PDA

View Full Version : Going with Pre-Pay for Spring Start-Ups


JimLewis
01-23-2007, 02:20 AM
Last year we did about 200 winterizations. (I know that's not a lot compared to some of you guys here.) And we just left the invoice on the door, along with a checklist of what we did. Then we just wait for them to pay, which is the way we've always done it.

But I read somewhere here on Lawnsite that someone was making their customers pre-pay for winterizations and start-ups. I think I am going to go that route.

Our invoices said, "due on receipt". But only about 50% of the people paid within the first 10-30 days. Another 25% paid 30-60 days. Another 15% paid after 60 days. And there's about 10% that still haven't paid. I wish I could say this is the first year it was like this. But it isn't. I've just been putting up with it too long.

Well, I am sick of doing business that way. I don't tolerate late pays for our maintenance division, so why should I tolerate it here?

I am sending out 200 letters Feb. 1, explaining our policy change and enclosing an invoice. And I am not going to do one dang start-up this year until it's already been paid for.

So there!!! :angry:

bdb
01-23-2007, 02:36 AM
You could make them "feel" better if you do a contract for a start up and blow out paid by "x" and then they will be a preferred customer. And give them other benefits of being a "preferred customer". ie...15% discount on other services performed in the year or what ever you else you can promote with making more money in the end. That will get the money in sooner. And put on the invoice a steep service charge for late payments. So it will be in the best interests to pre pay.

JimLewis
01-23-2007, 04:38 AM
That's not a bad idea, actually. I could raise my prices by 15%. But then offer a 15% discount if they pre-pay. So then at least those who don't pre-pay, I am making 15% more for the trouble.

Hmmm....Something to think about....

Still, I think 95% or more of our customers would just go along with the mandatory pre-pay thing if I went that route. So why offer anything else? Even with additional fees, percentages, etc., it's still not as nice as just getting paid on time.

PurpHaze
01-23-2007, 08:19 AM
So there!!! :angry:

Guess the vacation down south has worn off already Jim? :laugh:

jerryrwm
01-23-2007, 08:54 AM
We offered a 5% pre-pay for start, blow-out, and seasonal checks for this coming season. About 20-25% are sending in checks with the renewal contract. Just have to remember to note who paid later this fall when we do shut-downs.

garydale
01-23-2007, 09:19 AM
We have always offered prepay.

It's a desending discount !0% December, 7% January and 5% Feburary.
About 40% of our accounts go this route.(Usually seniors)

We have the same collection problems you outlined. A $5.00 minimum or (1.5%) late fee after 30 days.

The last two years, we have turned the 60 day accounts over to a collection outfit that gets great results.(www.olddebts.com)The basic fee is about $16.00 per account.

DUSTYCEDAR
01-23-2007, 10:19 AM
i hate latepayers-- pre pay is the way to get paid on time

JimLewis
01-23-2007, 12:43 PM
Guess the vacation down south has worn off already Jim? :laugh:

Yah, unfortunately it has. And I am sitting here looking at all these people who still haven't paid getting angry. I wish I was back there sipping some cool drink by the pool instead of worrying about this stuff.

bicmudpuppy
01-23-2007, 12:59 PM
Everybody likes to get paid...................
Seems like nobody like to Pay.............
and the world keeps turning

Tack on nasty fees for those that are 90+days. Don't do anything else for them unless they become current. I've never actually been anywhere that had any significant luck with collections. BUT, unpaid winterizations seem to get paid with fees on most accounts when they need the water in the spring. Spring turn-ons or repairs seem to become very important when you won't do the turn-off until you get paid for all balances plus the winterization at the time of winterization.

Offer a "pre-pay" and slowly adjust your prices so that those that don't pre-pay are absorbing the costs of not pre-paying.

kozmo
01-23-2007, 01:47 PM
That's not a bad idea, actually. I could raise my prices by 15%. But then offer a 15% discount if they pre-pay. So then at least those who don't pre-pay, I am making 15% more for the trouble.

Hmmm....Something to think about....

Still, I think 95% or more of our customers would just go along with the mandatory pre-pay thing if I went that route. So why offer anything else? Even with additional fees, percentages, etc., it's still not as nice as just getting paid on time.

"See, I think that's about one of the sleeziest things a contractor can do - entice someone in with a coupon or "discount" that really isn't saving the customer any money at all because the contractor is just going to mark the price up to cover the supposed discount.

It's this kind of crap that gives contractors in general a bad name.

If you're going to offer someone a coupon or a discount, make it real or don't do it at all. " Quote Jim lewis

There is another one of your quotes maybe you should rethink it !!!!

