Take care of slow / late payers for good !!!

Discussion in 'Lawn Mowing' started by JimLewis, Oct 25, 2001.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    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.
     
  2. SJR Lawncare

    SJR Lawncare LawnSite Senior Member
    Posts: 250

    I am interested, Late payers are really becomming an annoying problem for me. Its getting worse every month.

    SJR
     
  3. Shady Brook

    Shady Brook LawnSite Bronze Member
    from Indiana
    Posts: 1,517

    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
     
  4. bruces

    bruces LawnSite Senior Member
    Posts: 648

    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.
     
  5. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    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.
     
  6. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    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.
     
  7. Runner

    Runner LawnSite Fanatic
    Posts: 13,494

    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.
     
  8. 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.
     
  9. Lawn Wizard

    Lawn Wizard LawnSite Member
    Posts: 99

    This seems like a pretty good idea. Do you have a link with some more info?
     
  10. cos

    cos LawnSite Addict
    Posts: 1,253

    Offer a discount with this auto pay!
     

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