Now most people would think this talks about accounting or your checkbook. Others might think it has to do with keeping a balance on life or what you do professionally. As property managers we work with finances and deal with many areas. Sometimes we focus on the balance sheet or financial report and are slow to make changes, not really understanding or analyzing things like how some of the numbers impact the bottom line. When we see occupancy income, concessions, and in particular bad debt, what does it mean other than just a set of numbers? It can mean the difference between cash flowing and meeting goals or not.
Tied to these financial areas are two important aspects including the applicant checks and the handling of unpaid balances. We have many options when it comes to resident screening, most accessing the same information to provide your data. We also need to take into consideration there is a delay between when negative information is provided to the credit agencies and when it will show up on an account, which includes late payments, judgments, evictions, etc. Approval, conditional, and denial parameters can be set with any of the software programs, which provide guidance in reaching your decisions. One of the most useful technology changes we have had over the years is having these systems, which takes subjectivity out of the approval process. In the past we received a credit report from one of the reporting agencies (Equifax, Experian, TransUnion), looked at the data, and made decisions with many variables to consider. Today the variables can be programmed in, providing for a better handling of Fair Housing issues as well as a way to set and track scoring as markets and the economy changes. In addition to Fair Housing and the data tracking, many other tools such as "what if" scenarios are available...but seldom used. A recent conversation with a property manager brought up the first part of this topic, the "checks" aspect. She said her corporate office set all the guidelines and "what if" or other database information was not reviewed with her regional or anyone from corporate. She basically said, "I've been told it wasn't my job!" My response to her was, if no one else is offering why don't you ask to review and provide input. She indicated they were recently seeing more conditional and denial responses, her occupancy was being challenged, and she basically felt the blame was on her. Not the first time I have heard this coming from a site manager, and probably won't be the last. She had called me as she felt her position was in jeopardy, and since I was no longer her regional (which we used to review and revise based on her recommendations when we worked together) this aspect of oversight had been taken out of her hands but not the responsibility. So let me understand this correctly, we want to hold them accountable but not give them the responsibility that goes along with it! I politely told her to approach her regional and if she did not get anywhere...she might want to give her resume a review. The ease with access of this information so you can monitor and evaluate (being pro-active versus re-active), the rapid ability to make changes because of technology, and the ability to use the tools available are what makes these systems so great. The other thing I hear managers say is they may review quarterly and make adjustments, even though market conditions as we all know can change weekly. Unfortunately in our changing environments and quickly changing economic conditions, by the time you make the changes it is too late. What we would have given for these tools to be available even fifteen years ago, and to see them not being used to their fullest is shameful.
The other part of this is the "balances" aspect. We all know the job market is let's say "challenging," and this is not to mention with higher gas and other expenses the trend seems to be witnessing higher evictions and collection issues. The days of "promise to pay," or payment plans I believe have ended. Once someone is in financial distress, looses their job, or simply does not budget and manage their finances well, the handwriting seems to be on the wall. Four areas of prompt response and action are critical to minimizing bad debt, however, we appear to have conditioned our management teams to stay with the old standard ways of handling.
1. Review the application and credit report for credit card data. Managers may ask a resident who is late when they can pay (with promises that many times go unfulfilled), and of course send the "legal" notifications as required by state statute and company policy. Those legal notifications and policies should continue, however, in this day and age we need to look outside of the box and maybe look at the credit information. "Mr. Smith. As you may be aware to handle this from an equable position as well as from a legal standpoint, we do not have any options other than what is being done. We often find residents have options they have not thought of and that would be to use credit card resources in challenging times to bridge their situation. In reviewing your file, we see you have open credit card lines which may be able to assist you in avoiding necessary legal action." Also asking if they have relatives or anyone that can assist them is not out of line. This also many times diffuses some of the tensions as landlords (those evil people), and lets them know we are also looking at all solutions and not just the legal solution.
2. Process all necessary notices and file or submit for legal action consistently in the shortest time possible. Waiting a few extra days sets precedents, which also can have legal ramifications, and sends a message to other residents that it may be ok to not pay your rent on time. This delay can also raise Fair Housing issues, which you do not want to deal with. Being selective on who you file on because "Mrs. Smith is always late but she eventually pays," can also bring about litigious concerns as well as fiduciary ones as representatives of an owner. Collecting money is part of what we do as property managers, and while it is not the most fun thing to do it is our job. Don't like it...find another profession. It is also a proven fact the sooner you turn or begin collection efforts, the better you have a chance of collection.
3. One of the frustrations I hear from managers is by the time a judgment is posted through the court system to the credit agencies, the non-paying resident has already found a new apartment. The Fair Debt Collection Practices Act does not state you cannot turn over money owed to a collection company before you get a judgement, which can in turn report the amount owed to the credit reporting agencies. Make sure your documentation including lease allows this, as well as any state statutes are not preventing you from moving forward with legal action and allow for this type of action. Just be reminded, if you turn over to a collection agency you will owe them a fee if they collect.
4. Don't be afraid to ask for the apartment back if they say they have no options and will not be able to pay. Give them the benefits, which do not negate your ability to seek the money through collection efforts. You may find several benefits here. (1) You mitigate the bad debt on your financial. (2) You can get the apartment back to turn and get ready for a "paying" resident. (3) You avoid legal and court costs which in many cases you cannot recapture.
Many managers I find do not look at the options they have and how to handle outside of the ways things have always been done. I urge leadership to give them responsibility, encourage out-of-the-box thinking, and work smarter and not necessarily harder when it comes to financial and other management/leadership issues.
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