JimLewis
01-23-2007, 02:08 PM
Yah, I was talking about something totally different there. In that case I was referring to advertising. Where a contractor advertises a certain service at a "special discount" or "on sale" or whatever in an effort to try to lure in new customers when in reality it's really not on sale at all. It's just a fake discount or sale.

This isn't what I am talking about in this thread. In this case, I am not trying to ENTICE anyone. I am not luring them in with some fake special or sale. I am not advertising.

Nice try though. :rolleyes:

kozmo
01-23-2007, 02:23 PM
You would be luring your valued customer with a 15% discount that dose not exist to pre-pay. if anything that is more disrespectful to your customers than an prospected one. that is bad customer relations and dose not give contractors a good name

JimLewis
01-23-2007, 02:30 PM
No. We're not luring anyone in. These are people who came to us and want us to winterize their irrigation systems and then turn them back on in the spring. And I'd essentially be saying, "Well, because a lot of you have not been paying us on time, we're going to have to raise prices. But for those of you who would like to pre-pay, we won't raise prices."

That's not luring anyone. Again, nice try. And I am not sure what you're vendetta against me is. Sorry if I pissed you off in that other thread or whatever. But get over it, dude.

Wet_Boots
01-23-2007, 04:19 PM
Otter Pops at twenty paces :gunsfirin

PurpHaze
01-23-2007, 08:02 PM
More like photon torpedos. :)

I'm with Jim though... Gotta drive through his area on occasion and don't want to have him ticked at me. Course... If I took a couple of cases of Otter Pops with me I'd have something to throw at him if he was in a cranky mood. :laugh:

BSME
01-23-2007, 08:23 PM
I agree with Jim... it's raising prices because you need to for all the late payers... people who would like to pre pay are actually getting a discount.

I have a question that may belong in this thread...
I'm doing service contracts this year that include startup, mid season checkup, winterization, priority scheduling, etc...

those of you that do this/have done this... how do you collect? once at the beginning of the year or do you bill throughout the summer?

bdb
01-24-2007, 12:41 AM
how do you collect? once at the beginning of the year or do you bill throughout the summer?

I have seen it done a both ways. Associations usually like a per month price. Associations get the money monthly. Homeowners it is not as big of a dollar amount. This could also a good place to give a price schedule. Pay once a month and it is "x". Pay quarterly and it is "x". Pay now and it is "x". Payment options may get you more service accounts.

You can then give them the "preferred customer" status. They get separated from the "standard customer". Just make sure you have some kind of contract to distinguish between the two. ie. 24/48hr service from time they call on business days, if payment is late no service will be performed, discount off manufactures list prices, etc.

As far as pricing it is not deceiving to publish a price and give a discount. You should get paid for the service you provide. Overhead and materials go up why shouldn't your prices. Most people like a discount. It gives incentive to get things done. Then they don't have to worry about it. And put the finance charges on the bottom of the invoice so they see it and there isn't any doubt.

SprinklerGuy
01-24-2007, 08:41 AM
I always collected my service contracts up front.....

You know what is funny? I had service contracts in Arizona and had a hell of a time coming up with a good reason for them...i.e. no winterizing there....

Now I live in an area that I winterize.....why don't I have service contracts?

Hmmmmmmm

DanaMac
01-24-2007, 10:00 AM
I've gone back and forth on the prepay. I have gotten away from pushing it, and don't offer a discount if they want it. Two years ago I had about 25 that prepaid for the winterizing, and that was the most we ever set up for it. Last year I had 6, I think. I just kind of like getting the money when we do the work. Not 6-8 months ahead, then feel like we're not making money when we do the work. I know it's weird to think that. More than likely at some point I'll try it again.

I only have one that has not paid, and it's a damn landscape company that had me do a bunch of commercial properties. Over a grand that they owe.

BSME
01-24-2007, 05:27 PM
I often have people that ask to get put on my winterizing list (or start up list if we are out there winterizing). The problem is that I have never had this type of list... a lot of people love us in the spring when we come out and swear they'll never use anyone again but forget about us in the fall when that guy is working at their neighbors house and they just want it done right away...

I think this year I will have something extra on the startup invoice where they can prepay for the winterizing and I'll reserve a spot for them... this way I don't lose them to the guy working next door

aquamtic
01-24-2007, 11:06 PM
We do about 70% on annual service programs, they prepay in the spring for startup and shutdown.

For all others they are COD. Who ever said that we should bill them. If they will not be home, they can leave a check for us.

