitigating and collecting unpaid rent.
When it comes to self-storage delinquencies, prevention is preferred, and it all starts with the information you collect from each customer. At the time of unit rental, gather all critical customer data including name, phone numbers, e-mail addresses, employer info, emergency contacts, etc. This is the single most important measure to avoid delinquencies and lien sales. The customers whose goods go to auction are typically those with bad addresses and faulty phone numbers.
To confirm the customer’s address, send him a thank-you card on the day of rental. This will confirm you have a real address and will thank the customer in a personal way. If the card comes back to you for a bad address, overlock the customer’s unit immediately and start making calls to contact him.
You also need to confirm the customer’s phone number and e-mail address, so send a welcome e-mail and make a call as well. If any of the information is faulty, overlock the unit immediately. Don’t wait for a full month’s rent to become past due before taking action. You need to know immediately if there’s a problem and start contacting the customer to correct the issue.
At move-in, mention when rent is due, but don’t indicate when it becomes late. For example, if rent is due on the first of the month and late after the fifth, divulging this to the customer implants the notion that he has until the fifth to pay. Simply say, “Your rent will be due on the first of each month. If the payment is late, you will incur a late fee.” This sets the terms of your rental agreement without giving the customer a possible window for late payment.
You should also offer an auto-debit payment option with a “no late fee guarantee.” In this scenario, the customer avoids late fees as long as he provides current credit card info and authorization for monthly payments. The “guarantee” is null and void if his card on file expires or is declined.
You should also point out your auction calendar to new customers as an additional prevention measure. By showing them your monthly ad of units to be sold at auction, you show them what happens when they don’t pay. Invite them to sign up for your auction e-mails as well.
Have one set of payment and auction rules to which everyone should adhere and post them for all to see. Your rental agreement contains a set of rules that apply to every one who signs it, so make sure you consistently apply those rules to each and every customer. By posting a set of rules and sticking to it, everyone knows from the very beginning what will happen and when.
Avoid making exceptions for certain customers, for example, not overlocking someone because you know them from your child’s school, your church, a local store, etc., will only create problems. Making a stand behind a steadfast wall is easy; trying to make a stand behind a moving target (inconsistent rules) is difficult for managers to do, and even more difficult for customers to understand. Make one set of collections standards and adhere to them.
Immediate action and consistency are imperative to successful collections. As soon as rent becomes late, communicate with the customer. Past-due notices are a simple and reasonably cost-effective way to notify customers of delinquent accounts. You can send them via e-mail to save on postage and printing.
Between 85 percent and 90 percent of past-due customers will pay once they receive the initial late notice. Supplementing past-due notices with a follow-up collection call can increase your chances of receiving payment. Debt-collection calls not only stress the seriousness of the situation to customers, they can be used to gather helpful details necessary to collect.
Typical collection tools include phone calls, late notices via snail mail and e-mail, auction e-mails, and social-media postings about upcoming lien sales. These accomplish more than the obvious; they remind customers there is a process for those in default, and they bring more bidders to each sale, helping to increase the amount of your recovery from items sold.
Other “guerilla” collection methods include Facebook and Twitter postings. If you’re connected with customers through these platforms, you can post simple messages to trigger a mental reminder, for example: “Hi, Susan. We appreciate your business and would love to see you at the facility soon! Call or stop by to give us an update on what’s happening in your world.” You can also try text-message reminders via cell phone.
You attract more bees with honey than with vinegar. Try to maintain a cheerful, helpful attitude, even during collection calls. In the initial stages, it’s important to give customers the courtesy of believing they “simply forgot” their payment and acknowledging “these things happen to everyone.” Foster a sense of trust and responsibility between you and your customers by being tactful and allowing them to maintain dignity. Embarrassed or harassed tenants are much more reluctant to pay, sometimes out of shame or spite.
Some managers become passionate about ensuring customers’ valuables don’t get sold. They are regularly in touch with tenants, letting them know they don’t want customers’ goods to proceed to sale. This sincerity goes a long way toward reducing delinquencies.
Regardless of the collection method you use, be persistent with your communication. A lot can happen between phone calls or notices. Don't miss your chance to collect past-due accounts by failing to stay in touch customers. Especially with customers who are stalling, the manager who is most insistent is most likely to get paid.
Try to get the delinquent customer to give you a firm date on which he can make the payment, and follow-up with him immediately if he fails to follow through. Get specifics. If he says, “I’ll come by this weekend,” ask him which day and what time you should expect him. Make notes in his file so you can follow up.
Give every customer one “get out of jail free” card … but only one. The ability to waive late fees is a good bargaining tool for collecting late payments, but be careful how you use it. Consistently waiving late fees for repeat offenders programs them to pay late without consequence. If you ever enforce the rules and charge them a fee, they will balk and protest, even though you are well within your rights.
Waiving a late fee for a first offence, however, allows you to please and build trust with the customer while reminding him of the terms of your rental agreement. Say something like, “Since we appreciate your business and consistent on-time payments over the past 8 months, we will waive the late fee for your first late payment as a one-time courtesy to you.” Make a note in the customer’s file that you had this conversation. For any subsequent late payment, politely remind the customer that he has already used his “get out of jail free” card, and now a late fee must be collected with the past-due rent.
Document everything. Making lots of notes about each customer and conversation in your operating software will help all management staff understand the accounts and any previous deals, discounts, waived fees and payment agreements. Detailed notes can sometimes save the day if an account comes to debt collection or auction. Being able to prove you made every attempt to reunite the customer with his belongings prior to lien sale is important, especially in this lawsuit-happy age.
In summary, the best approach to delinquencies is to prevent them before they occur. Collect the appropriate data from customers during move-in and follow up to ensure it’s accurate. Create a single set of rules regarding payments and collections and ensure everyone knows what they are and adheres to them consistently. If a tenant does fall behind on a payment, contact him promptly via one or several methods. Be courteous and tactful in your dealings with delinquent customers to encourage them to pay. Finally, be persistent. Do what you need to do to get the money in on time and prevent future late payments.
M. Anne Ballard is owner and founder of Atlanta-based Universal Management Co., a full-service management and consulting company serving self-storage businesses worldwide. Ballard is a frequent speaker at national and international conferences, and author of The Hat Lady Speaks, which focuses on self-storage marketing and management. Stacie Maxwell is Universal’s director of marketing and communications. With more than eight years of industry experience, she is responsible for the company’s branding, design and marketing. For more information, call 770.801.1888; visit www.universalmanagementcompany.com.