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what do you do with a late paying customer?

Discussion in 'General Industry Discussions' started by Rons Rightway Lawncare, Sep 13, 2006.

  1. Rons Rightway Lawncare

    Rons Rightway Lawncare LawnSite Bronze Member
    Posts: 1,163

    I have a few customers that seem to put paying me on the low end of their prioritys..... It drives me nuts that they ignore my bill and can't even give me a call or email to tell me they want to pay it later.

    I have talked to other lawn care guys and most say they just stop cutting until the bill is paid.

    My problem is I have never pushed for my customers to do contracts - I don't believe they are worth the paper they are written on - so the bulk of my business is on the per cut basis. If I just stop coming out, I loose money.

    I rarely don't get paid at all, it is just a few customers that are always a few weeks late paying or will let their bill rack up to 2 or even 3 months later before finally paying.

    The way I do my billing is at the end of a given month once I am done with all work in that month, I add up what I have done and the amount due and generate a invoice. I leave the invoice for the customer the next time I am out cutting and have a Due date on the invoice of usually 2 weeks later - typically the 20th to 25th of the month. I tell my customers as long as they pay their bill before I make the next months bill I am happy. But like I said I have some that let it go past that, some that will let it go 2 or 3 months past that and they build up a bill of several hundred dollars before sending me some money.

    What do you guys do???

    I used to send out notices once a year that said I was going to add a 25$ late charge to the next bill to any accounts that did not pay by the due date. I had some customers get angry by this and I stopped sending out the notice and rarely add in a late fee these days. But I am thinking about bringing the late fees back.

    I got enough money in the bank that if these late paying customers wanted to just pay quarterly I would be okay with that. It is just the fact that they get the bill and ignore it that makes me mad.
  2. General Landscaping

    General Landscaping LawnSite Senior Member
    Posts: 802

    Slow payers and property for sale get put on a prepay system.
  3. Grn Mtn

    Grn Mtn LawnSite Senior Member
    Posts: 863

    As much as I need the money, if people don't respect the fact that I perform a service for an entire month out of my pocket and/or are not able to afford the service, -they get dropped period. No late fee's, just a letter stating "due to lack of on-time payments, GML will no longer be servicing your account".

    I used to do everything with a smile and a handshake, well that wasn't putting food on the table, so everyone gets a contract that states the frequency of cut, how much, etc. I don't have a "your locked into me clause" I think those are baloney, people should have the right to choose as they please, but ground rules are necessary.

    Since its only a few of your clients giving you a hard time, I would do one of two things: Drop them, or make them pay in advance.
  4. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    I'm a per cut guy and I have two policies in effect for any and all customers:

    First, no pay - no cut. You pay me for the last cut or I don't show up no more.
    Yes, even the first time around if they never pay for their first lousy 35 dollar cut, I don't show up again until that first check is in my hand and I don't care if they don't like it because that's the most important rule, it works great in weeding out those slow payers or the ones who never pay right off the bat, I lose out on one cut in the worst case scenario and I still get to harass them and put it on their credit record and take them to court, I love it.

    Second, the 10 percent rule: For any customer who has been with me for some time, they are allowed to go in the hole by up to 10 percent of the total money they have already spent on me (meaning I got paid and the check has cleared the bank lol), so if a customer's been with me 5 years and in those 5 years they have paid for 4 thousand dollars worth of services then they have 400 dollars credit before I discontinue service. This one can still bite you but it's pretty safe and it gives customers an incentive to stay with me as a reward system, also if you end up getting stiffed for 300-400 on someone who already spent 4 thousand dollars, it doesn't hurt so bad really.

    Don't let them play you like that, this is your business, you own it, you run it.

    Good luck with them people.
  5. noseha

    noseha LawnSite Senior Member
    from MI
    Posts: 554

    I Charge Them More. I'll Change Their Bill Or Send Them A Note In A Bill! Telling Them They Are Going To Pay More Because Of Three Late Payments?
  6. Littleriver1

    Littleriver1 LawnSite Senior Member
    Posts: 811

    Personally, I think your all looking at it the wrong way. How does the car insurance companys handle the cost of late payers and not payers? How does health care providers handle loss? How does retail stores handle loss? They pass it on to all their good customers. So, to me it is all part of the cost of doing business. It should already be added into your price. Everyone is always saying we should know our costs. I say, figure out what it is costing you and add it to the price. If you can't make money in any business, then you wont be around long. My next question is, why are you working for some one that doesn't pay their bills? You need to learn how to determine who these people are before you work for them.
  7. Rons Rightway Lawncare

    Rons Rightway Lawncare LawnSite Bronze Member
    Posts: 1,163

    Some of these customers have been with me for years, and used to pay on time. Others are newer customers. It is really hard to pull up in front of a 500,000$ home and see the typical homeowner and get the vibe that they will not pay on time. You would have to wonder how they could afford to live in such a house if they paid their bills late.

