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Property Management Firm Endorses ACH
All across the United States, commercial and multi-residential owners and property managers are beginning to discover the advantages provided by the
Automated Clearing House (ACH) system for the collection of recurring payments. In the case of Hiban and Graffius Management, Ltd. (HGM), they have known it for some time. The company has been utilizing the ACH for
collection of condo and homeowners' association fees and rents since 1993.
HGM is a property management company located in Rockville, Maryland. The firm provides management support services for seventeen
properties, comprised of 4,800 commercial and residential units located in Washington,
D.C., Maryland and Virginia. The company's clients are condominium and homeowner associations, and rental and commercial property owners.
Automated Payments Collection: A Key Success Factor
To implement this innovative service capability, the company built strategic operating alliances with its service bureau, Wolf Computer
Systems, and Riggs National Bank. The three parties work in concert to provide HGM's
clients both ACH and coupon/check payment collection methodologies. With the ACH-based option, the payment collection process is reduced to a single ACH debit transaction that is generated by Wolf, along with an automatic off-setting entry to the accounts receivable system.
Wolf transmits the ACH file to Riggs which sends the ACH transaction through the ACH network to the payer's financial institution; there it is
posted against the payer's account. On the effective entry date of the transaction, Riggs posts available funds to the client's account. In the alternative payment processing flow, payment coupons and checks are
sent into a lockbox, where Riggs must open the items, record the amount of the check, deposit the check, capture the data on the payment coupon and transmit the information back to Wolf to update their accounts
receivable system.
The paper-based scenario is labor intensive and subject to human-error and
time delays. One of the most significant advantages of the ACH option is the elimination of costly exception items. For example, check payments sent without coupons require that Riggs manually create an exception item form which is sent to HGM. In turn, the HGM staff must research and manually post each item to the appropriate property's bank account and receivables system.
With the ACH-based payment option, HGM's clients also benefit from improved cash flow and cash forecasting. Clients know the exact dollar amount and
precise day that available funds will be deposited into their account.
ACH Experience Started with Payroll
HGM's initial experience with the ACH payment system began in 1988, when the firm decided to offer its clients Direct Deposit service for payroll.
HGM's conversion to Direct Deposit for payroll enabled the company to recognize that the ACH system provides numerous advantages over paper-based payments. Currently, 26% of the total employee base of 150 utilize
Direct Deposit. Most of the users are management staff, while the vast majority of employees who elect to receive paper checks do so because they do not maintain a bank account.
In 1993, HGM started piloting the ACH payment collection option for one property. The following year, several more property owners elected to try
HGM's new service. Since then, after observing the favorable results achieved by others, all but three properties now utilize the service. In a number of cases, condo and homeowner association clients signed up
because of demands by unit owners who wanted a convenient way to pay their fees. The usage rate for the ACH payment collection option varies between 10% and 40% of the unit base, depending on the type of property.
The $10-$50 penalty fee for late receipt of payment proved to be an important motivational factor. By using the ACH payment option, payers no longer have to worry whether the payment is received on time. Further,
payers save postage costs and reduce the number of checks that they have to generate, as well as the hassle factor of using checks. "We see a day when the ACH system becomes the sole service option for payment
collection," noted Mr. Hiban. Towards that end, HGM will be working with the bank to actively promote usage.
On the Horizon In addition to increasing the usage of ACH for payment collections, HGM's next objective is to begin evaluating the steps involved in
using the ACH system for Accounts Payable. "We're always looking for ways to reduce costs and improve operating efficiencies for our clients. HGM's strategic use of technologically innovative payment options
places us on the leading edge of the property management industry. Equally important, it enables HGM and our clients to survive in today's competitive marketplace." concluded Mr. Hiban.
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