Equal monthly payment ?

Discussion in 'Business Operations' started by scottishmaximus, Mar 3, 2004.

  1. scottishmaximus

    scottishmaximus LawnSite Senior Member
    from ohio
    Posts: 286

    How do you have contracts set up with equal monthly payments for mowing?

    One way that I see is basing your price on an average # of cuts per year. At the end of the year, if you mow "X" more or less times than the average, nothing happens.

    The other way i that I see it is prorating the last month to compensate for the "X" more or less cuts.

    With prorating, more work is involved and customers could get mad for when they thought it didn't need it. Also with prorating, what happens if there is a drought and you cut 10 times less than the average? How could you afford that?

    I would like to avoid paying per cut because it is an extra hassle. Equal monthly payments is also great for both parties for budgeting. I am looking for other opinions on this, and what methods you use.

    Thanks
     
  2. Soupy

    Soupy LawnSite Gold Member
    Posts: 3,125

    Edit: post to wrong thread....
     
  3. ElephantNest

    ElephantNest LawnSite Bronze Member
    from La.
    Posts: 1,878

    I base mine on 36 cuts per year, 12 equal payments. Depends on location on how many cuts. Offer a small discount for using this payment method, sure helps in the winter months.
     
  4. Expert Lawns

    Expert Lawns LawnSite Silver Member
    Posts: 2,660

    I agree ElephantNest

    around here we usually average 24-30 cuts. my customers can choose between 7, 9, or 12 equal monthly payments. or, they can pay up front and save 5-10%
     
  5. cklands

    cklands LawnSite Senior Member
    from MA
    Posts: 360

    I base mine on th average number of cuts. Usually 24-28. Then I give them 9 payments
     
  6. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Another thing to consider is that they will be used to paying you each month and this may help you when it comes time to renew them for the next year.
     
  7. j fisher

    j fisher LawnSite Senior Member
    Posts: 296

    I bill my customers for the # of cuts per month. If they are weekly, and ther are 4 weeks in the months, they are billed for 4 cuts. I there are 5 weeks in the month ( depends on there scheduled day), then they are billed for 5 cuts that month. I have never given an estimate for the entire year or season. Estimates are given "per service". For bi-weekly customers, it's normally 2 cuts per month. On the months with 5 weeks (again depends on their scheduled day), then they are billed for 3 services that month.
     
  8. mtdman

    mtdman LawnSite Gold Member
    Posts: 3,137

    I have, until this year, done what j fisher wrote. However, this year I went to the equal monthly payment plan. There were many factors to this decision. It equalizes your income over the life of the payments, you know exactly what you will be bringing in each month regardless. This lets you budget better as a businessman, and lets the customers budget better in their payments. Billing per month could sometimes lead to large bills for 5 week months, small bills in months with drier weather. This equals that all out. Also, it stops the cheap-os from trying to screw you by calling off. Call off all you want, you still have to pay the same this month!

    It also allows you the opportunity to get in a full set of mowings. My mowing season has been outlined from April 12 to November 22. This gives me 32 weeks to get 26 cuts in. Even if I have a few weeks of drought in the summer, I have a six week leeway to get all my cuts in. That's part of the plan.

    I have in the past offered refunds in the form of credits, other services and cash for customers that prepay the season and don't get the full 26 weeks in because of weather, etc. I know some people here will boo-hoo that, but I think fair is fair. I'm not charging for something I don't do. However, I've only had to give extra service credits, and only for a couple people. A fall cleanup, edging, etc in exchange for a few missed cuts. THis keeps the money in my pocket, and keeps me working at the end of the year when things are slow. I have put this into the equal monthly payment plan as well. If worse comes to worse and I do owe a refund, I can always pro-rate the last payment for credit.

    However, I will be inspired to get as much work in during the season so as to get all 26 cuts in. I don't doubt that I will get them all in, but I will be doing SOME kind of work each week, whether or not the lawn needs mowing. Even if it is picking up debris, blowing sidewalks, etc.

    I did leave an opening for those who don't absolutely feel comfortable with the equal payment thing, but I expect most of my people who don't prepay to go with this option. I've had to explain it to a few folks already who didn't understand, but thought it was a good idea upon explanation.

    I do mine over seven months, May through November. This is the first year and I may offer it from April to December next year to get the payment down lower. I don't want to do it over 12 months. That becomes too much like financing for free, and I worry about the deadbeats that might skip out during the offseason. But that's just me.
     
  9. scottishmaximus

    scottishmaximus LawnSite Senior Member
    from ohio
    Posts: 286

    Thanks for the replys.

    mtdman, I thought the same thing about the deadbeats with a 12 month plan. I see how it may be easier to get them to resign, but more tempting for them not to pay since work is not being done during the winter.


    Any proraters out there?
     
  10. scottishmaximus

    scottishmaximus LawnSite Senior Member
    from ohio
    Posts: 286

    Expert, how do your clients react when they see that the number of cuts may vary on an equal payment? Do you offer other services to compensate for these cuts?
     

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