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The New-School Approach to Self-Storage Collections

Collections is an integral part of every self-storage manager’s job, but it’s often the least liked responsibility. While aggressive tactics work, an effective, new-school approach retains customers’ dignity by treating them like adults.

December 19, 2016

6 Min Read
The New-School Approach to Self-Storage Collections

By Colleen Wood

Resolving delinquent accounts is an integral part of every self-storage manager’s job, but it’s often the least favorite part. Sometimes, it’s more difficult than it needs to be, and managers make work for themselves than necessary.

In-house collections procedures are often tailored to reflect the perspective of the owner, manager or management company. The process should be compiled into the training modules for new employees, but as you might imagine, there’s more than one school of thought on the best way to approach delinquent accounts. Let’s explore the options.

Old-School Aggression

One philosophy—one might call it “the old-school approach”—espouses aggressive collections tactics. They typically look something like this:

  • Call/mail/e-mail the customer to remind him his payment is due.

  • Call/mail/e-mail the customer again to remind him a late fee is pending.

  • Notify the customer by phone/letter/e-mail that his rent is now past-due and a late fee has been assessed.

  • Call/mail/e-mail the customer once or twice per week thereafter, until he brings the account current or his unit is processed for auction.

  • Contact the customer by all available phone numbers and addresses to advise that his unit is going to be processed for auction, and when.

  • Once the customer is in lien status, mail or e-mail the applicable legal notices (depending upon state law requirements).

  • Continue to call/mail/e-mail the customer for payment until auction day.

Most of us who have been in the storage industry for more than a few years recognize this format as one of the familiar procedures for collecting delinquent funds. It became one of the industry standards because it worked. So, what’s wrong with that? Read on.

Because it works, the above technique is frequently employed by collections agencies and short-term money lenders. The customer may even borrow funds from family and friends just to make you go away and leave him alone! So you win, right? You’ve got the money. That was the objective of the exercise, correct? Not so fast.

While the tenant’s payment under duress “cures’ your delinquency problem this month, the tactic comes with side effects that aren’t necessarily a win for you. Let’s take a closer look.

Side Effect 1: Bill Monitor

One side effect is the collections system above sets you up as the “bill monitor” for your customer. Because you reminded him every time his bill was due, the customer didn’t have to remember when to pay it. You remembered for him. Every time a late fee was approaching, you reminded him there was an additional cost pending. So your customer never suffered any consequences for not paying his bill on time.

Wait a minute; that sounds very familiar. Isn’t “consequences of actions” one of the life lessons we teach our teenage children? Many parents of successful adults report they taught their teens to be self-sufficient by holding them accountable for their actions. They didn’t enable them to become financially irresponsible or impose their responsibilities on others. Hold that thought for a moment.

There are self-storage managers reading this article who are thinking, “It’s not an imposition; it’s part of my job to remind my customers of their payment. We offer exceptional customer service. Going the extra mile is a regular part of our management practices here. Customers are very busy, and they often forget. My tenants appreciate my reminders; it saves them the expense of a late fee.”

Not long ago, I applauded and practiced that exact method. But every time I was out sick or on vacation and customers didn’t get their reminders, I was chastised by them for “failing to do (my) job.” It wasn’t their fault they were late with their payment. Now, it had become my fault because I failed to call them. They didn’t want to hear any of my excuses either. All they wanted to hear was confirmation of their instructions to me: “That late fee better get waived!” The customer’s perception is he has endured undeserved, poor customer service.

Side Effect 2: Resentment

Another side effect that can occur is customers feel like they’re being harassed. No one wants to feel badly about themselves. An inability to meet one’s financial obligations can make many adults feel inadequate. Resentment builds when repeated phone calls, letters and e-mails exacerbate those feelings. Harassment, resentment and ill will foster a perception of undeserved, poor customer service.

We need to ask ourselves these three questions:

  • Do we want our level of customer service to be categorized as the same or worse as that of short-term money lenders and collection agencies?

  • Do we want to continue practices that result in customers feeling like they’ve received underserved, poor customer service?

  • Shouldn’t we promote practices that create a win-win situation for us and our tenants?

New-School Approach

Not all is lost. There’s a new school of thought on collections. Our customers aren’t children, and we shouldn’t treat them as such. They don’t need anyone to hold their hand while they cross the street or pay their bills. That kind of “customer service” isn’t only counter-productive in the long run, it could be deemed disrespectful to facility managers and the customers it purports to serve.

Does your electric company call to remind you that your bill is due? No, it sends one late notice advising of the penalty for late payment and advises you of the service termination date. If payment isn’t made by the deadline, it shuts off the electricity. The company doesn’t make any apologies for doing so. The water company does exactly the same thing. So does the cable company. And no one expects them to behave any differently. These companies run successful businesses by treating customers like adults who should take responsibility for their financial obligations. They either meet those obligations or accept the earned consequences for failure to do so.

Under this new-school perspective, the collections procedure typically looks something like this:

  • Customers are advised of their rental rates, rent due dates and late-fee structure when they sign their lease.

  • Written notification is sent to the customer (mail/e-mail) when any financial change is made to his account (late fee, auction fee, rent increase, etc.).

  • Written notification is sent to the customer once the account arrearage places him in auction status, in accordance with the lien laws for that state.

  • Customers with financial difficulties can negotiate settlement agreements to satisfy their account.

Exceptional customer service is still the order of the day. That requirement hasn’t changed. The only change is the delivery mode. The collections procedure under this format is tailored to inform and assist. The customer is informed as required by state statutes and given the courtesy and respect to deal with his financial obligations as/when/if he can.

If he’s unable to resolve his financial difficulties on his own, then the manager can offer settlement options, which will ease the financial burden, allow him to retain his belongings and eliminate the threat to his credit standing. All of this is delivered in a professional manner designed to allow the customer to maintain his dignity and respect.

The customer’s perception is that he has received undeserved, exceptional customer service. The facility is able to settle the delinquent account and return the unit to inventory. That’s a win-win.

Colleen Wood has 15 years of experience in self-storage management. She’s currently an administrative assistant for Columbia, S.C.-based Southeast Management Co., which offers full-service management and consulting services to self-storage operators. For more information, visit www.southeastmanagementcompany.com.

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