We state on our paperwork under our policies that a $10.oo billing fee will be added to any

We do treat commercial accounts and certain customers differently.

aquamtic
01-24-2007, 11:10 PM
And we do "honestly" offer a 10% discount on heads, valves, sensors, and 15% on controllers, backflows and pumps on customers that prepay. We also inform them that preapying lockes them in at that price for the season.

bicmudpuppy
01-25-2007, 08:05 AM
And we do "honestly" offer a 10% discount on heads, valves, sensors, and 15% on controllers, backflows and pumps on customers that prepay. We also inform them that preapying lockes them in at that price for the season.

Yeah, and your losing money w/ the discount? your just thinking about it from the wrong angle because your "system" is in place. The guy who isn't on the progam is paying more because he won't pre-pay. Your prices should reflect a desired profit margin at the les 10%.

The one other alternative I have seen in the past is the invoice fee for charges. If I do the invoice at the door, and they pay it, that is the price. If the "girls" in the office type the invoice and mail it, 2.5% gets added for misc. materials and handling. This doesn't have to be an obvious fee. you can still offer pre-pay plans, etc. but the misc. materials fee on all mailed invoices w/ additional charges for reminder mailings at 30day intervals will get their attention. If you plan on using a collection agency, keep your intrest at a "legal" level. If you use the "we don't service past due........." and that is all, then your late fee can be anything you can get away with.payup :gunsfirin

cush
01-29-2007, 06:21 PM
I did around 850 blowouts this year solo. I did hire my sister to take the orders over the phone and after she got their address she was asking them how they wanted to pay. Most of them were like oh um just leave me a bill and I will pay it. Well I can tell you from experience this is a disaster waiting to happen. I did business this way and you get a portion of people who are home when you go out to do the work. You knock on the door tell them you are there to blowout the sprinklers and ask them to please have the check ready. You do the work and go to the door again. Half of them will have the check for you and half will ask now how much was that? You wait for them to write out the check and chit chat and then you are done.

Now by the end of the day you have checks and cash and all these invoices usually in the morning I am good about writing paid or left bill etc. But by the end of the day I inevitably have invoices I can't tell for 100% if they are paid or not. Overall way too much time is spent with the payments and paperwork. After seeing what was happening over the years I decided to take credit cards in the fall of 06 primarily for sprinkler blowouts and one time services where it is a pain to send a bill. I told my sister to rephrase her question to "would you like to pay for that with a visa or mastercard" this must be done in a tone which they perceive they only have two was of paying either a visa or a mastercard. Roughly half would just give you a cc# others would ask to leave a check and about 10% would ask to have a bill sent. As I got busier in the fall I told her to only take the cc's. Sure we lost a few who did'nt want to give their number out but for 98% of the people they would give us a #. Cards were run the morning of their scheduled service and any cards that did not go through were told to call back with a good # and reschedule.This saved me so much time during the day I was able to do more blowouts.

This year I will only accept cc's for turn on and blowout. Way less paperwork and I know I am getting paid. Sure it costs a little but it saves sending bills and late notices and prevents me from making call in December and January for a lousy $30. I finally got the balls to tell people if you can't trust us with your cc# then you should'nt trust us with your $2500+ sprinkler system.

SprinklerGuy
01-30-2007, 07:56 AM
Well said...and good idea.

Precision
01-30-2007, 09:57 AM
I did around 850 blowouts this year solo. I did hire my sister to take the orders over the phone and after she got their address she was asking them how they wanted to pay. Most of them were like oh um just leave me a bill and I will pay it. Well I can tell you from experience this is a disaster waiting to happen. I did business this way and you get a portion of people who are home when you go out to do the work. You knock on the door tell them you are there to blowout the sprinklers and ask them to please have the check ready. You do the work and go to the door again. Half of them will have the check for you and half will ask now how much was that? You wait for them to write out the check and chit chat and then you are done.

Now by the end of the day you have checks and cash and all these invoices usually in the morning I am good about writing paid or left bill etc. But by the end of the day I inevitably have invoices I can't tell for 100% if they are paid or not. Overall way too much time is spent with the payments and paperwork. After seeing what was happening over the years I decided to take credit cards in the fall of 06 primarily for sprinkler blowouts and one time services where it is a pain to send a bill. I told my sister to rephrase her question to "would you like to pay for that with a visa or mastercard" this must be done in a tone which they perceive they only have two was of paying either a visa or a mastercard. Roughly half would just give you a cc# others would ask to leave a check and about 10% would ask to have a bill sent. As I got busier in the fall I told her to only take the cc's. Sure we lost a few who did'nt want to give their number out but for 98% of the people they would give us a #. Cards were run the morning of their scheduled service and any cards that did not go through were told to call back with a good # and reschedule.This saved me so much time during the day I was able to do more blowouts.

