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Keeping a ceiling on arrears, by John Squires

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25 November 2005

Registered social landlords need to use imaginative methods and lateral thinking to keep track of rent arrears. Finding ways of reducing them also requires unorthodox approaches and effective use of IT

Rental income is the lifeblood of registered social landlords - but is it seen that way? Do RSLs manage performance or do they shy away from it? And do they fully appreciate the impact on business plans? These are key issues that the RSL sector needs to address honestly if it is to be efficient.

The overriding question is: are we challenging enough in our income management and are resources targeted in the right areas? RSLs probably all target their arrears figures and void levels; many are members of benchmarking clubs.

They are no different to any other organisation in that they are ready to shout from the rooftops when they are top of the league - but sometimes sound like Vicky Pollard from Little Britain when their results have not been so good. If this is to be the basis of monitoring our income, then it is the responsibility of RSLs to ensure that they have accurate, appropriate and timely performance indicators that managers can and will act upon.

No matter how you dress it up, performance lapses represent money that you have not collected - and your business is much the worse for not performing to its optimum level.

One of the areas where monitoring does fall short is around collecting income from tenants. Rent comes into RSLs from two sources: housing benefit or the tenant. Rents due through housing benefits are basically secure; councils' performance will vary, but in reality local authority debt is sound.

RSLs should therefore consider deducting housing benefit income from rent debits and then looking at how good they are at collecting money from tenants. Even as hard-nosed finance people, we also have to recognise that this just as much about supporting residents through the benefits process and helping those who cannot pay - as against those who will not pay. RSLs should look at their performance against the income they need to collect from tenants and seek continuous improvement in this area.

This process is readily transferable down to individual officers and patches. Targets can be set for these areas and RSLs can look for continuous improvement, even in the most difficult and more popular areas. It is an effective method of measuring performance down through the association.

Throughout this process RSLs must continue to work closely with tenants to improve benefit take-up. Part of the cure is prevention. Staff should address benefit entitlement when tenants sign up, when visits are made and when tenants fall into arrears. Visits to elderly people and those in sheltered accommodation - who often find the system confusing - can also help.

Linked to this is close liaison with the local authority. Both organisations should work in tandem, to make sure tenants claim their entitlement to benefit. The regulators might wish to consider this area when looking at effective performance.

The local authorities' performance should also be monitored. Although good relationships need to be maintained, associations must seek to ensure payments are received on time and for the right amount. Electronic transfer of data is by far the most effective, secure and accurate way in which to convey information.

There are many efficient ways of collecting rental income. These include direct debit, standing orders, counter payments, debit and credit cards, by cash at post offices and via the Internet. If RSLs do not use all these methods, they should review the benefits of doing so.

As RSLs strive for efficiency, staffing resources are a cost they need to review. Associations should have arrangements that transfer information and post electronically to the tenant's rent account. This is by far the quickest method of data transfer and the most accurate. Investment in this area will pay dividends in the future.

Income collection is not a nine-to-five job. To be effective you need to move outside these parameters and also monitor the results. The trick is knowing what works. One association within the Regenda Group has cut its arrears significantly, held its voids at a consistent level and improved its re-lets over a one-and-a-half year period. This has been done by challenging what was custom and practice and having the courage to try out new things.

If your RSL collects rents over fewer than 52 weeks, consider targeting 'rent free weeks' as arrears recovery weeks. Other techniques include making out-of-hours and weekend visits to tenants, during which they can be encouraged to make a commitment to reducing their arrears.

In these challenging times for RSLs, maximising income collection is something to be encouraged.

John Squires is executive director (finance) for the Regenda Group and a member of CIPFA's RSL Panel

PFnov2005

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