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What’s the best way for your tenants to pay rent?

Industry Insight July 5th, 2022
What’s the best way for your tenants to pay rent?

Collecting rent is one of, if not the, most important elements of managing a property. Whilst some property managers will enforce one specific way of rent being paid are many ways for tenants to pay their rent; but with each method, there are advantages and disadvantages for both tenants and property managers. As the world is shifting towards a more digital landscape, payments that can be made using our smartphones and computers are becoming more popular as they are typically quicker and easier for both parties, yet not all tenants have the ability to pay like this. Whilst being flexible can help tenants, it is important to weigh all of the options and decide what will work best for you.



Despite the fact that cash payments for rent are becoming increasingly rare in the rental property world (only 9% of tenants), some tenants still prefer to pay their rent in cash. This can be for a multitude of reasons – from their job to make it easier to manage their money. Whilst there is no legal issue in accepting cash, it can cause a bit of a headache. 

The lack of a paper trail is an issue with accepting cash payments from your tenants. To ensure that you and your tenants have proof of payment, you will need to manually create and issue receipts each time, with both parties retaining a copy. Maintaining your records diligently will keep you out of trouble with taxes, but will take some manual effort. Furthermore, you’ll need to wait to reconcile on your accounting system as the money will need to be deposited in a bank branch and then cleared before you can update your systems.

If a tenant wants to pay in cash but you’re managing a  property that is not in the vicinity of your office, or you own a portfolio in a different part of the country,  accepting cash then becomes even harder. Sending money through the post is high risk and it is unlikely the tenants will be willing to travel to give you the money in person. 

A less common issue that can be faced is that of counterfeit money. Whilst The Bank of England believes only 1 in 40,000 notes in circulation are fake, by accepting cash you are placing faith in yourself and your staff to be able to notice these if and when they are passed to you.



In today’s world of online banking and Direct Debit payments, cheques are almost a surprise when seen. However, some tenants still prefer to pay their rent this way.

Cheque payments also have a number of difficulties, just like cash payments. Your tenants will usually send the cheque to you by post, and this opens up the door to potential excuses around it getting lost in the post, for example. The problem is that in some cases this may be the truth, and there’s no way for you to determine that without requesting all cheques to be sent via tracked and signed-for postal services or delivered directly to you.

Cheques also serve no value until they are deposited at the bank. Luckily for property managers, there is now technology that allows for cheques to be scanned rather than having to take them to your local bank branch and deposit it into your account. However, it can take up to 3-5 days for the payment to clear into your business account and there is always the risk that the cheque will bounce.


Standing order

In comparison to cash and cheque payments, standing orders are far more efficient and are the go-to choice for property managers – many now state that proof of a standing order being created must be provided as part of the move-in process. Standing orders are preferred because they are easy to set up for tenants, reliable, and easy to track.

In the case of rent payments, the tenant sets up a standing order so that the rent amount is sent to the property manager’s bank account on the due date each month. Standing Orders can run indefinitely until they are cancelled or set to occur a specific amount of times.

Standing orders are preferred by property managers since they simplify the process of rent collection by automating, securing, and collecting the payment that can easily be tracked and monitored. Furthermore, with a pre-defined reference, reconciling the receipt of money becomes a much simpler task for those in charge of credit control. In addition, tenants often prefer to set up a Standing Order since they are in complete control of it, unlike a direct debit, and they do not need to remember to send bank transfers whenever a payment is due. 


Direct debit 

Collection of payment via a direct debit bureau is one of the most reliable and secure ways for tenants to pay their rent, although it might be a bit complicated to initially set up. 

Direct debit payments require a mandate signed or approved by the tenant before they can be activated, and organising this yourself can be challenging. Third-party providers, however, can manage your rent collection process from start to finish by setting up direct debit payments from your tenants. 

Direct debit payments eliminate the need for your tenant to remember to make a payment each month. Rent is automatically deducted from tenants’ accounts on the due date. You can easily alter the rental amount if a rent increase or decrease is necessary. As with a Standing Order, references are pre-defined making the reconciliation process far simpler and faster.

There will be no need for you to visit your bank to cash cheques, check your bank account every day to see if anything has cleared or chase late payers. Most direct debit bureaus will automatically notify the collector when a payment has failed on a mandate has been cancelled, thus removing some of the tedious manual work. 

The ease of direct debit payments does come at a cost. Most providers of this service will charge a % of every transaction. This affects the bottom line for those who self-manage and those that manage on behalf of others. For those handling money that isn’t theirs, it can also make reconciling monies received more complex, with figures not exactly matching what was expected.


Bank Transfer 

A bank transfer is simply the direct transfer of funds. In contrast to other payment methods covered in this guide, bank transfers don’t require any specific setup requirements on the business’s part or the tenants.

Typically, property managers prefer direct debit or standing orders as they do not have to depend on the tenant to remember to send the rent every time it is due as they will automatically be sent out at a certain date. Although bank transfers are typically quicker, they leave the possibility for tenants to forget to send their rent or send it later than the agreed date.

For tenants, bank transfers tend to be the preferred method of payment with 61% of them paying their rent in this way. By sending the money via bank transfer, tenants are in control and can ensure they have the correct funds in their account before money is sent. It also offers them the flexibility to send monies from different accounts if needed. With almost all banks, alongside e-money institutions, now having simple smartphone apps that allow tenants to easily login and transfer money, the hassle of organising bank transfers has now decreased significantly.

There are positives and negatives to all payment methods discussed in this article and property managers must choose which one is correct for them based on a balance of speed, ease and preference for tenants. Each company is different and as long as money can be reconciled quickly and easily, allowing credit controllers to chase any missing payments, there is as little manual intervention as possible and there are few to no tenants in arrears, then it may be worth sticking with what you have. However, if any of these issues are rife it may be worth considering a different solution.


*Disclaimer: please note this blog is only intended as a guide, and is not to be taken as legal advice*

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