This year I will only accept cc's for turn on and blowout. Way less paperwork and I know I am getting paid. Sure it costs a little but it saves sending bills and late notices and prevents me from making call in December and January for a lousy $30. I finally got the balls to tell people if you can't trust us with your cc# then you should'nt trust us with your $2500+ sprinkler system.

very good plan and congradulations

Flow Control
01-30-2007, 10:49 AM
cush:

Nice plan, that is what I am going to do next fall, my problem is that our pricing is in direct relation to the amount of stations. Before I read your post I was thinking about running the CC's through for start-ups and just leaving a balance on anything that was up and above the 45minute deal along with any parts. I guess as for winterizations if the owner is not accurate I can just bill the balance. I am also like you where I have a stack of invoices where it is not exactly clear if they had been paid or billed and not paid. I photo copy every check that I deposit as a backup and I guess that I will have to make a spread sheet to figure things out before I mail out past due invoices.

cush
01-30-2007, 03:30 PM
I've found it is easier for me to charge a flat rate for lots up to 1/3 acre it is $30 1/2 acre is $45 3/4 is $60 an 1 acre is $70. I target large subdivisions and know the approx lot size for each sub so when they call in we know what price range by their sub. Pretty much anything under 1/3 I can blow all the zones out at once. Some are 4 zones some may have 8 but the number of heads is usually about the same. I have found people would rather know the price up front.

Most people don't know how many zones they have and depending on how long I have to drag the hose, if they have a back flow, how the filter is installed etc etc, determines how long it will actually take. I know the prices are low but it is actually above average for my area and I can still make good money at it. One company is already advertising $16 startups!

Wet_Boots
01-30-2007, 03:40 PM
Sixteen bucks? I wouldn't even think about someone's system for sixteen bucks.

JimLewis
02-01-2007, 02:59 AM
Well, I sent out 170 Letters today, informing all of our spring irrigation start-up customers about the new pre-pay policy. Should start getting payments as soon as next week. For those who pay up, we'll commence with the start-ups March 1st, in the order we receive payments.

I guess I'll see how successful this new strategy is.

PurpHaze
02-01-2007, 08:41 AM
Good luck Jim. Let us know how it works out come spring.

Precision
02-01-2007, 09:22 AM
Good luck Jim. Let us know how it works out come spring.

yeah good luck. I think you made a very smart business decision.

Repairs
02-01-2007, 10:54 AM
I offer a $10.00 off discount to folks who pay the same day the work is done, and promote getting a credit card if they are not home. Within three days saves them $5.00. Customers hate getting called about late bills it typically makes them pay, so we call them after 30 days and inquire in regards to the outstanding bill. The call is the thing that speeds things along. I can send 4 reminders and get nothing, but the simple phone call almost always does the trick. I also always include a return adressed envelope in our billings, and this year we are going to start including postage as a trial. My experience has been the easier I make it for them to pay me, the faster I get paid.

Precision
02-01-2007, 03:56 PM
I offer a $10.00 off discount to folks who pay the same day the work is done, and promote getting a credit card if they are not home. Within three days saves them $5.00. Customers hate getting called about late bills it typically makes them pay, so we call them after 30 days and inquire in regards to the outstanding bill. The call is the thing that speeds things along. I can send 4 reminders and get nothing, but the simple phone call almost always does the trick. I also always include a return adressed envelope in our billings, and this year we are going to start including postage as a trial. My experience has been the easier I make it for them to pay me, the faster I get paid.
For my maintenance accts that are not on auto pay, I have gone to SASE with the billing and it made a dramatic improvement in percent of immediate payments. I still have the same few people who like paying late fees, but there are always some no matter what you do.

koster_irrigation
02-01-2007, 07:55 PM
id love to do prepay, but most all of my spring turn ons involve extra work, over and above the spring turn on service call show up fee. Just bill it all at once.

bicmudpuppy
02-02-2007, 07:54 AM
id love to do prepay, but most all of my spring turn ons involve extra work, over and above the spring turn on service call show up fee. Just bill it all at once.

