Calculating the value of a renter using autopay for a property management company involves several factors. Here's a simple, concise, and detailed guide on how to calculate the value, encourage adoption, overcome common challenges, and track program performance.
Calculation Steps
Step 1: Identify cost savings
Savings come from reduced printing, postage, manual processing, fewer late payments, and reduced follow-up on unpaid rent. This could include the cost of time it takes for someone to monitor, follow up, contact the resident, etc...
Billing costs
- Estimate the cost per payment cycle for billing (e.g., $2 per renter per month).
Collection costs
- Estimate the cost per payment cycle for collections (e.g., $5 per renter per month).
- For example, say you have 2,500 residents who aren't on autopay and your property accountant ($40/hr)Â spends ~3 hours/mo preparing reports for collections. Over 12 months, that's about $1.15 per resident... just for the collection side.
Step 2: Estimate improved cash flow
When payments are made on time, it increases cash flow stability and reduces the need for short-term borrowing.
Timely payments
- Calculate the value of having predictable and timely payments (e.g., $10 per renter per month).
Step 3: Estimate reduced vacancy and turnover costs
Renters on autopay are less likely to miss payments, reducing eviction risk and turnover costs.
Turnover costs
- Calculate the average cost of turnover (e.g., $1,000 per turnover).
- This includes cleaning, repairs, and marketing to new tenants
Reduced turnover rate
- Estimate the reduction in turnover rate due to autopay (e.g., 5%).
Step 4: Estimate operational efficiency gains
Less time on payment processing allows staff to focus on other tasks.
Time savings
- Estimate the value of time saved by staff from not processing payments manually (e.g., $3 per renter per month).
Step 5: Assess customer satisfaction and retention
Autopay boosts tenant satisfaction, leading to higher retention and longer lease terms.
Convenience and retention
- Estimate the increased retention value due to higher tenant satisfaction (e.g., $200 per renter per year).
Step 6: Calculate the total value
Use the formula to combine all the savings and benefits:
Total value of an autopay renter = (Billing Cost Savings Ă— Cycles per Year) + (Collection Cost Savings Ă— Cycles per Year) + (Timely Payments Value Ă— Cycles per Year) + (Turnover Costs Ă— Reduced Turnover Rate) + (Operational Efficiency Gains Ă— Cycles per Year) + Retention Value
Example calculation
Let's break down an example:
- Billing cost savings:
- $2 per renter per month
- 12 cycles per year
- Total: $24 per year
- Collection cost savings:
- $5 per renter per month
- 12 cycles per year
- Total: $60 per year
- Timely payments value:
- $10 per renter per month
- 12 cycles per year
- Total: $120 per year
- Turnover costs:
- $1,000 per turnover
- Reduced Turnover Rate: 5%
- Total: $50 per year
- Operational efficiency gains:
- $3 per renter per month
- 12 cycles per year
- Total: $36 per year
- Retention value:
- $200 per renter per year
Total value calculation
24+60+120+50+36+200=490
In this example, the value of a renter signing up for autopay is approximately $490 per year.
Try it
Adjust the numbers based on your situation.
Key considerations
- The formula is (as intended) fairly basic and doesn't take into account things like time value of money, weighted or partial attribution, diminishing returns, opportunity costs, etc...
- You can customize the model based on your specific property management context and renter behavior.
- This calculation represents an estimate, and the real results will vary. You can increase the accuracy by basing the values on your real-world data.
What's next?
Now that you can estimate the value of renters using autopay, you can make more informed decisions, such as how to encourage residents to sign up for autopay.
Communicate the benefits
Highlight the convenience and hassle-free aspects of autopay. Residents won't need to worry about late fees or missing payments.
Emphasize security so the residents feel that their payment info is securely handled.
Offer incentives
Provide discounts, incentives, or gift cards to residents who sign up for autopay. For example, an exclusive discount on brands they love or a $5–$10 gift card can be a strong motivator.
A rudimentary version of this is fairly simple for small operations to do manually, but scaling to larger operations (more doors and/or multiple locations) almost always involves software.
For example, Paylode Boost enables companies to use perks (discounts, gift cards, etc...) to motivate user behavior. Property management companies see significant improvement when using Paylode Boost to motivate residents to opt into autopay, fill out feedback surveys, etc...
Make it easy to do
Make sure the autopay signup process is easy for residents to complete in a few minutes. If needed, offer support to guide them through the process.
Use multiple communication channels
Use a mix of communication channels to achieve the best result. Tailor the mix to your community as needed.
Digital reminders
- Send regular reminders and information about autopay through emails, newsletters, text messages, push notifications, etc...
Physical notices
- Post flyers and notices in common areas of the property (lobbies, mailrooms, community boards)
During the onboarding process
- Include autopay information as part of the new resident onboarding process. For example, you can demonstrate how easy it is to set up and use autopay.
Monitor and adjust
Keep track of the autopay enrollment rates and resident engagement.
- Monitor the rates over time
- Regularly gather feedback from residents on their experience and make improvements to the process.
- Be ready to tweak your approach based on what works best for your residents.
By effectively communicating the benefits, offering incentives, and simplifying the process, you can encourage more residents to sign up for autopay. This will benefit them and enhance your property management operations.
