Last editedDec 20222 min read
Landlords and property managers collect rent in a variety of ways, including via cheques, bank transfers and card payments. However, setting up Direct Debit payments as a means to collect rent is growing in popularity due to the convenience it offers both landlords, property agents and tenants.
In this post, we’ll explore why Direct Debit is a great option for rent collection, discuss the benefits it can offer and guide you through how to set it up.
Why use Direct Debit for rent payments
With Direct Debit, the power lies with you when it comes to collecting your tenants’ rent. As Direct Debits are pull-payments, they are initiated by the payee, who has control of the frequency and payment amount.
This means that your tenants don’t have to worry about manually transferring the rent or paying by other means, and can relax knowing that it will occur automatically. On your end, you can feel relaxed knowing that you don’t rely on your tenants being organised and timely when it comes to paying their rent.
To summarise, collecting rental payments by Direct Debit can help you in the following three ways:
Reduces/eliminates late rent payments
Allows you easily increase rent or change the payment date
Benefits of using Direct Debit for rent payments
Collecting rent by Direct Debit offers a range of benefits for landlords and property managers, these include:
1. Reduces late payments
Direct Debit allows you to take control of when you receive the rent. Once you have authorisation from your tenant, you can collect rent payments on their due date, without having to wait for your tenant to remember or get organised. This effectively means you no longer need to worry about chasing payments from tenants. Tenants, meanwhile, don’t need to worry about manually making any payments. In fact, with automated Direct Debit payments, it's easier for everyone.
2. Increased flexibility
From time to time you may need to adjust the rent payment date, increase the rent amount or add on extra fees or charges. With Direct Debit, you have the flexibility to make these changes yourself, without having to set up a whole new authorisation process with the tenant.
3. Reduces admin
Collecting rent by cheque, cash or other methods can be a big administrative burden. With cheques, for example, they need to be cashed, and this can take time and effort. There’s also the chance the cheque will bounce, losing you more time and energy chasing the tenant for payment.
With Direct Debit payments, however, the whole process is automated - meaning no manual input is required from you. Once the rental payments are set up, they’ll be collected automatically each month, so you don’t even have to check your bank statement to see if the money’s arrived or not.
How to set up Direct Debit for rent
In order to set up Direct Debit transactions with your tenant, the following steps are required:
Agreement from the tenant to make recurring payments with you
A signed authorisation form (either paper or digital) stating the tenant’s agreement to have their bank account automatically debited
GoCardless helps make this process far easier with its BECS Direct Debit system. This system requires tenants complete a Direct Debit Request authorising the setup of a Direct Debit. Then, landlords can initiate Direct Debit payments without any further action needed from the customer.
GoCardless’s PayTo tool is another innovative Direct Debit solution, allowing landlords to initiate real-time payments from tenant bank accounts. With instant verification, PayTo is the fastest and safest way to conduct account-to-account payments.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.