Recently, a Web-based property management software solution provider announced that it had added a utility billing component to its application. It was billed as “the first property management system to offer do-it-yourself utility billing” and considered by the company as a major enhancement. The company even pitched the offering as a way to capture new billing service fee revenue.
While making it easy to calculate utility bills and print statements is a nifty feature, it’s important to note that the resident utility billing process is time and labor intensive, and profit margins are razor thin. If you’re an owner or property manager who’s already overloaded, you might consider outsourcing the Ratio Utility Billing System (RUBS) or submetered billing process, to a professional. Here’s why.
Utility billing is by nature a low cost, low margin business. Billing service providers charge a small administrative fee, usually in the $2.50-4.25 range (per resident) to calculate, print, and mail monthly bills. This fee often includes processing resident payments, providing customer service when residents call with questions, and accounting for all transactions. Most billing providers offer electronic billing and online payment services to give residents multiple payment options.
The “hard costs”–postage, paper, and envelopes–alone are nearly $.90 per bill. Then, there are costs associated with billing software, Web portal hosting, and fees for electronic payment processing. Before you know it, gross profit for the billing provider is less than $1.00 per bill.
And we haven’t even factored in the cost of performing other billing-related tasks such as: entering the master-meter bill data, verifying accurate bill calculations, knowing the state regulations that must be followed, printing, stuffing, and posting bills. In addition, it’s very laborious to collect checks, administer electronic payments, account for all transactions, and make bank deposits.
Similar to grocery stores, billing companies are able maintain a sustainable income stream when they can generate enough volume, i.e. contract to send enough monthly bills. Usually, this is on the order of 10,000-20,000 bills per month. If your apartment complex consists of 200 units, monthly billing is inevitably going to cost you money to administer.
Since most billing companies’ administrative fees are paid by the resident, and the process adds a lot of work for the manager or owner, it’s almost always a smarter decision to engage a competent billing provider to manage this process. Being able to calculate bills in your property management application is neat; performing all the associated billing tasks each month is probably more than you’re interested in handling.
Todd A. Brehe is Director of Client Education at American Conservation & Billing Solutions, Inc. (AmCoBi), an affordable multifamily utility billing services provider. To learn more about the utility billing process, and how it can help your multifamily complex increase cash flow and save money…visit AmCoBi’s website, www.AmCoBi.com and download, “The Multifamily Owners Complete Guide to Resident Utility Billing.”
About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.com