Stop Waiving Your Late Fees!

Those Late Fees Are There for a Reason

Sometimes managers can be their own worst enemies by allowing customers to avoid paying fees. If they don’t act, payments are often late. I noticed that among the many stores we had, some managers were exceptional at collecting payments; they would promptly call customers before any late fees were incurred. On the other hand, managers who didn’t make the effort to call were not as effective. The issue is that they allowed customers to fall into late payment situations simply because they didn’t reach out.

Many customers might say they forget to pay, but proactive managers benefit everyone involved. It’s important to remind customers before late fees are applied, rather than waiting until after they’ve accrued. Why would you wait to call the customer? If you’re trying to help someone, it makes more sense to remind them before the problem arises, so they don’t feel frustrated with you later.

Some managers seem to have a routine of starting their reminder calls on the 10th of the month, but why not reach out on the 5th? A simple reminder that payment hasn’t been received can go a long way. Often, it’s not even necessary to have a conversation; just leaving a message or sending a text can suffice.

When Do Late Fees Normally Hit?

The typical grace period is about 10 days after the due date. While some states have a shorter grace period of around 5 days, generally nationwide, it’s about 10 days.

Customers are normally receptive to phone calls. However, some request not to be called. If a customer asks us not to call, we respect that, especially if they know the payment should be on autopay.

For example, if we call on the 5th, but a payment isn’t due until the 10th and the customer has it set to be deducted on the 5th, it may not hit our bank account on that date. Additionally, if they use bill pay, a physical check might still be mailed, which could also affect the timing of the payment. So, payments can sometimes be made on time or not.

Excuses, Excuses!

Let’s discuss the excuses we often hear from managers in the software industry. One that drives me crazy is seeing “courtesy waive” repeatedly listed on the same tenant ledger. Month after month, it appears as “courtesy waive first time,” and then a couple of months later, it shows up again.

As an auditor, it’s frustrating to see this happening repeatedly.  The home office is often unaware of this issue because it only sees the most recent entry. It makes me want to yell at them, “Just look at the reports! Check the fees waived reports!” If they did, they would see how much money is being left on the table.

It’s crucial to analyze not just one month but several. I usually try to pull up reports for three to six months, sorted by tenant, and the results can be shocking. The amounts are often ridiculous!

Notes Make a Difference

The problem arises when we don’t determine who did what and why. I rely heavily on notes to audit effectively. If someone writes “waived” repeatedly, I get confused—what about “waive one,” “waive two,” and so on? It’s crucial to count and keep track; otherwise, it becomes chaotic.

There are exceptions.  Take, for instance, an elderly former customer of mine. Her issue was that she received her Social Security payment on the 15th, but her rent was due on the 10th. As a result, she consistently incurred late fees. I suggested changing her due date to better align with her pay date.

This isn’t rocket science! For older customers, it’s often just a matter of helping them out. If they’re on a fixed income, they can’t easily change their situation. She showed me her check, explaining when it was postmarked and when she actually received it. She was sincere and nice, and I turned to the manager with a plea: honestly, can’t we address this? The manager doesn’t need my permission to make adjustments; managing is what they’re supposed to be doing.

Don’t Let Customers Run Over You

We had one tenant who came into the store, arrived in her Rolls-Royce, and was late on her payment. She wanted us to waive the late fee for her, and she’d already had it done multiple times before. I was there and thought to myself, “Look, she’s already had this done so many times.” When I told her that we weren’t going to do it for her again, she replied, surprised, “Oh, you’re not going to do it for me?” I explained, “Ma’am, you’ve had this done plenty of times already. We need to consider changing your due date since we know you’re going to be late every month.”

What was her excuse? It seems she just keeps forgetting to pay on time or something. She mentioned she was on vacation!  Not a valid reason to change her due date.

How Do You Tell Customers, ‘No More Late Fee Waives’?

I tell them calmly, “I apologize, but I must clarify that I can’t do anything beyond what I’ve already done. If you have any further complaints, you’ll need to escalate them to someone above me, as I’m unable to take any further action. “

Perhaps you could suggest alternatives, especially if the issue concerns individuals receiving monthly government checks. For instance, consider moving the payment date from the 1st to the 15th; it wouldn’t cause significant issues, and you could easily prorate it. In the case of the elderly woman, I would recommend not even asking her for the prorated amount—just give it to her.

It simply isn’t worth the potential negative publicity that could arise. I believe managers should think creatively and recognize that not everyone gets paid on the 1st. Some people receive their funds on the 10th or the 15th due to various subsidies, and without this flexibility, they would struggle to make payments on time each month.

Owners, LOOK at Your Fees Waived Report!

There’s a significant issue with managing collections at the beginning of the month. I would suggest that for properties with over five or six hundred units, you should avoid processing everything on the first of the month. This is because all the payments come in at once, overwhelming your managers who then must deal with a backlog of late payments and other issues. It becomes particularly challenging if you’re managing 1,500 or even 2,000 units.

We’ve conducted numerous audits, and whenever we review the total number of waived late fees each month, we’re always frustrated. A key takeaway is that you should regularly check your ‘Fees Waived’ report monthly. Examine the total number of waived late fees, and you may notice that around 90% of these waivers are unjustified.

It’s crucial to get this under control. Encourage your managers to stop waiving fees unnecessarily and to accept the fact that some customers will owe late fees. Instead of trying to alleviate the situation, tell your managers to make it clear that there’s little that can be done about the late fee charge; it is policy and comes from the home office.

It’s worth noting that a common belief is that around 10% of your customers will pay late each month. It might be beneficial to reach out to these customers and ask, “I’ve noticed you tend to pay late. Is there anything we can do to assist you?”