Utility cost recovery is critical to maximizing a multifamily property’s NOI. Non-payments (and late payments) impact cash flow and the homeowner or property manager’s ability to properly budget.
Of course, a number of factors impact utility cost recovery. But (arguably) the most important – resident billing itself – is too often overlooked.
Why does billing matter so much? The answer is a mix of logistical and psychological factors. In this post, we’ll take a deep dive into three core ways that your billing – outsourced – can improve utility cost recovery.
Utility Billing Best Practices
- Positive resident experience
- Predictable timing and cadence
- Fair, defensible bills
Creating a Positive Resident Experience
“X” acronyms are everywhere these days. Thing about “CX,” for “customer experience.” “UX,” for “user experience.” “BX,” for “buyer experience.” And the list goes on.
Here at Livable, we like to talk about “RX” – Resident experience.
Creating a positive resident experience is crucial in retaining tenants. It’s far easier to retain a good resident than it is to find a new one. The costs of advertising and showing a vacancy – to say nothing of $0 rent when a unit is empty – add up fast. And while paying a utility bill is nobody’s favorite task, you can make it as painless as possible by using our custom RUBS or our net-zero billing system. That means a happier resident – one having a better experience, and one more likely to renew their lease.
A simple task such as paying a utility bill can be made more manageable by using custom RUBS or net-zero billing systems. This leads to happier residents who are more likely to renew their leases, reducing the costs associated with finding new tenants to fill your units.
Ensure Predictable Timing and Cadence of Billing
It is crucial to send utility bills at the same time every month, ideally on the same day of the month. You wouldn’t want bills arriving randomly and neither do your residents. This consistent timing and cadence can prevent financial hardship for your renters and reduce the likelihood of delayed payments. Establishing this cadence early in the homeowner-resident relationship and sticking to it is vital. The easiest way to do this is to engage with a professional billing company dedicated to just that.
Make Sure Bills are Fair and Defensible
Residents not paying or paying late can be a significant financial burden for housing providers. It is essential to have fair and defensible utility billing practices in place to ensure that tenants receive bills they feel are justified. A well-planned Ratio Utility Billing System (RUBS) can capture and bill a resident's actual usage as accurately as possible. This system creates a sense of ownership among residents, as they can see how their actions affect their expenses month-to-month. Studies have shown that individually calculated utility bills can reduce water, gas, and electric usage by up to 35%.This not only benefits residents by saving them money, but it also reduces your master utility bill costs. By having a lower bill, it also reduces the percentage of utility costs that can't be recovered.
That’s why fair, defensible utility billing practices are so important. If a tenant receives a bill they feel is unjustified – “How could I have used that much?” – the likelihood increases that the utility bill will go unpaid.
This means two things:
- Residents save money – and have the ability to directly impact their savings. This creates a differentiating factor for properties where billing is perceived as fairer.
- Your master utility bill is lower. There will almost always be some percentage of utility costs that can’t be recovered because of things like lobby lighting and lawn watering. If that number is 5%, it’s better than it’s 5% of $65,000 versus 5% of $100,000.
While there are many factors that contribute to recovery rates, arguably none matter more than the billing itself. If bills aren’t backed by solid customer service, delivered consistently and fair, recovery will suffer. And that’s a direct hit on your property’s NOI.
We’re not saying this is easy – far from it. A housing provider or property manager – even one with several full-time staff members – probably doesn’t have time to do all we’ve listed above.
That’s why firms like Livable exist. We specialize in handling all aspects of utilities for mid-sized and large owners and property managers across the United States. We take care of the RUBS system, Submetering setup (partnering with resellers and installers of submeter) to substantially lower your cost. Best of all, it all comes at effectively zero cost to the housing provider.
If your goal is to maximize utility cost recovery, Livable should be your next call. Learn why owners and property managers of tens of thousands of units trust us every month – connect with us here.
