Why is a Ratio Utility Billing System (RUBS) a better approach than an All Bills Paid/Flat Fee Option to a Utility Billing Program on a Multifamily Community?
Multifamily properties have unique challenges when it comes to charging residents for utility fees. You likely begin to ask yourself questions as to what is going to be better for you and your bottom line.
The question remains, should you charge a flat fee or a use a ratio-based billing structure?
Reduce Volatility and Financial Risk
When residents are charged a flat fee, it can impact your cash flow. Prices go up and down from month to month, and with a flat fee, you must compensate as the rates change.
Using a ratio utility billing system instead ensures that residents are responsible for their fluctuating usage as opposed to you being stuck with covering the overage. As they pay their fees, your cash flow is less volatile, and financial risk is minimized.
Lessen the Legal Risk
Some property managers and owners may not think about the legal risk, but it could be an issue if you’re not familiar with existing laws. As regulations are strict about over-allocating utility expenses bundled with rental fees, you need to be well aware of these laws.
Using RUBS will lead to minimal legal risk since you’ll be charging what the residents are using compared to what you think they might use.
Proactive Response to Regulation
As regulations change every so often regarding fees and their allocated use, few things tend to remain constant, like submetered billing and the RUBS approach.
Submeters at each dwelling allow owners to bill tenants on actual usage where allocated billing like RUBS uses a formula to calculate how much to charge tenants on overall usage.
Many utilities cannot be submetered, and when that happens, the ratio is the next best thing.
Increased Competitive Advantage
Many rental properties include a flat fee, all bills paid approach. While it can reduce administrative overhead, flat fees also inflate rental costs, therefore pushing potential tenants in a different direction.
On the other hand, with RUBS in place, tenants will see what the rental fees are without utilities. They see a range of what they can expect to pay for services allowing them to make a more informed decision.
Improve Resident Satisfaction
Communication is critical in everything you do when you’re answering questions with your residents. There will almost always be someone that will inquire why their bill is different this month compared to previous months.
By letting them know ahead of time how the billing system works, answering those questions becomes a lot easier. You can explain to them why their bill fluctuates in a way that will make sense, which will leave them satisfied with the outcome more often than not.
Proactive Approach to Consumption
Something else to think about is the way people use their utilities. As an example, paying a flat fee for water and sewage regardless of usage is going to result in over consumption by some.
Consider your personal water usage. If you see your bill go up, you’re going to watch how much you use to make sure it goes back down. Ideally your tenants will do the same thing as they watch their bills rise and fall with typical fluctuations.
When You’re Not Sure What to Do
Here at Southwest Utility Solutions, we can answer any questions you may have about how ratio utility billing systems work. Our goal is to increase efficiency and maximize utility recovery as well as billing revenue for you.
Contact us to learn more about what we can do for your multifamily community!