Smart Strategies to Prevent Self-Storage Delinquency and Improve Collections Results

Of all the challenging duties assigned to a self-storage manager, the one that’s often dreaded most is the collection of rent from delinquent tenants. Pursuing past-due payments isn’t a job we’re born to do. It’s difficult to hear about customers’ struggles, and some tenants are mean or abusive in this situation, even though the manager is just doing his job.

Collections is an inherently negative task that can cause employee apprehension, morale loss and discontent. Often, owners don’t discuss the challenges involved or implement a training program to help staff through the process because it isn’t fun to discuss. However, staff need to understand the importance of collections and get the proper training to handle it successfully. Here are some ways to prevent payment delinquency and strategic methods to produce better results when lateness does occur.

Preventing Lateness

Having a good rapport with your tenants can go a long way toward preventing late payments. Forming a cordial relationship gives customers someone to feel accountable to when rent is due. Once you have this positive foundation, here are some other things you can do to avoid tenant delinquency.

Lease comprehension. It’s imperative that you understand the intent of every provision in your rental agreement. While you may not understand every aspect of the legalese, you must comprehend the meaning of each section, be able to explain it to new tenants, and competently answer any contract-related questions.

Tell tenants exactly what will happen if rent is late, including the amount of the late fee and when it’ll be assessed to their account. Present the lease in a positive manner and make sure they understand it. Spend time with each customer and don’t rush the process.

Autopay. Assume every tenant is going to make automatic payments using his credit or debit card. During the rental process, ask, “What card can I use for your autopay?”

Autopay is the best way to ensure customers pay on time. A self-storage bill doesn’t rank as high on most people’s list of financial priorities as their electric bill or home rent/mortgage. It isn’t an essential need or top of mind when they sit down to pay their monthly bills. Even those with the best intentions might overlook it. Autopay saves everyone time and hassle. Just keep a close eye on these accounts. Watch for expiring cards to ensure there aren’t any payment interruptions. This is part of the good customer service you should be providing.

Complete information. It’s also important to gather the most comprehensive information you can from tenants at the time of move-in. Applications should be filled out in full and legible. If a tenant stops paying and you have to start the lien-sale process, it’ll be critical to have accurate contact info. Follow up and verify all e-mail addresses and phone numbers provided on the lease. This can be done conspicuously by making a thank-you call or sending a welcome e-mail or card.

If you discover that you have invalid information, follow up via an alternative mode of communication. It’s good practice to conduct occasional audits of tenant files to ensure the accuracy of contacts. It’s much easier to get any information you need out of a person while his account is in good standing.

Collecting Debt

Despite preventive measures, late payments will occur, and you need a process to guide your collections efforts. Create a written procedure and stick to it.

As soon as a tenant is late, remind him that he needs to make his payment. You can do this via phone, e-mail, letter or even text message. E-mail or text will be more efficient than trying to call or send snail mail, especially if you have a lot of late-payers. If possible, try to remind the tenant more than once before his grace period ends and you have to assess a late fee. As a customer-service measure, you want to save him money whenever possible.

As you approach the date when a second late fee will be assessed and the unit overlocked, start hitting the phones. Have a plan for how many calls will be made for each day, week or month. Completing calls around other duties can be difficult, so set aside some time. If you can divide the list among multiple team members, it’ll go faster. Hopefully, a warning about a looming second fee and a reminder that they’ll be locked out of their unit will motivate those delinquent customers to pay.

When making calls, it’s important to have a script, which ensures the correct message is delivered on every call. You also need to understand the Fair Debt Collection Practices Act, which outlines certain things you aren’t allowed to do during a collections call. For example, you can’t using harassing language or speak to anyone other than the tenant.

Have a method for recording and documenting calls so you know what’s been said, to whom, and when. It’ll also help you institute a follow-up plan. Perhaps your follow-up is an e-mail or text message three or four days after the first round of calls.

Schedule another call session before the delinquent units go into auction status and are assessed a lien fee. Once the units have gone into auction status, the calls become about not wanting to sell tenants’ items. Since your last wish is to sell anyone’s goods and put yourself at risk of liability, collections calls should be made more frequently before the lien sale. Maybe those in auction status get a weekly reminder of the balance owed.

A Word on Late Fees

Your company needs a written policy regarding late fees. It isn’t in your best interest to waive them. If you get into the practice of doing so, word will get out and other tenants will expect the same concession. Keep in mind, you could face an unintentional discrimination lawsuit if fees aren’t assessed uniformly.

Ask yourself: How and when do you decide to waive a late fee? Who’s decision is it? What criteria are used to make the decision? Additionally, what motivation do tenants have to pay their bill on time, or at all, if they know you’ll waive the fees? Establish with your customers up front that delinquency won’t be tolerated.

Using Technology

If you need additional help, there’s technology you can use to help navigate the murky waters of debt collection and produce favorable results. In fact, there are several options to automate collection efforts via text-message alerts, robocalls and autogenerated e-mails. These programs are designed to take pressure off of self-storage managers, allowing you to focus on renting units and keeping the business running smoothly.

These “set it and forget it” tools require some initial setup. You’ll need to decide what you want your messages to say and the frequency of outreach. You’ll set a timeline and create custom notices. You’ll need training in how to use the program, and you’ll need to understand any related policies. Anyone who will use the tool should have some ownership over the program and process.

An automated collections program will integrate with your property-management software, pulling information every day to see who’s late and needs a reminder. It’ll place a notation in the tenant’s account and continue with follow-up reminders until the rent is paid. The program should also come with a dashboard you can use to change settings and pull reports.

Collections don’t need to be stressful and shouldn’t cause employee grief. Put strategies and tools in place, and make sure everyone understands why they’re important. When self-storage staff have a little help to get the job done, collections should be less dreadful. Everyone will be happier as delinquencies fall and income rises.

Cheli Rosa is an auctioneer and strategic account manager for StorageTreasures, managed by OpenTech Alliance Inc., a Phoenix-based provider of self-storage kiosks, call-center services and other technology. With nearly a decade of industry experience, she helps her clients carry out successful auctions and increase their debt-recovery percentages. She regularly speaks at industry events and contributes to self-storage publications. For more information, visit [email protected]; visit www.opentechalliance.com.