Getting a handle on account receivable and late payers

Discussion in 'Lawn Mowing' started by JimLewis, Jun 30, 2000.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,835

    Been since early spring since I have posted here. Way too busy for this lately. Business is incredible! But I wanted to come back briefly to let you all know of a wonderful solution I found to handle late-payers and keep accounts receivable down.<p>For the last several years (until this year) I spent a GREAT deal of time chasing down money from people. Late payers, slow payers, etc. It was killing me. Payroll would come due and I would have barely enough money to pay my employees and nothing left for me. Then I was waiting on all the late payers so I could pay MY bills. Sound familiar, guys? <p>Well, I am grateful that I finally found a solution. This may not be for everyone. And I am not pushing this on anyone. But I wish I had known about it a long time ago and feel obligated to share it with you all. <p>At the end of last year I took a few drastic measures to ensure that I would no longer have to waste time chasing down money. First, I got rid of all of my clients who were currently more than a month late. In most cases, I would collect the money and THEN cancel them. Late payers never change. They are ALWAYS going to pay you late. I finally learned that. And I finally decided that I was never going to work for them again. I don't have to. There's so much business out there these days I can be choosy. So I axed about 10 or 15 of our 120 customers. The people who were slow-payers (10-15 days late consistently) I had a talking to and explained that they had to be on time from now on. That left me with a core group of customers who were loyal AND paid me on time. <p>Next, I contracted with a local billing company to handle what's called &quot;Automatic Payment&quot;. Simply put, a new client signs up by filling out a short form and enclosing a voided check and from that point on, their payments are made automatically each month on the day they chose. This year we offer this service to new customers. If the choose to be invoiced instead, it's $15-$20 more per month. Most every one of our new clients have chosen to go with Automatic Payment as a result. And a good 10 or so of our old ones have too. Next year, we are going to make it mandatory for all new customers. I can't say enough about this method of billing clients. It's so smooth. The billing company who does it for me does do work for companies all over the US so if anyone wants more info, email me. <p>Another thing I did was reward the early payers. You know. The ones you love! The people who - the day they get their bill - send you a check back in the mail. Or anyone who had consistently paid early or on time every single month, without exception. As a New Year's gift, I sent them all a nice thank you letter and gave them all $25 gift certificates to use on any &quot;side job&quot;. This was great because it encouraged them to think of additional work they needed done and we got more business as a result. <p>Finally, I keep a tight lid on NEW late-payers or slow payers. I have a zero tolerance policy. If someone pays more than 10 days late once, they get a late fee and a polite letter explaining that future payments need to be on time. If someone does it 2 or 3 times they are given the option to sign up for automatic payment, pay each month in advance, or we will not work for them anymore. Again, I put this in a way that is very polite, but gets the point across. Amazingly enough most people have admitted they were wrong and elected one of the first two option. One lady resented the letter and we don't work for her any more. Her loss. <p>One more thing I should add is this year we made it clear that for all side jobs or major landscaping, payment was due in full the day of completion. I enforce that stringently as well. <p>End result - Accounts receivables are the lowest I've ever had. I never have to struggle to meet payroll. There are virtually no late payers and only a few minor slow-payers. I get my money on time now every month. Another nice benefit is there is a lot less paperwork. I don't send out invoices for the Automatic Payment clients unless they request one. <p>Another awesome benefit is that I now get a lot of payments in the middle of the month. Before, I was always getting paid at the end of the month by everyone. Well, with Automatic Payment people get to choose their own date for payment. Over 50% choose the 15th for obvious reasons. So now I get money every day of the month and a good deal of it is now in the middle of the month! <p>I hope this can help some of you. It's been a dream come true for our company. It was horrible last year and it's 100% better this year. <p>Jim Lewis <br>Lewis Landscape Services - OR<br>email: jim@lewislandscape.com<br>http://www.lewislandscape.com<p>----------<br>Jim Lewis - Lewis Landscape Services<br>http://www.lewislandscape.com
     
  2. MOW ED

    MOW ED LawnSite Fanatic
    Posts: 5,028

    Jim, <br>This sounds like you are doing well with this system and it is impressive. I am small time compared to you with only 25 weekly so it is easier to control but I do have some questions for you as well as others who will read this.<br>What does the billing company charge for this service?<br>What is the grace period after billing (due immediately - 30 days?)<br>Do you charge the late payer a penalty if they pass the grace period and if so how much? Does the billing company do this?<p>Good to see you are busy and thanks for the advise.
     
