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View Full Version : Take care of slow / late payers for good !!!


JimLewis
10-25-2001, 06:29 AM
Guys! I can't believe more people haven't caught onto this. There is a simple and easy way to get rid of slow and late payers for good in this business. I see posts all the time about "How do I get people to pay me on time?" etc. Sheesh, we must see 100 or more posts like this a year.

The truth is there's a simple solution - Automatic Payment. I've talked about it many times here but I'll explain it again. It's really the best solution out there.

Before I get into how it works and such let me explain how I came upon this. I too was struggling with late payers about 2 years ago. I always had. But it wasn't as big a deal when I was smaller. But as our company began to grow the problem became much more pronounced. Late payers are a problem and always will be. They exist in good economies and in bad ones. And ours are usually the first bills to be ignored if money is tight because people know their consumer credit won't be effected by paying us late like it will if they don't pay Citi Bank. So we have to be smart.

Let's take a lesson from others who are in our position - health clubs for instance. They are in the same boat. Many people sign up for a health club membership but then as their resolve to work out fades so does their interest in paying their bill on time. So most health clubs now require AutoPay in order to become a member. We should take note!

I finally reached my breaking point 2 years ago when late pays accounted for over $4000 each month. I had had enough. And out of adversity often comes inginuity. So I searched for a way to rid myself forever of this problem.

First, I began to look for a local Payment Processing company to process Automatic Payments (AutoPay) for me. Once I found one that was affordable I began to offer it to all of our clients - new and old. Now obviously most people aren't going to choose to have money taken out of their accounts automatically if there is no incentive. And I don't blame them. I hate it when things come out of my account automatically. But the fact is more and more companies are offering or requiring it nowadays. And people are at least used to the idea. They just need an incentive.

The incentive I give to new clients is that I offer a $15 per month discount if they sign up for AutoPay. (In all actualilty I just penalize those who don't sign up by $15. I never lowered any of my prices.) Now, when I give an estimate it has two prices on the bottom. One for AutoPay and one rate if they "prefer to be invoiced" ($15 more). And guess which one 95% of new clients choose?

I gave no incentive to current clients who had always paid on time. I don't mind invoicing people if they pay on time. But I did offer the program to all of them.

I gave a good incentive to chronic late payers - sign up for AutoPay or we'll cancel your service (I worded it a lot more cordial than that.) Some did. Others chose to leave. I didn't care. And have been better off without them.

Today, 2 years after we began this program, we have about 80 clients signed up on AutoPay. That's over half of our clients. And that percentage is constantly growing. Lawn and Landscape Mag says that LCOs turnaround their clientel almost 100% about every 7 years. So as we lose older clients (which is normal as people die, get divorced, move, etc) and sign on new ones, our percentage of people on AutoPay goes up every month. I fully expect to have 95% of our clients on this program in another 3 years.

The results? Well, we get about 95% of our payments on time every month. And 99% within another 5 days. Accounts receivable are almost nothing. Guys I am telling ya, this is the way to go. Life is so much better when you don't have to worry about this stuff.

If you are interested in doing this you can call around and find a local company to handle AutoPay for you. Or I can give you the number to the company I use. They can handle payment processing for you regardless of where you live. It's simple and very affordable. And it's worth checking out.

SJR Lawncare
10-25-2001, 06:52 AM
I am interested, Late payers are really becomming an annoying problem for me. Its getting worse every month.

SJR

Shady Brook
10-25-2001, 09:41 AM
Sounds like a super idea Jim. I would be currious to find out what they charge. I do not have a yearly contract that dictates how much per month my customers owe, so I would have to make some changes, may be worth it though.

Thanks for the idea
Jay

bruces
10-25-2001, 11:36 AM
I assume most of your customers are on a level monthly payment.

How do you handle additional charges and services or customers whose charges vary from month to month?

Along the same lines, how many people on here take credit cards?

That seems to me to be a good alternative for accepting payment.

I would be interested in receiving the name and phone number of the company you use to process the automatic payments.

JimLewis
10-25-2001, 12:45 PM
I pay $1.00 per AutoMatic Payment the company generates for me.

Yes, all of our clients are on a flat year-round rate, which makes this a little easier. But you could do it with variable rates too. You'd just have to send out a statement before you debited their account.

How do I handle additional charges for extra work? Well, it depends on what it is. We don't often have small additional charges. Most of our additional work are larger projects - e.g. in the hundreds or thousands of dollars. Those I just treat like a regular job. We get paid once the job is completed. Sometimes people want to pay for those with Automatic Payment too. In that case I just send an email to our Payment Processing Company and they create another AutoPay for us. It's simple.