Additional tips for promoting autopay
Provide customizable templates for property managers
Provide email templates, flyers, and other promotional materials that property managers can quickly customize and use to promote autopay at their location.
Integrate incentives automatically
Set up your property management, marketing, and/or email software to automatically include incentives when residents sign up for autopay. This is the ideal approach since residents get immediate gratification when they complete the action (vs having to wait or go somewhere to collect it in person).
For example, set up the autopay enrollment confirmation email to include the relevant perks for signing up. This way, the resident sees their reward right away. You could also do the same thing inside your resident portal.
Address FAQs from residents about autopay
Document common questions about autopay and post the FAQs on the resident portal or provide them as a handout. For example:
- How does autopay work?
- Is there a fee for using autopay?
- How can I sign up for autopay?
- What happens if there's a problem in the autopay process?
- How can I change or cancel my autopay settings?
Common challenges and solutions
Challenge 1: Effort vs benefit
Some residents may feel that signing up for autopay isn’t worth the effort, even if the process is easy.
The solution is to increase and communicate the value:
- Demonstrate value: Clearly communicate the tangible benefits of autopay, such as avoiding late fees, saving time, and ensuring hassle-free payments.
- Make it worthwhile: Provide compelling incentives that make their effort worthwhile. These could be one-time discounts, rewards, or entry into exclusive raffles for those who sign up.
- Streamline the process: Ensure that the autopay sign-up process is as simple and quick as possible. Consider offering mobile-friendly sign-up options and provide step-by-step guides to ease the process.
Challenge 2: Technical issues with the online portal
Residents might find it difficult to complete the process on the online resident portal. For example, they might not understand how to navigate the portal or which settings to choose during enrollment. Or, they might have tried to sign up while the resident portal was undergoing maintenance.
The solution is to make sure it's easy to find and complete enrollment and provide residents with help and guidance as needed. This could be in the form of step-by-step instructions, video tutorials, or in-person walkthroughs.
Challenge 3: Resistance to change
Some residents may be resistant to changing their current payment methods due to habit or distrust of new systems.
The solution is to overcome that resistance somehow. For example, offer small incentives to encourage the switch, such as discounts or rewards. Highlight the convenience and reliability of autopay, emphasizing how it eliminates the hassle of manual payments and reduces the risk of late fees. Demonstrating the reliability and security of your autopay system.
Challenge 4: Lack of awareness
Residents might not actually be aware that autopay is an option. It might seem obvious, but moving can be hectic and it's not always easy to keep track of the finer details like setting up autopay.
So, increase awareness through the various communication channels (emails, flyers, website, etc...). You don't want to overdo it to the point of spam or frustration. Choose the right mix of channels and cadence that make the most sense for your community.
Metrics for measuring success
It's good practice to understand how you'll measure the success of your efforts to increase autopay enrollment.
The key performance indicators (KPIs) we encounter most often are:
- Autopay enrollment rate
- Definition: The percentage of tenants enrolled in autopay compared to the total number of tenants.
- Calculation: (Number of Tenants Enrolled in Autopay / Total Number of Tenants) x 100
- Target: Aim for a steadily increasing enrollment rate.
- Notes: You can break this metric down per period
- Reduction in late payments
- Definition: The decrease in the number of late payments after autopay implementation.
- Calculation: (Number of Late Payments Before Autopay - Number of Late Payments After Autopay) / Number of Late Payments Before Autopay x 100
- Target: Significant reduction in late payments.
- Improvement in cash flow
- Definition: The increase in timely rent payments leading to better cash flow management.
- Calculation: Measure the variance in monthly cash flow before and after autopay implementation.
- Target: Stable and predictable monthly cash flow.
- Decrease in administrative costs
- Definition: The reduction in costs associated with manual payment processing and collections.
- Calculation: Compare administrative costs related to payment processing before and after autopay.
- Target: Noticeable decrease in administrative costs.
- Increase in retention rate
- Definition: The increase in the percentage of tenants who renew their leases.
- Calculation: (Number of Lease Renewals / Total Number of Tenants) x 100
- Target: Higher retention rates year-over-year.
- Notes: You may also want to compare this to the same metric, but filtered to only residents who are enrolled in autopay. While not perfect, it can give you a very basic signal as to how retention compares between the two groups.
- Tenant satisfaction scores
- Definition: The overall satisfaction of tenants with the autopay system.
- Calculation: Use surveys to measure tenant satisfaction before and after autopay implementation.
- Target: High satisfaction scores and positive feedback.
- Customer support requests related to payments
- Definition: The number of customer support inquiries specifically related to payment issues.
- Calculation: Track the volume of payment-related inquiries before and after autopay implementation.
- Target: Fewer support inquiries, indicating a smoother payment process.
- Cost per payment processed
- Definition: The average cost incurred for processing each payment.
- Calculation: Total Payment Processing Costs / Number of Payments Processed
- Target: Lower cost per payment due to automation.
There are many other KPIs, and it's easy to get quickly overwhelmed. You don't need to track every single metric for the program to be successful. It's more important to track the metrics that are important to your business and that you use to make decisions.
