Choosing a vendor
If you own or manage multifamily residential units--apartments, condominiums, student housing, affordable housing, manufactured homes, or military housing--you are probably involved in utility billing in some fashion. Utility expenses for these types of properties can be substantial so most owners look for effective ways to manage these costs.
The Master-Metered Complex Predicament
It's common for multi-tenant commercial and multi-residential properties to be "master-metered." Master-metered properties receive a single utility bill that includes consumption for several tenants. The problem with master-metered properties is that there's no way to bill tenants for their actual usage.
This has led owners to use different methods to divide utility bills so that they can recoup the tenants' share of the overall utility expense. In fact, transitioning a multifamily complex from owner-paid utilities to tenant-paid utilities can be one of the fastest ways to boost net operating income (NOI).
Utility billing is usually managed in two ways:
- Internally by owners and property managers
- Externally by a third party utility billing service provider.
While some owners prefer to manage utility billing "in-house," billing providers have invested extensively in software tools and technologies to streamline the process so that it is efficient, affordable, and well-supported. Multifamily utility billing is a task that can successfully be outsourced, saving property owners and managers significant time, effort, and money.
Choose a Billing Provider Wisely
As with any outsourced service, you'll want to pick a provider carefully. Common industry problems include:
- Inaccurate and late resident bills
- Unresponsive customer service for residents and management staff
- Under- and overbilling.
The impact of these problems can be quite problematic for owners. Consider the following as examples of how you don't want your billing company to perform:
- A company underbilled two multifamily properties, comprising more than 500 units, by nearly $500,000 over a three year period. The owner has sued the company in court to recover the losses
- A multifamily owner in the northeast upgraded his apartment complex's heating system with new, high efficiency furnaces. The billing/submetering company reinstalled the heat metering system, but did not adjust the billing method to account for the new equipment. The result was that tenants were consistently overbilled for several months before the error was discovered and substantial credits had to be issued
- A large utility billing company was charged $50,000 by a state Public Utility Commission (PUC) for overbilling tenants at a 367 unit complex
- A billing services provider managing 80,000+ bills each month routinely sent more than 50% of those bills out late
- A company servicing a 400 unit complex in TX had allowed the billing to fall behind and tenants were receiving bills three months in arrears. This reduced the amount of money collected by the owner and made it nearly impossible to collect for unpaid utilities when a resident moved out.
Service Issues to be Aware of
The quickest way to irritate tenants and spur high volumes of calls to the leasing office is to send bills to the wrong residents, calculate those bills incorrectly, or deliver them late. Inaccurate bills undermine resident confidence in the billing process and lead to vocal complaints--sometimes to the public utility commission. Late bills create hardships for residents because they result in a shorter timeframe to pay. Utility billing works best when it's managed in a consistent, reliable, professional manner.
Poor customer service--e.g., unanswered or unreturned phone calls/e-mails, or untrained call center staff providing incorrect information--will most certainly generate tenant criticism. Fast, friendly, responsive service is the key to a successful resident utility billing program.
Utility billing generates a substantial amount of data that owners usually want integrated into their property management and/or accounting systems. If the only option available to staff members is to manually enter this data, the process can be very time consuming, labor intensive, and prone to error. Be sure to address this function when selecting a billing provider.
Utility Billing Service Options
The basic set of services offered by utility billing providers includes:
- Resident bill calculation, printing, and delivery
- Utility payment processing
- Electronic bill presentment and online payment options
- Property management/accounting software integration
- Late payment administration and collections.
Billing companies also offer ancillary services such as convergent billing, vacant cost recovery, and utility expense management.
Selecting a Billing Services Company That Meets Your Needs
Because multifamily owners have a wide range of requirements and billing companies offer a diverse set of services, it's often the case that a specific billing provider will be better suited to manage your portfolio. It's important, therefore, to clearly outline your requirements so that they can serve as a guide during your evaluation process.
Asking a prospective utility billing company the following questions will help you conduct a thorough evaluation and choose a service provider that that best meets your needs.
- What types of billing does the company administer: submetered, RUBS, flat fee, etc.?
- What billing services are offered: convergent billing, electronic billing, vacant cost recovery, payment processing, etc.? [Which services do you require?]
- What type of electronic payment options are available, e.g. electronic check, credit card, ACH, autopay, etc.?
- What are the costs associated with online payments? [It's common for online transaction processing companies to charge a service fee of 3-4% for credit and debit card transactions.]
- What is the process the vendor follows for ensuring accurate utility bills? [Vendors should incorporate a data analysis and audit process to ensure that billing data is accurate.]
- How and when are utility bills estimated? [Some states have strict rules about when and if bills can be estimated.]
- If bills are sent to residents that are inaccurate or late, what recourse is available to the property owner/manager?
- Describe any performance guarantees offered. [Many billing companies offer refunds or pay financial penalties if they are the cause of an inaccurate or late billing.]
- If the company has a performance guarantee program in place, what is their track record for the last 1-2 years?
- How does the company provide customer service to residents and management? [If the company provides a customer support line, ask for the phone number, call in and see what kind of response you get.]
- What is the typical response time for a resident or staff member to receive an answer to an inquiry? [Expect response times in the 1-2 hour range.]
- How are customer service representatives trained?
- Does the company track performance metrics related to its customer service department?
- What is the company's track record for the last few years?
- What is the problem escalation process for more difficult issues? [Depending on the type of problem, you want to confirm that staff members at the executive management level are available if needed.]
Account & Billing Data Integration
- How is move-in/move-out data exchanged? [The data exchange process should be highly automated and require very little manual data entry.]
- How is convergent billing data transferred? [Rent, cable, Internet, trash and other fees can be added to utility bills to encourage timely payment.]
- What is the process for synchronizing billing and payment data with your property management or accounting system?
Legal & Regulatory
- Does the company understand the regulatory and legal issues regarding your state, county, and city? [Essentially you need to confirm that it is legal to bill for utilities using the method of your choice in your area.]
- How does the company assist with legal compliance?
- Will the company review your lease agreement?
- What type of billing contract is used?
- If the billing company fails to perform satisfactorily, what options are available for terminating the contract?
- Is or has your company been involved in any lawsuits related to its utility billing/submetering services?
- What reporting information is provided to management? [Review sample management reports to ensure that the information you require is included and is easy to understand.]
- Can reporting be accessed online? [It can save staff members a lot of time if the vendor offers a management portal or other web-based interface for viewing and printing management reports.]
- Can reporting be customized for your portfolio? What are the fees associated with customizations?
- What submetering installation and repair services are offered? [If your property is submetered, working with a billing company that offers submetering installation and repair services can be advantageous because these systems require routine maintenance.]
- How are repairs scheduled and managed?
- What analysis is performed on usage data to detect leaks, meter problems, or potential maintenance issues?
- How are master-meter bills handled?
- How are final utility (move-out) bills for residents created?
Developing a clear set of your own requirements and posing these questions to prospective utility billing service providers will aid in your evaluation process and ensure that the company you select can meet your expectations. Utility billing should be a very seamless process requiring minimal time and effort on the part of your staff. It should also maximize the amount of money you can legally collect with a utility cost recovery program. The best utility billing companies are responsive, flexible, and committed to providing outstanding service to all stakeholders.
About American Conservation & Billing Solutions, Inc.
AmCoBi offers affordable, professional utility billing services for the multifamily industry. AmCoBi helps owners and property managers improve profitability, reduce utility expenses, and save money.