With investment properties being big business in Australia – more than 1 in 5 Australians1 have investment properties – many property managers are looking for software solutions to help them manage their business and property portfolio in more efficient ways. Solutions that offer an excellent end-to-end payment experience within their platforms have a competitive advantage and happier customers.
Rental collections are a crucial aspect of financial management for property managers, and the larger a portfolio of properties are, the more complicated payments and reconciliation become. Processing rental payments on time and ensuring funds are accurately split for payouts between vendors, suppliers, and landlords is essential. However, this is not a straight-forward process. Fees and charges have to be debited before regular payments can be transferred to the property owner. And every month there are likely to be varying (e.g. utilities, insurance) or unplanned (e.g. repairs, maintenance) costs to be deducted.
On top of this, real estate agents have to be compliant with and keep abreast of any changes to regulations that vary from state to state, while also managing the various contracts they may have for commercial properties or short-term rentals.
The flow of funds in Property Management
The property management industry has complicated payment flows, let’s look at a relatively simple one:
- A property manager has an agreement with an apartment landlord to manage their property, collect rent, and pay regular bills such as strata and water, as well as ad hoc needs such as repairs.
- The property manager has a Direct Debit agreement with the tenant, where the rental payment is deducted from the tenant’s bank account once a month.
- From the rental payment, the property manager deducts their fee, pays any bills, pays suppliers such as plumbers, and then the remaining amount goes to the landlord.
All of these payments, including how one rental payment is split between multiple parties, needs to be reconciled and documented. Where this gets more complicated is where one landlord holds multiple properties with the same manager, one supplier services multiple properties, or disputes in payments and refunds arise. That’s all in addition to the regular business administration tasks of bookkeeping, invoicing, and accounts payable.
Collecting rental payments, splitting the outgoing costs, and keeping the finances neat and tidy is a time-consuming and tedious task. That’s why property management businesses are looking for software that does this for them.
These software solutions have a huge opportunity to modernise payments in the property sector.
PropTech payments are changing
A large portion of rental payments in Australia are processed via Direct Debit, a traditional payment method that causes frustration for both tenants and the property managers because it is slow and inflexible.
Direct Debits are processed through the Bulk Electronic Clearing System (BECS) which facilitates bank-to-bank transactions. To do this, a property manager must manually collate all the rental payments into essentially a giant spreadsheet. They submit this file to the bank, who checks it, and completes the transactions. This process takes days to complete. If a payment fails, it takes days to even find out that something’s gone wrong.
Although rental payments are usually scheduled for a weekday, they can still be interrupted by public holidays and other account-related delays. If a payment fails due to insufficient funds, for example, the confirmation of that also takes three business days, so chasing it up can extend that timeline even further, impacting cashflow.
It's no surprise then that this system is no longer considered fit for purpose and is being phased out by the RBA. Treasurer Tim Charles said, BECS’ “policies and regulations predate the development of mobile payments.” By 2030, BECS will be decommissioned and so the move to PayTo has already begun. Soon, this will be the preferred method for collecting rental payments.
PayTo is a real-time payment method that not only improves the cashflow of the business receiving the funds, it also comes with a slew of other benefits:
- Instant notifications if a payment fails or is incorrect
- Verification of funds before attempting to withdraw from an account
- Automated reconciliation of all transactions in and out (offered by Monoova).
Read more about the differences between PayTo and Direct Debit here.
Monoova for Payment Solutions, tailored to Property Management
Monoova's first rate payment solutions are a great offering for property management software looking to transact funds within the platform. Monoova not only offers direct debit, PayTo, BPAY, and card and digital wallet payments, our API-based approach makes us an ideal technology partner.
Developers and technical teams can access our API documentation here.
Monoova doesn’t stop with just transactions. For platform solutions, segregating your customer funds is a must. Our ledger product creates a digital segmentation of funds and reconciles each account as well as your overall account, keeping your customers funds safe and transparent.
Our API enables real-time notifications, workflow automations, customisable reconciliation rules to action a mispayment without bothering your team, and comes with industry standard adherence to regulations for security and payments.
"We saved two FTEs at least 50% of their time which was spent on reconciliation. Now they can focus on customer support. It's dramatic for a small team."
Christiaan Lok, CTO, Rello
If you're ready to hear a good news story about the property rental market, talk to one of our experts or download our one-page explainer: Real-time funds for Rental Collections to see how Monoova can benefit your property management platform.
1https://www.afr.com/policy/economy/australia-has-passed-peak-property-investor-20241023-p5kkrc
