Utility Billing and Invoicing Technology: The Next Frontier?

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Any retail landlord will tell you that he or she has three main priorities: getting paid on time, keeping the retail space looking fabulous, and keeping tenants happy.  True retail landlord nirvana occurs when all three of these tasks are accomplished in unison at all times.

However, we don’t live in a perfect world and although everyone tries their best, things are bound to happen: pipes burst, sidewalks crack, tenants miss payments, landlords bill incorrectly.  So, given that we live in an imperfect world, is there a way to use software to make tenant interactions with landlords more frictionless?  I believe there is and the place to start is with simple utility billing.

Many landlords across the country operate their retail spaces under Triple Net (NNN) leases.  This means that the tenant is responsible for paying all expenses in addition to their base rent: this includes operating expenses, property taxes, utilities, and other miscellaneous expenses associated with the property.

As landlords, we typically pay these expenses up front so we don’t get hit with any late payment fines from governments or local utility providers, and then we have the task of figuring out which tenant owes which portion of these bills.  When utilities are sub-metered, like electricity, this process is easy.  Tenants receive a separate bill each month that they are responsible for paying.

Conversely, many utilities like condenser water are not sub-metered and the landlord is responsible for figuring out each tenant’s pro rata share of the total payment and then billing it out to the tenant.  This takes time and energy every month.  In many cases, large national retailers contract out with third party vendors to handle their utility bills.  Cass Utility Information Systems is a leader in this field and contracts with many large retailers. 

So, sometimes a very small utility bill can become a very large time suck for many different people.  The bill is seen by at least four parties: the utility, the landlord, the retail tenant, and the third party utility vendor.  With different people at all of these companies, often times bills can slip through the cracks or get lost while they move through this process.

Although I haven’t found it yet, I believe there is a software program out there that can fix this problem and save everyone including landlords, retailers, or vendors both time and money.  If it doesn’t exist yet then someone should build it as soon as possible and let the team at MetaProp NYC help take it to market. 

Enterprise software platforms like SageYardiMRI, and Realpage make it easier for landlords to create dynamic invoices for tenants so that all categories of bills including rent, operating expenses, utilities, and other expenses can be included on one invoice.  This is a huge innovation and saves landlords and tenants lots of time (and ultimately money) not having to sift through a plethora of different invoices every month for the same property.

That said, what I propose takes the billing process one step further.  There should be a software solution that through natural language processing can scan a utility bill, instantly calculate a retail tenant’s pro rata share of that bill, and then automatically generate an invoice to send to the tenant.  With a click of a button upon receiving a bill from a utility provider, a landlord will know how much each tenant owes for each utility for that month.  Also with one click, the landlord will be able to invoice the tenant the correct amount.

On the tenant side, this type of process can save time and money as well.  With this level of dynamic invoicing, there is no reason why a landlord couldn’t automatically generate two separate invoices: one invoice would have every expense that is billed to the tenant including rent and operating expense, and the other invoices would include just the utilities that the third party vendor was responsible for paying.  This way, instead of waiting weeks before the third party vendor even receives the invoice, they could receive it almost instantly, just minutes after the utility company generates it.

While this is certainly not the most glamorous part of real estate, getting paid and keeping tenants happy is arguably the most important part of real estate.  While real estate technology continues to innovate in areas like leasing, marketing, property management, and financing, we need more innovation in areas like retail utility billing.  This will save landlords and tenants alike both time and money, and provide everyone with piece of mind and potential retail landlord nirvana.