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,835

    Mow Ed Wrote: <p>&gt; snip...<br>&gt; I am small time compared to you with only<br>&gt; 25 weekly so it is easier to control but I<br>&gt; do have some questions for you as well as<br>&gt; others who will read this.<p>You may be small now but if you plan on being bigger I suggest you find a way to get late payers and accounts receivable under control. The longer you wait, the more painful it is. Some people say, &quot;It's just part of the business. Get used to it and plan for the late payers.&quot; I disagree. I have proven that it isn't a necessary part of the business.<p>&gt; What does the billing company charge for<br>&gt; this service?<p>I think they charge me around a dollar fifty per check they process for me. The more you do, the less the rate is per check. It's worth it to me. I get checks on time now so it's worth a buck or so to get that. <p>&gt; What is the grace period after billing (due<br>&gt; immediately - 30 days?)<p>I give people 10 days before they are charged a late fee. Payments are due on the last day of every month. if they don't pay by the 10th of the following month they get a late fee. But like I said, that doesn't happen much anymore. <br> <br>&gt; Do you charge the late payer a penalty if<br>&gt; they pass the grace period and if so how<br>&gt; much?<p>Unless they made arrangements with me, yes. $10. <p>&gt; Does the billing company do this?<p>For people who aren't on automatic payment, I still do all my own invoicing. Quickbooks is just too easy to pay someone to do it for you. The billing company only handles the Automatic Payments for me. <p>&gt; Good to see you are busy and thanks for the<br>&gt; advise. <p>No problem. Sometimes it amazes me how busy we are. Some of my landscaper friends aren't quite as busy and I know why (marketing methods). But we added almost 10 new year-round accounts in the last week or two. Now back to work. Good day!<p>----------<br>Jim Lewis - Lewis Landscape Services<br>http://www.lewislandscape.com
     
  4. Getmow

    Getmow LawnSite Senior Member
    from VA
    Posts: 445

    Jim,<br>Thanks for the good advice. I don't know what my bookdeeper (wife) would worry about without the same 4 or 5 latepayers to worry about. We &quot;fired&quot; the rest of hem a few years ago. We do charge a finance charge on late payments but it usually does not come up to $10 per account.<br>
     
  5. All Green

    All Green LawnSite Member
    Posts: 43

    I have a credit card machine that automaticly takes payment it costs25 per month and 2% of bill.
     
  6. All Green

    All Green LawnSite Member
    Posts: 43

    I have a credit card machine that automaticly takes payment it costs25 per month and 2% of bill.
     
  7. All Green

    All Green LawnSite Member
    Posts: 43

    I have a credit card machine that automaticly takes payment it costs25 per month and 2% of bill.
     
  8. TurfMan

    TurfMan LawnSite Member
    Posts: 68

    AllGreen<p>do you have a studdddddeeeeerrrrrriiiinnnnnggggg Problem????
     
  9. geogunn

    geogunn LawnSite Gold Member
    from TN
    Posts: 3,010

    jim--this is great news in the billing department.<p>but have you come up with the solution to &quot;lowballing&quot;.<p>I seem to remember lowballing was about your favorite subject several months back.<p>thanks,<p>GEO
     
  10. cutntrim

    cutntrim LawnSite Senior Member
    Posts: 474

    Jim,<p>Sounds like your system is working well. Here's what we do - our lawncutting customers pay us with post-dated checks (May 1st - October 1st) and our fertilizing customers have the option of paying with one check in advance (April 1st) or pay in three installments (post-dates) which costs them 10% more. Our landscaping jobs (we're 90% maintenance) we invoice upon completion and there are few enough of those that it's easy to keep track of who owes and who doesn't.<p>----------<br>Dave in S.Ontario<br>www.cutntrim.com
     

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