Anyone who wants additional info regarding the company we use and more details of how it works should email me. I don't want to appear like I am promoting a certain company here. I am not. I am promoting an idea that has saved us a fortune in time and money and headaches. But if you can't find someone locally who can do Automatic Payments for you I'd be glad to connect you with the company we use.

JimLewis
10-25-2001, 12:47 PM
Someone asked about credit cards. We used to take Visa / MC. Only problem is that if you don't use it very much (and by very much I mean hundreds of times a day like stores do) they begin sending you notices that your rates have gone up. Even at the low beginning rates, 3% off the top is a bummer. But when it got to 8% I cancelled our Visa service. My conclusion is it's not worth it for small companies.

Runner
10-25-2001, 01:18 PM
Very interesting. Thanks, Jim, maybe I'll look into this as well. This would be great like for a fert service that has multiple accounts.

lawnboy82
10-25-2001, 03:13 PM
So you are saying that this debits the customer's bank account? What happens if the money just flat out isn't there? People usually have several bank accounts, not just 1. Also they get paid at certain times, so what happens if they don't get paid until after you do? Hows about builders? They don't normally have all the money to pay you right away for the work that you do, because the bank won't release it all at once. I think that this may be a good idea, but there are potential problems with this situation that would have to be sorted out between you and the customer first.

Lawn Wizard
10-25-2001, 03:29 PM
This seems like a pretty good idea. Do you have a link with some more info?

cos
10-25-2001, 04:33 PM
Offer a discount with this auto pay!

JimLewis
10-25-2001, 04:53 PM
So you are saying that this debits the customer's bank account? What happens if the money just flat out isn't there?
It's not really a concern. For one, the clients choose the day of the month that the money comes out. Most people choose the day of or the day after pay day. Whenever I have to set up an AutoPay thing I always make sure it's set up to come out when I have the most money in my account. I find that my clients think the same way. And I've only ever had two instances where money wasn't there the day we drafted their account. In those two cases, the money WAS there within a few days. I never even had to call them.
Hows about builders?
I never work for builders.
They don't normally have all the money to pay you right away for the work that you do
Exactly. That's why I never work for them :D
but there are potential problems with this situation that would have to be sorted out between you and the customer first.
There really aren't any problems. Like I said, we've done this for 2 years now and it works smooth as silk. We now have 79 clients on this program. Once the client signs up I am virtually guaranteed payment regularly forever. It's that simple - otherwise I wouldn't be so gung-ho about it. Do you have a link with some more info?
Again, if someone wants more details, please email me and I will give you the full scoop on exactly how it works and who we use, etc.

casey
10-25-2001, 05:51 PM
How much did it cost you to set up AutoPay?
You said 80 clients signed up. You pay $80 per month for this service?

JimLewis
10-25-2001, 07:04 PM
I may be down to $.75 per transaction now. I don't really look at the invoice any more. The rates go down the more you get. But yah, I guess I pay about that. But it's totally worth it. Consider this;

1) I am saving money in the form of stamps ($27 for 80 stamps), envelopes, paper, inkjet cartidges, etc...

2) I am saving a LOT of time in that I don't have 80 less invoices to prepare, print, stuff into envelopes, etc.

3) I am guaranteed prompt payment from each of these people each month.

So, to me, it's way worth it. Our total income from AutoPay clients each month is $9300.00 I save approximately $30 in costs (above). So I basically pay $50 to not have to worry about late payments any more. I dunno about you. But it's hella worth it to me.

casey
10-25-2001, 08:13 PM
What does your average AutoPay client generate per month?
How much did it cost to set up AutoPay?
Thanks.

JimLewis
10-25-2001, 09:05 PM
Our average client is about $120 per month. But that's deceiving. There are a few thrown in there who just pay like $45 a month to have us come by and edge only. This is also a year-round rate and lawns are pretty small here. We mow only once per month in the winter.

There is no charge to get set up. At least not with the company we use. There is only the per-transaction fee.

JimLewis
09-19-2002, 03:53 PM
New info. on this subject. I made a small web site explaining how AutoPay works in more detail. Thought I'd post it here;

http://www.cybcon.com/~jimlewis/AutoPay.html

awm
09-19-2002, 06:25 PM
sounds good jim. wish i could get all my bill to be due on the 30th of the month. like u said u could set it up for your customers. ive tried to get some to do this and they were unmoving in there due dates. mabe if i offered to put them on automatic draw it would solve a problem for me. u guessed it ,i hate paper work an payin bills etc.its an idea, to be looked into