Social landlords could save up to £40,000 a year* by outsourcing their direct debits, according to payment specialists allpay Limited.
The figure, drawn from an analysis of allpay Limited’s existing client base of housing associations, Arm’s Length Management Organisations (ALMOs) and stock-holding local authorities, includes:
- Staff savings through automation
- Reduced transaction costs through increased take-up and;
- A reduction in arrears through offering greater flexibility around collection dates and frequencies.
The analysis shows greater savings made for those social landlords still relying on paper mandates, manual bacs submissions and rigid collection dates and frequencies for direct debit rent collections. This is particularly prevalent across ALMOs and stock-holding local authorities, with only a small proportion offering any-day collections, and just 36% going paperless.**
Independent research by the Housing Quality Network’s Rent Income Excellence Network (RIEN) shows offering greater flexibility on collection dates and frequencies can boost take-up by up to 20%. This reduces transaction costs significantly from costlier payment methods such as cash and debit/credit card payments, which can incur nearly five times the cost per transaction on average, given that debit card transactions have moved to a % of the transaction value.
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ALMOs Kirklees Neighbourhood Housing (KNH) and Your Homes Newcastle have increased the take-up of direct debits by more than 120% since moving to allpay Limited’s ‘any day’ collection service, with both organisations citing the increase in flexible collection dates and frequencies and allowing multiple users to set-up and manage direct debits in the office and in the field via a cloud-based platform as key factors.
Michelle Martin, account support supervisor from Kirklees Neighbourhood Housing said: “Since working with allpay Limited we have increased direct debit take-up among residents from 3,000 to 8,500. As this system is paperless, instructions can be set up online in minutes and the choice of any day collections and multiple frequencies has been crucial to increasing take-up.”
Both ALMOs were relying on paper mandates previously and limiting the management of direct debits to a small number of individuals in the organisation. Utilising an automated, paperless platform – outsourcing Bacs submissions, customer correspondence and compliance costs – is also driving staff savings with allpay Limited clients saving on average a full time member of staff.
South-East-based Mount Green Housing Association said outsourcing its payments to allpay Limited was the equivalent of saving the employment of two additional administrative staff; while Exeter-based Cornerstone Housing said it was the equivalent of saving half an FTE.
Cornerstone’s housing manager Alison Howard said implementing allpay Limied ’s direct debit service had reduced arrears from 0.91% to 0.84%.
She said: “The system is very flexible and allows our tenants to set-up separate arrears and rent payments e.g. weekly/fortnightly on a date that suits them – so they can tie in their collection date with when they receive their housing benefit. This flexibility has led to an overall flattening of our arrears which have reduced from 0.91% to 0.84%.”
Arrears reductions alone, the service could save a social landlord with a £50m rent roll £35,000.
Nick Peplow, allpay Limited’s bill payment director, said that at a time when social landlords were looking to increase take-up, reduce administration and costs, outsourcing direct debit collections ticked all the boxes.
He said: “Using an external provider for any day, paperless direct debits results in much of the resource intensive elements falling onto the external provider and is proven to increase take-up. With housing association teams often based in a wide geographical area across many different regions, a unified, cloud-based platform that automates the process from the online set-up to the Bacs submission and customer correspondence provides a robust, cost effective solution.”
*Figure includes transactional savings from 20% increase in take-up, reduction in staff costs (Ave. 1 x FTE) and 0.07% arrears reduction
**Housing Quality Network’s Rent and Income Excellence Network (RIEN) Report – The Impact of Flexible Direct Debits.