Why Accepting Rent in Cash is Old SchoolJanuary 31, 2019
There are plenty of ways to accept rent payments. Some landlords deal only with cash while others avoid this option, stating that cash rent payments send shivers down their spine. As there is no official cash policy that could regulate cash transactions, some landlords select other methods to accept rent payments. To mitigate the risks inherent with any financial operation, many landlords are switching to digital forms of payment to collect rent payments online and keep track of each transaction.
Let's convince ourselves that receiving cash rent payments is a bad idea.
The simplest and most popular scenario for accepting monthly rent payments is to meet a tenant in person, receive the full rent amount, and happily get back to your business. But it doesn't always work like that. The tenant might be $50 short when leaving the rent amount in the envelope, or pay late and afterwards deny it. Without counting out loud in front of your tenant, it'll be hard to prove that the rent hasn't been paid in full. That's why signed receipts matter so much when collecting cash from tenants. Additionally, a copy of the receipt with the tenant's name, signature, and paid date is highly necessary. With a receipt in hand, you're unlikely to have any disputes with your tenants having to do with cash payments. Keep in mind that it's totally fine to receive rent in cash if you have only a few tenants living in the neighborhood or you're renting to close friends or relatives you fully trust.
But what is the main reason landlords still accept cash from all tenants? They aren't trying to avoid the IRS or to engage in illegal business. It's just that bank transactions can take up to six business days to clear. That's why landlords stick to cash payments - to avoid bank delays.
The alternatives to cash rent payments.
Since cash payments are difficult to document, let's consider other modern options as possible alternatives. If your tenant doesn't have a bank account (yes, it happens even these days), a money order or a personal check might work. Money orders are available at post offices and drugstores. They can also be sent via email. But a tenant should be aware that they have to pay for a money order on a monthly basis. A personal check may be an old-fashioned way to provide transactions; however, some landlords prefer this method for receiving rent payments. Remember that sometimes the overall process may take more than ten days to complete. Also, it's not that easy to verify if there are enough funds in the tenant's account to cover the full rent amount. You'll never know unless you've previously reached out to your tenant and received accurate information. Payments provided via credit cards are still popular among landlords and property managers. It's considered a secure method, but most credit card payment platforms require transaction fees from a landlord or tenant. Also keep in mind that the tenant can dispute the charges. Not a common scenario, but you never know.
Most property management software systems like TenantCloud offer online payment options that are secure and convenient for both landlords and tenants. For instance, TC Payments powered by Dwolla seems to be the best way to collect rent online. You can see the due date as well as the amount owed right in your TenantCloud account. Should a tenant be late with rent, they will receive notifications and notices indicating how much they owe and when late fee invoices will be generated. In addition, since funds can be deposited directly into your bank account, you save time.
Thus, the benefits of online rent payment tools are obvious:
Transactions can be made from anywhere
It's easy to keep track of transactions
The accounting is well-organized and available at any time (heaven for perfectionists!)
There is no need to meet tenants in person each month just to get cash or a check
Tenants aren't given access to your banking information
Less mistakes are made when calculating security deposits, management fees, late payments, discounts, etc.
If you still receive rent payments in cash, it's high time to reconsider the matter by rereading this article and switching to a digital payment tool to collect rent online.
What methods do you use to accept rent? Do you collect rent online? Are there any recommendations you'd like to share? Leave a comment below - we'd love to hear your thoughts on the topic. :)