Rent payments: What’s changing for B2B and commercial real estate

June 24, 2021

Digital adoption of rental payments for commercial real estate changed dramatically during the pandemic. Read how commercial landlords transformed how they take B2B rent payments and are continuing to improve the payment process for the future.

 

Digital Bridge eBook

It may take years to fully calculate the lasting impact of COVID-19 on American business, yet it’s clear that a dramatic shift in the payments landscape started in the early weeks of the pandemic. With offices locked down and workers sent home, most businesses converted to mobile payment processes almost overnight, accelerating a move towards digitization and automation that had been coming for some time. And if there’s a silver lining, it’s that sectors where digital adoption had been slowest – like commercial real estate – had the most to gain from the digital transformation. In fact, the sudden preference for digital rent payments created a wave of unexpected opportunities for business to business (B2B) landlords the increased throughout the recovery.

 

Moving the payment process from the pandemic to the future

The dynamics of B2B rent payments changed dramatically when the COVID-19 lockdowns began, turning the traditional paper rent check into a burden for both landlords and tenants. Printing checks became difficult for many tenants, while processing and depositing them became just as troublesome for landlords. Digital options like ACH and credit card payments solved those initial problems and opened a window into the types of efficiencies digital payments make possible.

“They could streamline the entire payment process with technology, create efficiency in accounting, and get rid of the paper item altogether, not to mention the benefits of digital payments for fraud prevention and risk reduction,” says Dhiren Patel, Senior Vice President and Head of CRE Deposit & Payment Solutions for U.S. Bank Commercial Real Estate.

“That’s the beauty of a tenant portal like Versapay,” he explains. “The tenant payment, the delivery of statements and billings, the accounting, and the deposit are all processed digitally, like most consumer payments, so there is a tremendous opportunity to drive automation and increase efficiency from end-to-end. They’re also better positioned to ride out any uncertainty in the future as now they are enabling tenants to pay from anywhere, and for them to accept and process payments from anywhere, at any time.”

Ironically, many commercial real estate companies migrated their own payables to digital solutions long before the crisis, moving to virtual cards and ACH over the past five years. They understood the efficiency and advantages of digital payments, yet concern that tenants might be resistant to adopting a digital platform still kept them from going digital for accounts receivable (AR). Until the world changed.

 

Understanding the history of B2B rent payments

Digital payments are actually common in most industries, even Business to Consumer (B2C) real estate, where they account for the vast majority of rent payments in the multi-family and self-storage asset classes. The benefits of digitization are obvious, since paper payments are expensive to process. They cost time and money to record, transport, and deposit, whereas a digital payment can be automated to reduce those expenses virtually from beginning to end. On top of that, with integrations between tenant portals and enterprise resource planning (ERP) systems, digital dashboards can create real-time visibility throughout the processing.

Still, most B2B rent payments stuck to a more traditional script. “Tenants in retail and office properties were accustomed to sending a check because their landlords had built an entire AR process around a check being sent to a lockbox,” Patel explains. “The process to recognize who paid and to apply the cash into the accounting system was all super manual, but it was something that always seemed to work. It was inefficient and costly, and human processing led to human errors, but clients were hesitant about disrupting that process.”

Of course, that disruption occurred independently, but it also created unexpected advantages for the companies that were disrupted. Rather than piloting something new, they’re receiving the benefits of technology that has been refined and tested over time. In fact, some tenant portals and ERP systems have seamless integrations via application programming interface (API).

“The integration between a portal like Versapay and the ERP system is so strong that you can truly drive efficiencies and cost saving that you would not be able to drive without the combination of that integration and the level of technology that is now available,” Patel explains.

 

Preparing for the next step in payment digitization

The roadmap of transition varies from business to business. Some are slowly adding to their first stages of digitization while others have quickly pushed for end-to-end integration. Still, the lessons learned from the early days of the crisis are instructive.

“Clients that were already on the path of innovation and automation before the crisis, had an easier task,” Patel says. “If you already had the ball on the 50-yardline, it’s easy to keep it moving along. You have the foundational items already in place. You've maybe bought into it culturally. Executive management might be behind it.”

Landlords that had an existing tenant portal or other means of accepting rent payments simply needed to communicate those capabilities with their tenants to take full advantage of them. "The first line of defense in any situation that disrupts business at scale is communication. Landlords who were already using Versapay were able to quickly and efficiently communicate with their tenants as soon as the world went into lockdown," explains Chad Nicholson, Director of Strategy at Versapay. "Our clients used the Versapay platform to let their tenants know about waived late fees, rent deferrals and other relevant information."

Non-digital landlords who needed to jump-start their transition on the fly are in a different position. They should now re-evaluate those newly created processes, both to secure their digital foundation for any future lockdowns and to identify opportunities for further automation and efficiency.

“The integration between a portal like Versapay and the ERP system is so strong that you can truly drive efficiencies and cost saving”

What should you evaluate during the transition to digital payments?


It’s important to realize that the path of your digital transformation may take many shapes along the way, from managing the initial crisis, to optimizing current processes, to establishing an end-to-end foundation for future success. However, there are three important ways to assess any phase of your transition.

1. Digitize payments of all types.

Although end-to-end digitization creates the most benefits and efficiencies, you have to put tenants in a position to change their behavior. Paper payments won’t completely disappear in B2B – at least in the short term – but don’t let that slow your transition down. Digitize the paper lockbox payments by translating the data into a digital record that can be processed the same way as your other digital payments. Keep in mind that technology may not replace checks, but the enhanced visibility tenants will get can dramatically increase their accuracy of payments across all types.

