Discount for early payment?

[Property Maintenance Plus]

Just wondering if anyone gives their customers a certain % discount for early payment, such as pay within 10 days get a X% discount?
For example, I work at a paint shop that deals with mostly contractors and industrial customers, if they have an account with us they are sent a monthly bill. The contract when they set up a charge account states 30 days until full payment is due but there is an option to pay within 10 days and they will recieve a 1% discount. So if their totall bill for the month is 1,000 and they send payment with 10 days they will only pay 990. Now granted its not alot but when the big industrial companies have a total bill of 15,000 a month thats when they can save a bunch of money.
I dont know about you guys but the sooner I would get my money, the happier I would be payup
Any input would be great. Thanks guys
:waving:

[INTEGRA Bespoke Lighting]

Does your Dentist do this? How about your Lawyer? Do you consider yourself to be a professional? If so, then do as they do.

Bill for everything. Invoice Immediately. Provide no discounts. Get paid promptly and in full.

Regards

[Big C]

HELL NO:nono:.....why reward people for paying on time.........that's what they are suppose to do....

[Property Maintenance Plus]

I do consider myself to be professional, and I did not state that I provided discounts. I asked if anyone has done or does do this, but thank you for your responses.

[ScaperX]

This is my 1st post, I'm new to the site, so dont beat me up too bad :)

While I do agree with the comments in regards to professionalism, I will share some insight into what works for us. We offer a 2% net 10 discount to commercial accounts only, and only on maintenance services. Residential clients receive a typical monthly statement with payment due in 30 days with no discount offered. We do offer an annual pre-pay discount to residential clients that gets a good response, they have until January 31st to take it. Almost all of our maintenance contracts are set on a 12 month payment schedule that follows the calendar year. With a mix of pre-pay & monthly contracts we typically bank 15-20% of our annual contract revenue before the start of our season. This is very helpful in spring start up costs and the ability to buy equipment and materials at a discount. We are very careful not to spend this $ on unneccessary off season projects to keep employees busy, spending those funds will kill you at the end of the year.

Like I said, this is what has worked for us over a number of years, but every business has different needs.

[UpNorth]

I have offered 10% off for every customer who paid for all of their services upfont for 12 years. Every year I also raise prices. Some more than others, and some who have been customers for years and years I don't.

The past two years I told my customers that because of the economy, I would do my part to help, and not raise prices, however I could only offer them a 5% prepay discount.

This money keeps me afloat over the winter, and more importantly I use that large amount for marketing. If done correctly, the money you spend with the prepaid money will come back in greater quantities. If I didn't offer this, I wouldn't have as much cash on hand to spend on spring marketing.

INTEGRA...You mentioned lawyers, dentists, etc... We are not them! As much as as some like to believe, our profession does not require almost a decade of higher education. Professional or not, have you ever used a coupon at the grocery store? Have you ever gone to Home Depot because something you needed was on sale? It's basically the same thing. And as far as the question, in my side of the business (fert and weed)... Lawn Doctor, Scotts, TruGreen, etc all offer a pre-pay discount. So if they are big competition, how can you not offer your customers something comparable.

It gets tiring seeing posts about lowballers, an such on this site. If your business allows you to offer something that the competition doesn't, then do it!! Wal-Mart didn't become the largest company in the world by keeping prices the same as the completion. They ran companies out of business who couldn't compete. Weather or not you agree with their tactics or not, it's still the truth.

I think what people fail to realize in this industry is... We DO NOT own lawn care companies!!! We own marketing companies the happen to cut, or fertilize grass. The end result may be cutting the grass, but let's be honest...anyone can cut grass or kill weeds with right equipment or products. But can anyone get hundreds of new customers a year?

[ScaperX]

Good point on "marketing companies".

I hear from many of the doctors, lawyers, etc. that I know that they are often making payment plans with clients who cant afford to pay the whole bill at once. CASH FLOW IS KING in our business, so if you have a method for increasing it then do it. Make up for the discount in better managing your contracts or some other way.

