PT the Auditor
Accounts Receivable for Parking? Not!
I have been auditing some facilities that have large accounts receivable, and they cause nothing but problems.
In one case, the operation lost $400,000 over a four-year period. In other cases, the garage staff spends hours each month dealing with past dues, payment postings and other activity that take away from their normal parking duties.
In most cases, the parking managers simply don’t have the skills to deal with accounts receivable. They are parking managers, not bookkeepers and accountants. Much of the write-offs are due to poor recordkeeping, lack of attention, and inability to find the account holder when the past due is to be rectified.
I’m not convinced there is a strong reason for accounts receivable. We converted on location away from monthly past dues to simply making the cut-off the first of the month. There were some problems the first month, but by the second one, everyone was paid by the first.
How did we do it? We notified everyone that if they weren’t paid by the first of the month, their access cards would be turned off. Then we did it. When the monthly parkers were stopped at the gate, they were given a couple of choices:
They could pay for their monthly parking fee right then and there with a credit card; they could pull over and go to the office and discuss the matter; or they could become a daily and pay the full daily rate (usually twice as much as the monthly rate).
The second month, parkers knew we meant business, and there were no more problems.
Business accounts that paid a large number of monthlies were handled the same way. We notified them of the policy, and they paid up. They didn’t want 50 or 100 employees locked out because they were past due.
Validation sales are handled on a cash basis. They bring a check, we give them the validations.
Government sales can be a problem, but there are ways. When the government account signs up, we invoice them twice in the first month. The payables officer knows what we are doing and pays both invoices. From then on, they are paying in advance.
You have to have a friendly payables clerk, but usually if you have the conversation with them, you can work it out. Or you can simply put it in the contract that the parking must be paid in advance.
We had one situation where a local utility was allowing its employees to sign tickets and we would bill them at the end of the month. It was a substantial amount monthly. Of course, this put all sorts of holes in our revenue control system.
We provided them with prepaid coupons that they could issue to their employees. They got the parking, we got the float – plus, we knew that a number of the coupons would never be redeemed
Owners may balk at first when you discuss stopping arrears payments, but if you go armed with the cost of lost receivables, increased bookkeeping time, and the fact that a considerable amount of money is not put in the bank until later in the month, the conversation can be an easy one.
When do you ‘lock out’ your unpaid?
Most of the garages I audit give four or five days for the parker to make the payment. I think it should be the first. If you give them four days and they don’t pay, you have lost four days of revenue – that can be as much as $30 a day or more – remember, they are parking in the garage and not paid; they are a daily parker, not a monthly parker.
If they don’t pay and you have given them a grace period, that means you are holding that space open for them. If they simply don’t return and don’t let you know, and if your garage has a waiting list, you are losing that revenue. Forever.
Even if there is no waiting list, you must keep some spaces open for monthlies and may end up turning away lucrative daily parkers.
It’s not like you are being unfair. If they don’t pay, you lock them out on the first of the month. They can still park by pulling a ticket. They become a monthly.
Some systems allow them to use their access card as a daily permit, allowing them to pay the daily rate on exit with a credit card. They will be paying more, but that’s the penalty they pay for not paying their fees on time.
Just be consistent. Most people park in your lot because of your prices or the location. They aren’t going to leave, and if they do, so be it. You will replace them with someone who pays on time and save big bucks in accounting fees, lost “float” interest, and possibly lost receivables.
Article Abstract from March, 2013