Having been a homeowner since early 1994, I feel pretty safe saying that I have tried almost every conceivable way to collect my residents’ monthly payments. I want to go over some of these methods and tell you the pros and cons of each technique. I’ll end by telling you what I do now.

Personal collections

Scheduling appointments to collect payments was never a consideration for me as a standard way of doing business. I am too lazy and consider it the resident’s responsibility to pay me if they want to stay. The advantage is that you know immediately who is getting paid and who is not. You don’t yet know if the check will clear with good funds, assuming you were not paid with cash or certified funds.

Of course, I have met with residents to collect payments on special occasions when the resident was late or trying to avoid late fees. Again, in my opinion, this is a waste of time.

I now have a designated place for residents to drop off payments if they want to go this route. Additionally, chronic defaulters lose the privilege of paying in any way other than with certified funds in the mailbox. Once they have paid consistently and on time for six months, I will consider going back to the standard payment system which I will discuss later.

If you decide to meet with your residents to collect, I recommend that you DO NOT meet at your personal residence. Don’t let any of your residents know where you live. In fact, my opinion is that you should have an unlisted phone number for your particular line and that you should spend as much time as necessary deleting personal information from various Internet directories. Sorry about the tangent here, but I thought it was important enough to include it.

I do not recommend this method because it requires too much effort on your part.

The check is in the mail

This is probably the way they all start. The payment does not arrive and the resident claims that it is in the mail. If it comes, is it good? Who knows? The advantages of this method are that it is very common and, if you have a large tenant, it can be an easy way to collect payments.

Disadvantages include reliance on resident memory to write the check, address the envelope correctly, post the correct postage, and mail the payment. Also, you then rely on the postal service to deliver the payment to the correct address and in a timely manner.

I’ve even gone so far as to provide payment coupons and self-addressed envelopes to residents to eliminate some of the risks associated with this methodology. I did not find this extra effort to make a noticeable difference in results.

I do not recommend this method as it requires a lot of participation from your resident.

The resident makes the deposit

I realize that many of you will be completely opposed to this idea, but I have tried it for years with some success. Before I have a drop box location, I would give my late payers a bank account number into which they could deposit the monthly payment directly.

Naturally, I went from that step to providing pre-printed deposit slips so that the name and account number were not inaccurate. In this case, this additional effort reduced monthly “I don’t have this or that information” phone calls from residents. I have never been so concerned about a resident attempting to withdraw from my account, although I am sure it is a possibility. To reduce this risk, you can have a separate bank account for deposits and transfer the funds to another account periodically.

Another consideration here is that you could potentially run into a botched eviction for accepting partial payments. Whether or not a judge considers a tenant making a small deposit in a last-ditch effort to avoid eviction as a “constructive receipt,” I cannot answer. So far, (knock on wood), none of the people I’ve evicted have tried this angle.

However, what will invariably occur is that residents WILL MAKE partial payments. The truck broke down, the legal expenses for child custody, etc. Exceed the priority shelter and the few remaining funds that remain end up in your account. So you’re left with the fun job of trying to determine who paid for what.

The advantages of this method are that you don’t have to go to the bank and if you have online banking, you will know in a day or so if the deposits are there. Again, you don’t know whether or not they paid in pennies or if they stole their neighbor’s checks, but at least you see the deposit made.

I don’t recommend this method as a standard way to get paid, but you might consider it for the good pay you just had a bad month.

Print the checks for them

(Thanks to Earl B. for the following advice)

I forgot when it was, but probably about eighteen months ago, one of my friendly competitors suggested that I give this service a try. One of his friends was using it successfully, so I signed up. It’s inexpensive and allowed me to sit down and print all the monthly payments at once. I signed up all the new residents and bribed some of my existing residents to join.

The service is presented to residents as an automatic wire service and they sign a one-page form authorizing you to debit their account. The program itself is a Windows-based software application that allows you to print these “Demand Drafts”.

The advantage is that payments can be set up as a recurring monthly payment and you can print them whenever you want. So instead of waiting for the mail to arrive, just sit at your PC and hit print. Checks come out of your standardized printer. In other words, you don’t need any special equipment. The first of each month (or whenever) just go to the bank.

Again, you don’t know if the resident has good funds or not, but at least he’s not waiting to make his deposit. One of the downsides is that you will have to buy checks, but I think I received 300 checks with my initial purchase.

Another advantage of using this software is that you can set up your own invoices so that each month you simply print your recurring invoices or a set of blank checks with your information pre-printed.

I don’t use this method anymore, but I can recommend it as it worked fine for me.

Direct deposit

For the last year I have been using a new service that I found. I looked everywhere for a quality, reliable direct deposit service that wasn’t designed for huge apartment complexes. Everything I found had a fee structure that valued it far beyond my reach.

Again, as before with the software application, I enrolled all of my new residents in it (company policy, don’t you know?) And bribed some of my existing residents to join as well. I think it’s fantastic.

Residents receive an email notifying them of the next draft and everything runs through the banks’ Automated Clearing House (ACH) systems, so I have absolutely nothing to do.

The resident’s account is automatically charged on the designated day and I receive an email the next day showing me which accounts were drafted correctly and which ones failed, if any. Three days after that, the funds are automatically deposited into my account.

Residents know it is coming, and because it is automatic, like other bank drafts, it requires no effort on your part. It also does not require any effort on my part. It is the simplest solution I have found and very affordable to boot.