    Like I said I RARELY ever get stiffed. It is just some of them will not pay until I call them on it and by then it may be 2 or three months behind.

    I always get my money and I can stay alive and pay my bills without their money if they want or need to divert money to other things and pay me later. It is more a matter of lack of respect that bothers me. I try to have a very personal relationship with my customers, to try to know them on first name basis and when they don't pay I get angry.

    Contract customers, which I have a handful of, I will just stop coming out if they are more than a month and a half late. I won't call them either. They get the picture and almost always pay rightaway when I stop showing up each week.

    But like I said, the per cut customers, if I just stop coming I loose that income - yeah I know you will say if they aren't paying on time, then I am not loosing income, But these people ALWAYS pay at some point or another, so I still get the income even if it is 3 months later.

    I want to put out a payment policy notice and have late fees, and possibly a pre pay system for those that are late often. Just wondering how to do it without shooting myself in the foot.
  8. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Posts: 273

    Stick em all on a credit card, hit their card in the evening after you are done and be done with it. No more statements, no more waiting on checks, no more calling on outstanding bills - it's so simple that it's literally a no brainer.
  9. Dagwin

    Dagwin LawnSite Member
    Posts: 5

    Here's how I handle late/non-paying customers:

    Let's assume these are non-contract, residential...

    My billing goes out the first week of every month (for the previous month's services). Payment is due by the 15th of every month. I will cut to the end of the month, and then send them a double bill the following month, indicating that payment is due immediately upon receipt of that invoice or service will be interrupted. I also state that if the double bill isn't paid by the day before their next scheduled service date, service is suspended pending payment in full. Then I also tell them there is a $25.00 fee to reinstate service if it ever becomes suspended.

    They can end up getting as many as 9 cuts out of me before the service stops. I will then attempt to call the delinquent customer. Most of the time, when talking to them on the phone, I receive a commitment to pay, and I receive the payment shortly in the mail, or they leave at their home for me to pick up.

    If this doesn't work, I will visit them in person. There is a big difference in ignoring a piece of paper, than there is ignoring someone on YOUR PORCH. Again, this method is VERY EFFECTIVE if they answer the door.

    If this fails, I then send another invoice, with a letter stating collection action will begin if payment isn't received by a certain date.

    Then I begin sending more and more threatening letters. Subsequent letters will threaten small claims court (including an amount higher than their bill to cover court costs, etc.), ruining their credit, and a MECHANICS LIEN on their property that prevents sale or remortgage until lien is satisfied. This scares some into paying.

    Before I get too threatening, though, I also offer an installment plan for them to pay what they owe (maybe dividing it into 2 or 3 payments). This has helped me get money many times, too.

    Have I ever taken someone to court? Nope.

    I've had over 400 different customers in the past 3 years (been in business 11), and how many owe me money? ONE!!! Yep, that's it, ONE!!! It's a customer from this year that owes me $90.00. I've done everything above, and they still haven't paid. But, as you can see, my methods have been very successful for me in getting paid.

    Hope this hleps.
  10. Poncho25

    Poncho25 LawnSite Senior Member
    Posts: 369

    you are killing yourself with the pay per cut deal man!!! 1st off take the word "Contract" and toss it out, for now on, call it an Agreement!! I have all "agreements" with my clients, that are year long...but they are not tied in for a year, they can cancel any time with at least a 30 day notice...but the main reason for this "Agreement" is to clear up a few other things, like being late...I tell all my clients that my phone is my business, and if at all they are going to be late, or need to put it off to just call me, its stated in my agreement that if its past 30 days and I have not been called, that a 10% late fee will be charged and I have the right to stop servicing them. If you want to see a copy of a blank agreement I can show you, and I have no issue what so ever if you want to use it, edit it for your use or whaterver, I am here to help :) :weightlifter:

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