2. Revise your entire process.

Are you using a bandage to get through the crisis, or can you create a surgical fix? Complete an end-to-end-mapping of the payment process, looking at each stage, each system, and how information is sent and received. Look at everything, including billing, receipt of payment, collections, cash application and accounting, and make sure your newly digitized processes integrate with them properly. 

3. Collaborate internally and externally.

"We think of AR as an accounting or treasury function but it’s a core part of your business that touches the entire company," Patel notes. "Successful transformation requires engagement from accounting/finance, treasury, legal, risk management, technology and property management." Ensuring all parties are involved from the start will lead to a more successful execution. This will also help build the strongest communication plan with your tenants. 

Finally, remember that most B2B tenants have multiple landlords. Whether that’s a restaurant like Starbucks or a large retailer like Old Navy, the tenant engages with multiple landlords on multiple systems. As awareness of improved payment systems increases, they will notice the difference – for better or worse. 

“The CRE business is all about a tenant experience in a physical setting," Patel says. "We need to ensure that experience is positive across all interactions, including making payments.  Ease of doing business is critically important when it comes to tenant satisfaction."
 

Contact U.S. Bank to learn more about efficient payments best practices.

Related content

Higher education and the cashless society: Latest trends

Unlocking payment flexibility with intelligent payment routing

How the next evolution of consumer bill pay makes it easier to do business

A simple guide to set up your online ordering restaurant

ePOS cash register training tips and tricks

What corporate treasurers need to know about Virtual Account Management

Innovative payroll solutions may help attract hourly workers

Managing the rising costs of payment acceptance with service fees

Standardizing healthcare payments

Integrated payments healthcare benefits

Consolidating payments for healthcare systems

Tap-to-pay: Modernizing fare payments pays off for transit agencies and riders

Zelle® helps Sunriver Resort make payments efficient and secure

Role of complementary new channels in your payments strategy

Navigate changing consumer behavior with service fees

How blockchain technology is changing treasury

Enhancing the patient experience through people-centered payments

How COVID-19 is transforming healthcare payments

Ways prepaid cards disburse government funds to the unbanked

Restaurant survey shows changing customer payment preferences

Luxury jeweler enhances the digital billing and payment customer experience

4 ways to make practical use of real-time payments

How Everyday Funding can improve cash flow

Payment industry trends that are the future of POS

Modernizing fare payment without leaving any riders behind

Access, flexibility and simplicity: How governments can modernize payments to help their citizens

What government officials should know about real-time payments

Webinar: Approaching international payment strategies in today’s unpredictable markets.

Automate accounts payable to optimize revenue and payments

Want AP automation to pay both businesses and consumers?

Unexpected cost savings may be hiding in your payment strategy

Addressing financial uncertainty in international business

Benefits of billing foreign customers in their own currency

How AR technology is helping advance payment processing at Avera Health

Increase working capital with Commercial Card Optimization

Top tips for card payments optimization

3 ways to adapt to the new payments landscape

Banking connectivity: Helping businesses deliver the easier, faster, more secure customer experience of the future

4 benefits to paying foreign suppliers in their own currency

Crack the SWIFT code for sending international wires

Solutions banks can offer during the COVID-19 pandemic

Improve government payments with electronic billing platforms

ABCs of APIs: Drive treasury efficiency with real-time connectivity

Hospitals face cybersecurity risks in surprising new ways

Higher education strategies for e-payment migration, fighting fraud

How emerging banking solutions enable better decisions

Escheatment resources: Reporting deadlines for all 50 states

Colleges respond to student needs by offering digital payments

Can faster payments mean better payments?

Artificial intelligence in finance: Defining the terms

Adjust collections to limit impact of USPS delivery changes

How electronic billing platforms improve government payments

Key considerations for online ordering systems

4 ways Request for Payments (RfP) changes consumer bill pay

Time is money: Intelligent Payment Routing saves businesses both

3 timeless tips to reduce corporate payments fraud

Digital trends poised to reshape hotel payments

Three healthcare payment trends that will continue to matter in 2022

The surprising truth about corporate cards

Digital banking for business: How connectivity improves customer experience

Safeguarding the payment experience through contactless

How AI in treasury management is transforming finance

Automate escheatment for accounts payable to save time and money

The benefits of payment digitization: Pushing for simplicity

Cashless business pros and cons: Should you make the switch?

Understanding and preparing for the new payment experience

White Castle optimizes payment transactions

Collect utility and telecom bill payments faster

3 reasons governments and educational institutions should implement service fees

Rent payments: What’s changing for commercial real estate

Buried treasure: Maximizing analytics for treasury management

3 benefits of integrated payments in healthcare

Webinar: AP automation for commercial real estate

Webinar: CSM corporation re-thinks AP

Webinar: A closer look at U.S. Bank AP Optimizer

The future of financial leadership: More strategy, fewer spreadsheets

Tech tools to keep your restaurant operations running smoothly

COVID-19 safety recommendations: Are you ready to reopen?

How to improve digital payments security for your health system

Government billing survey: The digital transformation of the payment experience

Enhancing liquidity management: 4 benefits of visibility

Top 3 ways digital payments can transform the patient experience

How to accept credit card payments without transaction fees

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.