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Slow payers

Discussion in 'Business Operations' started by Dave does lawns, Sep 11, 2012.

  1. 123hotdog

    123hotdog LawnSite Senior Member
    Posts: 481

    Dave, I have the same issues. Three years ago I implemented a 5% late fee. I bill on the fifteenth. Its due on the 30th. If I don't have it by the fifth, the late fee is applied. On average I make $50 a month on late fees. I can't get that return at the bank. If they become one month past due and one month current due, I suspend service.
     
  2. Dave does lawns

    Dave does lawns LawnSite Senior Member
    Posts: 260

    Thanks everyone,

    I made several phone calls yesterday to people behind. Most had a payment due on the 15th and now its the 25th, all those who fit into the category said no problem a check will be in the mailbox, under mat .....etc.

    However the two that are at 2 months owing question me over the phone, more like debating their balance.:hammerhead:

    I had an idea, what if I bill in advance on the 1st, make it due the 15th, any payment not received by the 30th will have their credit cards charged, which I will have to keep on file. Furthermore after the 30th, any payment still not received, (declined cards, no card # on-file) will have a 5% late fee, or service suspension.
     
  3. Braveheart

    Braveheart LawnSite Member
    Posts: 120

    I used to have the same problem. The most important thing I learned was that however you finally do decided to handle the issue that you do it consistently. Sometimes Owners have a tendency to go on a case by case basis. It's hard to scale / grow your company if you handle each late paying customer differently.

    For instance if you find that your customers pay but it's always late and that's not an issue for you then I would implement a policy that customers are dropped three weeks after the second invoice is issued. Then track your customer retention rate and cash flow...
     
  4. WheatBookkeeping

    WheatBookkeeping LawnSite Member
    Posts: 108

    If you decide you have too much money wrapped up in late payers, have your bookkeeper set up an Allowance for Doubtful Accounts account. It will be reflected on your Balance Sheet and, more importantly, on your Income Statement as a bad debt expense. You’ll gain tax relief for the debts you are owed and haven’t been collected by tax filing time. To a quarterly taxpayer this may be a big deal.

    Keep your bookkeeper in the loop, you’ll save money.
     

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