Late Fees
When you are the owner or manager of a self storage business, one of the decisions you need to make is how to handle your late fees. With the large number of tenants your facility will generate and the relatively small monthly expense, you are likely to run into several late payers.
If you end up with a large number of tenants paying late, you may find yourself in a cash crunch. In order to prevent that from happening, it is important to pro-actively collect from your late payers.
One effective method for giving your customers a reason to pay the bill is the use of a late fee. I’ve seen several different structures regarding charging late fees to tenants.
- Some charge a late fee one time a month – after a grace period of about 7 days. Perhaps a one time fee of $5 to $20.
- Other owners may charge $1 a day after a grace period until the balance is paid.
- Still other’s may charge a fee after 7 days, and another fee at day 14.
We have always gone with the first option, charging just one late fee a month, after the grace period. Most of our tenants do eventually pay – and it turns into a nice little revenue booster for us. I am considering trying out one of these other structures, however. It would be interesting to see how a change in late fee structure would impact:
Our late payers (will they pay up more quickly?)
Our bottom line (additional revenue in the form of additional late fees.)
Perhaps we will make the change at just one of our facilities to test it out. If we decide to do that . . . I will be sure to report the results here!
Date: February 7th, 2009 @ 15:11
Categories: management, self storage