However, cash flow without profit is what dooms most small businesses. It's a fine line.

[shade tree landscaping]

I'm with UPNORTH, a letter goes out to all customers 1st week of Jan, if they pay for entire season in full by Jan31 I take a set % off. Has worked out great for me so far, have money for capitol purchases, money for advertising, and such.

[mdlwn1]

Does your Dentist do this? How about your Lawyer? Do you consider yourself to be a professional? If so, then do as they do.

Bill for everything. Invoice Immediately. Provide no discounts. Get paid promptly and in full.

Regards

Actually a lot of businesses do this....dentists especially. Many offer pay in full cash discount....I've seen up to 7%. To the op, in the landscape maint biz we always offered a 5% pay in full for the season discount. Those that say it's wrong don't understand the value of cash flow yet. When you allow 30 days...you have loaned your money to a customer without interest. Inevitably a large business will have to borrow money to operate smoothly...this loan will be 5% or MORE. I feel bad for the guys that dont realize cash flow management is FAR MORE IMPORTANT THAN KNOWING HOW TO BE A LANDSCAPE PERSON..

[BearWise Landscapers]

It is tough to run a business right now in this economy. I agree that you should expect clients to pay on time and not reward them for early payments, but cash is king right now and it becomes a judgement call for what works best with your business and unique situation.

[richardsonlawnnlandscape]

I too, am new to the business and I'm trying to get a better system of payment for my business. Can anybody send me an outline of a good invoice or a monthly bill? Thanks.

[INTEGRA Bespoke Lighting]

INTEGRA...You mentioned lawyers, dentists, etc... We are not them! As much as as some like to believe, our profession does not require almost a decade of higher education. Professional or not, have you ever used a coupon at the grocery store? Have you ever gone to Home Depot because something you needed was on sale? It's basically the same thing. And as far as the question, in my side of the business (fert and weed)... Lawn Doctor, Scotts, TruGreen, etc all offer a pre-pay discount. So if they are big competition, how can you not offer your customers something comparable.

My apologies... I did not consider the audience or the nature of the businesses that would be reading my advice. There is a big difference between professional lighting design / build companies and lawncare / property maintenance companies.

Another consideration is the nature of your work and the difference between contracted services and time + materials.

Some might say it is elitist to say so, but I call it as I see it. And yes there is a big difference between a profession and a trade. Comparing lawyers and doctors to trades is probably not a great example.

Continue to offer payment incentives if it works for you. I will continue to collect in full upon completion of services rendered.

[UpNorth]

My apologies... I did not consider the audience or the nature of the businesses that would be reading my advice. There is a big difference between professional lighting design / build companies and lawncare / property maintenance companies.



No apology needed. It was just your first post was a little blunt and really one sided. However, if can run your business and never offer discount that's awesome! But for some it's helpful for customer retention to offer the discount, and as some of the others have mentioned... It helps with cash flow too.

I just wanted to make sure the OP had some advice on when it might be good to offer a discount. We all know that full price is always better but sometimes discounts help all parties...owner and customer.

[360ci]

I don't give discounts, I'm cheap enough. If they don't like it, they can go elsewhere. I spend NOTHING to advertise this past May, and this year has been the best yet, word of mouth landed me five new clients this spring - already, and spring is still five months away!

[Vogel-Landscaping]

im not very cheap but i do offer a few different types of discounts at different times. back in my beginning days i tried in january, when i was low with money, sending out a letter asking for the first month prepay for the mowing season and i offered a certain percent off for months thereafter. it was stupid and messed my billing up all year. now in my more wise days the only discount i offer is if you refer me a customer that signs on to mowing for the season you get a free cut. the customers are glad to save 35 plus dollars (depending on who it is) by just talking to friends and i make a lot more each season from one new customer then i lose on one free cut. also offer 10 percent discount on landscape work for seniors during summer months when my landscape work slows down. it gives me more landscape work when the cutting slows down. but like i said i charge people im not anywhere near cheap. but im always busy. so i discount here and a discount there attracts people and doesnt hurt me.