Late payments. It’s a situation every self storage business eventually has to deal with. Sometimes the situation is a once-in-a-while issue, but other times it becomes a chronic problem that can lead to a total lack of payment. As a facility owner, you should give customers a fighting chance to get payments back on track, but you must also protect yourself and run a profitable business.
The Rare Late Payment
Sometimes even the best customers at a self storage business end up being late once or twice. You want this type of late-paying customer to have time to make the payment and catch up without a penalty.
Have an adequate grace period for late payments before late fees are assessed. Consider 10 days or so; this gives customers plenty of weekdays to take care of whatever is going on. Make late fees easy to overcome. It’s pointless to assess a late fee that’s so high that it’s difficult for the customer to pay.
Tell the customer to stay in contact, and call the customer if you haven’t heard anything or received payment after a few days unless the customer has given you a specific payment date. Be sure to send written notice too. This ensures that no one forgets, and your self storage business eventually gets its payment.
Chronically Late but Paying
You may end up with a customer who becomes a chronic late payer. This is not necessarily due to irresponsibility. Sometimes a person hits a bad patch. However, a situation like this can’t go on because it affects your accounting and keeps you in a holding pattern regarding the storage unit. You never know if this will be the month when the customer finally stops paying.
Devise a program to help chronically late customers. Search for a cheaper unit, such as a portable storage pod with limited access, so that the customer has an easier time making monthly payments. Alternatively, create a payment program where the late amount is spread over two or three months so that the customer has a chance to pay it off easily. Do, however, include additional penalties if one of those payments is missed. Those penalties serve as incentive to get the new payments in on time.
Note that if you create these programs, you do have to extend them to all of your customers, even those you suspect are just being irresponsible. If you do not extend them to everyone, that could easily be mistaken for discrimination.
Late and No Payment in Sight
If someone has simply not paid and not been in contact, contact the person during the grace period and every few days after that. If you can’t reach the person, even after the late-fee period begins, contact the emergency contact on the account.
If it gets to the point where you have to close the storage unit, move the person’s belongings first to a storage pod. That frees up the regular unit for a new customer without totally getting rid of all the old customer’s belongings. Continue to try to contact the customer and the emergency contact. State law may require a certain amount of time between the payment due date and the time you auction the belongings. Give notice not only by phone, but in writing as well to ensure you fulfill your state’s requirements.
If you still can’t reach anyone after the time required by law, you’ll have to put the items up for auction to recoup your costs. Since collection laws vary by state, consult with a local collections attorney to ensure you’ve fulfilled all legal requirements for proceeding to the auction stage.