By Russ Sandlin, MRI Real Estate Solutions

The Federal Reserve’s Automated Clearing House (ACH) electronic automatic transactions process is an option for time-crunched property managers who must administer rent check deposits each month. Sandlin explains how it can save time and money.

On or around the first of the month is usually when the rent is due and property managers begin receiving lots of rent payments—which is generally a good thing for a community. But processing all the checks that come into the office can be a very taxing process that every property manager must complete. Valuable service time would be better spent assisting residents and prospects.

“It is time consuming,” said Ginny Decker, a community manager for a Mid-America Apartment Communities property in Smyrna, Georgia. “During that time of the month it takes our assistant manager 3 to 4 hours every morning to process checks.”

Decker manages a 439-unit property and that means they are handling up to 100-150 checks a day during the first week of every month. Tracy Hall, senior property manager for two Archstone-Smith properties in the suburbs of Atlanta can relate.

“It takes a lot of time. You get about 80 checks that you have to go through manually. I enter them into the system, print out deposit slips, stamp them and then actually take them to the bank. It takes days to process them all,” said Hall.

While there is no “typical” system for entering rent payment checks into a property’s accounting system, the aforementioned companies, as well as many other companies across the country use a similar process. Residents drop off their checks or mail them to the property office. A person collects the checks and enters them manually into their accounting system.

“It isn’t the typing that is time-consuming,” said Decker. “It is having to look up the resident in the system and matching the check to the correct unit.”

After finding the correct resident and entering the appropriate information, a deposit slip is printed. All checks are then stamped on the back and personally driven to the bank. This process repeats itself each day, sometimes twice a day, until all the monthly rent has been collected.

So as the money begins to flow in, property managers are solely focused on entering checks. In many cases that time could be better spent serving residents and leasing to prospects.

“Ultimately, we generate revenue by working with our residents to make their living experience at our properties enjoyable,” said Hall. “You can’t do that when you are stuck in your office behind the computer.”

In an effort to shorten the time collecting rent, multifamily companies are considering alternatives to bill collecting through new technology. One alternative is electronic check scanning through the Federal Reserve’s ACH. Electronic ACH transactions automatically deduct rent payments from residents’ accounts and deposit them into the property’s account.

This payment method has become increasingly popular in other industries such as utility, insurance and credit card companies. According to the National Automated Clearing House Association Web site (www.nacha.org) in first quarter of 2003, bill payments $48 billion were made through ACH.

The NACHA represents 12,000 institutions and 650 industry organization councils. While issuers of credit cards are the most popular users of ACH transactions, it is easy to see where this type of technology could benefit the multifamily industry.

Instead of having to manually enter payments into a property management system, prepare manual deposits, and have them delivered to the bank, rent payments are automatically cleared through ACH electronically. The information is posted automatically in the property management accounting system.

As the popularity of paying bills electronically for consumers grows it is not hard to believe that residents will begin to want the same functionality in paying their rent.

The benefits of such a system are clear for property management companies. Property managers can virtually eliminate the time needed each month for data entry and trips to the bank to deposit checks. The rent payments would be posted to the community’s account within 24 hours.

To use the process the resident presents a paper check to the office, which the property manager scans using a new electronic image scanner. The property system records the check, posts the resident’s account and creates a batch file, which is sent to the community’s financial institution over a secure Internet connection. The funds are automatically deducted from the resident’s account and deposited in the community’s account. In the event of an NSF, the bank returns an e-mail with NSF notification and the system reverses the transaction.

With an automatic ACH check scanning system in place, many property managers would look at the first of the month rent collection as “the best of times.”

Property managers should check with their property management software provider to see if the ACH check scanning system can be used.