ACH can take the ache out of rent check processing: 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 mouth is usually when rent is due and property managers begin receiving 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, Ga. "During that time of the month it takes our assistant manager three to four hours every morning to process checks."

Decker manages a 439-unit property. They handle up to 150 checks a day during the first week of every month.

Tracy Hall, senior property manager for two ArchstoneSmith properties in the suburbs of Atlanta can relate.

"You get about 80 checks that you have to go through manually," said Hall. "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."

While there is no "typical" system for entering rent payment checks into a property's accounting system, the aforementioned companies, as well as many others 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 the 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 match 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 monthly rent is 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, making their living experience at our properties more enjoyable," said Hall. "You can't do that when you are stuck in the office behind the computer."

In an effort to shorten the time taken to collect rent, multifamily companies are considering alternatives to bill collecting through the use of 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 2003, bill payments totaling $48 billion were made through ACH.

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

To use the process, the resident presents a paper check to the office, which the property manager scans using an electronic image scanner. The property management system records the check, posts the resident 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.

INTERESTED IN CHECK SCANNING?

Does the idea of saving time and money each month in rent collection through electronic check scanning sound appealing? Here's how to get started:

1. Do Some Research. Check out www.nacha.org for information about electronic check scanning and ACH transactions. There is a wealth of knowledge about this type of service, resources to check out and links to other valuable Web sites.

2. Check with Your Bank. Depending on the relationship with the banking institution, it might make sense to set up an electronic ACH transaction system directly with the bank.

3. Talk to Your Property Management Software Provider. Most of the property management software providers integrate with third-party vendors that offer electronic check scanning services and can be consulted about the best way to implement such a service.

4. Go to a Third-Party Vendor. If your property management software provider doesn't integrate with a vendor that offers check scanning, one can be found through www.nacha.org.

THE SLOW WAY

Day 1 : Collect check from the resident.

Day 1-4: Post the check to the property management software, batch the deposit, go to the bank and receive validated slip for each deposit.

Day 11-14: Bank contacts property manager with "not sufficient funds" (NSF) check by telephone, fax, e-mail or mail.

Day 15: Contact resident about NSF rent payment.

Day 15-16: Collect second check or money order from resident, return "NSF" check to resident, including NSF fees and late charge. Hope the second check clears in time to close the books.

Day 20: Close the books on monthly income; explain any delinquent payments to supervisor.

THE FAST WAY

Ron Eshel Is president and CEO of TransZero Inc., a third-party provider of ACH solutions. He estimates significant time and cost savings in using a check scanning service.

"The rent is posted much quicker," said Eshel. "From a corporate point-of-view that means more working revenue earlier in the month. Plus, processing NSF (non-sufficient funds) returns normally takes 10-12 calendar days. With electronic scanning it is two calendar days."

"Depending on the software system the property uses, then is a 30 percent to 50 percent improvement in time spent processing payments," said Eshel.

If on average it takes seven minutes to process each rent payment (from the moment the check is collected until it is deposited), with check scanning will only take approximately three minutes to process. With 300 to 500 checks per month a property will see a significant reduction in time spent collecting rent.

Russ Sandlin is a business development manager at MRI Real Estate Solutions, Cleveland. He can be reached at [e-mail] or 800/321-8770.