What is velocity billing in multifamily?

What is Velocity Billing?

Velocity billing refers to a billing method that accelerates the process of utility billing for tenants. In a traditional setup, utility billing can take a considerable amount of time due to the need to wait for the utility provider's bill, process it, and then bill each tenant individually based on their usage or a prorated share. Velocity billing streamlines this process by using estimated utility usage data to bill tenants more quickly, often in advance of the actual utility bill from the provider. This method relies on either historical usage data or algorithms that predict usage based on factors like the number of occupants, square footage, and season.

The advantages of velocity billing include:

  1. Improved Cash Flow: Landlords or property managers receive payments sooner, which can be beneficial for their cash management.
  2. Reduced Administrative Burden: By estimating bills and processing them faster, the administrative workload is reduced.
  3. Consistency for Tenants: Tenants receive their bills at the same time each month, which can help with budgeting.

However, there are also potential drawbacks:

  1. Accuracy Concerns: Estimates may not always align with actual usage, leading to discrepancies that may need to be adjusted in future billing cycles.
  2. Tenant Satisfaction: Tenants might not be comfortable with estimated billing and prefer to pay for their actual usage.

Overall, velocity billing is a strategic approach that seeks to optimize the utility billing process in multifamily properties, balancing efficiency and cash flow considerations with accuracy and tenant satisfaction.

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