Why is billing for the extra work a big deal? If they pre-pay for the spring or season, you got that much up front. Helps w/ cashflow, etc. If your non-pre pay pricing is slightly higher, you can firm up that new customer by "letting them in" late when your out for that service call if they pay right on the spot. Again, these things are about getting paid. If the pre-pay is for the season, i.e. spring and winter or any combination, not paying you when later services are already paid and scheduled, leaves them on the hook. If they stiff you, they have to wonder what their status is with the future contract. Doesn't always help, but sometimes it does. Sometimes having that arrangement - "he's my sprinkler guy" - keeps you in the door. The cable, phone, landscape guy who tears something up, hears "let me call MY sprinkler guy" a lot quicker if you have an arrangement instead of a "I'll call you" situation.

JimLewis
02-02-2007, 06:36 PM
Yah, I agree. We run into a few jobs here and there that require us to do more than just the start-up. And when that happens, I'll just have my irrigation tech. leave another invoice for them, for that additional work, at the time of service. But at least I've already been paid for the start-up.

cush
02-02-2007, 07:35 PM
Another nice thing about gitting the cc# is if there is extra work you can adjust the charge that day.

JimLewis
02-05-2007, 06:41 PM
Got 11 checks in the mail today. So I guess it's working pretty good so far.....

2 clowns mowing
02-05-2007, 06:45 PM
we use up front pre-paid for all mowing customers. it works well you don't pay we don't mow everyone pays up front.

PurpHaze
02-05-2007, 09:58 PM
Bozo and Chuckles? First you mow and then you perform for the kid's birthday party? <JK> :laugh:

DanaMac
02-06-2007, 03:38 PM
we use up front pre-paid for all mowing customers. it works well you don't pay we don't mow everyone pays up front.

Kind of tough for us to that in the spring for start ups. There is rarely a job that we don't do something additional when starting up - freeze damage repair, replace a broken head or nozzle, move a head, replace timer, etc. So we don't know what things will cost before hand.

On another note, I finally have been paid for all the blow outs. I was waiting on one landscaper that had me do some commercial blow outs beginning November. $1100 and 90 days later I am all paid up.

SprinklerGuy
02-06-2007, 07:21 PM
Lucky you...I have invoices up to 75 days old totalling $9k

But not sprinkler work....sorry I didn't call you today, perhaps tomorrow.

Precision
02-06-2007, 07:57 PM
Kind of tough for us to that in the spring for start ups. There is rarely a job that we don't do something additional when starting up - freeze damage repair, replace a broken head or nozzle, move a head, replace timer, etc. So we don't know what things will cost before hand.

On another note, I finally have been paid for all the blow outs. I was waiting on one landscaper that had me do some commercial blow outs beginning November. $1100 and 90 days later I am all paid up.
I don't understand why you can't get advance payment on the start up and then charge for the additional work separately.

I realize it would be two invoices, but way better to be pre-paid for the majority of the work to be done.

JimLewis
02-17-2007, 04:35 PM
Update: Working well. We have received about 80 checks so far.

cush
02-18-2007, 02:45 PM
The longer I am in business for myself I realize the power we have as owners to set policies for our company that will ensure its survival. Most customers understand,and the ones that make a big deal about it are a pita and will go somewhere else. Be very good at what you do and set policies to weed out problem customers before they are a thorn in your side.

Hank Reardon
02-18-2007, 04:08 PM
The longer I am in business for myself I realize the power we have as owners to set policies for our company that will ensure its survival. Most customers understand,and the ones that make a big deal about it are a pita and will go somewhere else. Be very good at what you do and set policies to weed out problem customers before they are a thorn in your side.

Word. Clients have the option to go elsewhere if they don't like our policies. (Conversely, we have the option to let them go if we don't like their demands.) Those who decide to play in our sandbox do so under our rules.

JimLewis
02-19-2007, 10:57 AM
Word. Clients have the option to go elsew.......

Yes, indeed. Word!

(I think someone's been watching too many Fresh Prince of Bel Air re-runs :laugh: )

PurpHaze
02-19-2007, 10:59 AM
Jim,

Are you going to track how many of these pre-paid spring start-ups were simple start-ups versus those that required additional work and payment?

JimLewis
02-19-2007, 11:11 AM
Yes. Definitely. But we don't do too much repair at start-up time. We'll do minor replacements and repairs (replace nozzles, filters, etc.) but if it's something more complex, we leave a note that the system is in need of repair, and they call us and schedule a repair.

Over 50% of the start-ups we do are for systems we installed, and they are still on warranty. So if that's the case, we'll repair whatever is broken - on the spot - for free.

There aren't many that require repair as we are doing start-ups. It really doesn't dip below freezing level much here. And when it does, most irrigation systems aren't damaged. Especially if they are installed correctly. So again, there usually isn't anything damaged on most of the start-up jobs we do.