residential clients paying for season in advance Question

Discussion in 'Lawn Care Business Management' started by axitguy, Sep 11, 2017.

  1. axitguy

    axitguy LawnSite Member
    Male, from Ontario
    Messages: 24

    So far as an old guy and first season cutting lawns I have had fairly good luck, enough that I would like to try as full time next season and have 1 or 2 employees. Most of my customers like the option of E-Transfer and have been great for paying that way but hey there are always the exceptions and although they are regular customers they try diligently to strech out biweekly to monthly cutting for same price when the lawns are out of control by the time they want you back again.
    I have drawn up a seasonal contract for next years season 2018 covering some minor issues I have encountered so people know and understand my terms up front. Really nothing major.
    I know the seasonal snow removal services here that have the monster farm tractors with equally monster blowers attached have seasonal contracts and clients pay up front for the entire winter season ahead.
    My question is, does anyone on lawn site have the same type of up front seasonal total payment for the grass cutting season?
    Is it hard to get clients to agree to pay up front for the season even if you point out the benefits to them?
    Any advice on this would be great good or bad.
    Thank You all for your past comments and likes. It's very encouraging.
     
  2. BigJlittleC

    BigJlittleC LawnSite Bronze Member
    from Chicago
    Messages: 1,616

    I offer seasonal payments. To get people to sign up I do offer a small discount 5%.

    Some people really like it as it helps set there budget. About 80% of my condo associations go this route. It's lower about 40% for my single family homes. I think it has more to do with having that chunk of coin available then making smaller monthly payments to the single family homes.
     
  3. Cdlong27

    Cdlong27 LawnSite Member
    from South
    Messages: 126

    Why? I get cash flow can be a problem, especially in the Spring, but you stated that you are good on collecting and only have a few slow payers.

    I never understand giving a discount for paying ahead of time, if they were going to pay on schedule anyway. That's giving away money in my book.

    5% is a big chunk at the end of the year, and for me whatever that number is is worth chasing a few invoices every month.
     
  4. Todd73

    Todd73 LawnSite Bronze Member
    Male, from Florida
    Messages: 1,099

    Back when I was thinking about implementing late fees I came upon this article from Entrepreneur Magazine. I thought it made good sense.

    "When it comes to getting customers to pay on time, business owners typically use two approaches -- carrots and sticks. Pay your bill early and you get a nice discount. Pay your bill late and you get smacked with a late fee.

    The trouble is that neither of these solutions does the job it's intended to do. Quick payers who'd pay on time anyway often take advantage of early-payer discounts, cutting into your company's profit margin. Slow payers -- often cash-strapped consumers or small business owners themselves -- don't have the money to pay late fees and may not pay you at all.

    What's the answer? Scrap this ineffective system of rewards and punishments and try to figure out why your customers are paying late and what you can do to make them pay you faster.

    For example,

    1. The customer who pays late because he's angry. Not every customer pays late because he doesn't have the money. Some customers act out their frustration with your company by being passive-aggressive. While your customer may not want to confront you about shoddy workmanship or poor service, he'll accidentally "lose" your invoice or "forget" to send in his check. The solution: Invite your customer out to lunch and ask him what he likes and doesn't like about your company's product or service. Once you fix whatever is making your customer unhappy, you may be pleasantly surprised by how quickly your cash flow improves,

    2. The customer who pays late because he doesn't think your invoice is a priority. Consumers typically pay their mortgage first, their light bill second and their credit cards (at least the minimum balance) third. That's why, if your company provides a service like landscaping, dog walking or interior decorating, your invoice may fall to the bottom of the pile. The same goes for dealing with large corporations who see you as a small vendor who will wait 90 days or more to get paid because they know that your small business needs their dollars desperately. The solution: Let your customers -- big and small -- know that you're prepared to cut off service if they don't pay within a reasonable period of time. If your customers continue to pay late, you need to call their bluff -- and find new customers who respect you and your business.

    3. The customer who pays late because he doesn't have the money. While nobody likes to lose a customer, you need to be disciplined about cutting off customers who can longer afford to pay their bills. It's one thing to let a customer stretch out his payments during a seasonal cash crunch, it's another to continue to perform services or extend credit to a customer who has lost his job or whose business is going down the drain. Be friendly, be polite but be firm about explaining to a customer like this that your company cannot afford to work for free.

    Having run my own small businesses for more than 20 years, I've never been a fan of charging customers late fees or hitting them with punitive interest. I'd much rather sit down with them and figure out what the problem is and what we can do to resolve it amicably. If we can't -- or the customer can no longer afford my company's services, we shake hands and call it a day."
     
    sehitchman likes this.
  5. Mark Oomkes

    Mark Oomkes LawnSite Fanatic
    Messages: 15,135

    They aren't that big...

    We do a 3% discount for paying for the entire season upfront. Or we split it in 2 payments. A few larger, full service accounts are monthly. But we aren't sending out monthly invoices and processing payments for under $1200. It's an office time killer.
     
  6. Cdlong27

    Cdlong27 LawnSite Member
    from South
    Messages: 126

    This makes sense if you're big time.
     
  7. axitguy

    axitguy LawnSite Member
    Male, from Ontario
    Messages: 24

    Thanks for the answer. I have only had one to speak of late payer so that's really not too much of an issue. My biggest issues are residential customers that at first say they want weekly or biweekly cutting, trying to goat me to give a lower price and once you get the customer I have to text them to remind them it's time again and they put me off to wait another week or two, stretching it out to tri weekly or monthly and expect the lower price when the lawn is now a deforestation job.

    I was thinking that a seasonal pay up front agreement would be easier when I just show up on schedule and cut the grass and know that I have X amount per month income.

    A second reason is that I don't have to worry that they decided to get a student or someone with a rock bottom price I can't mach even though I take the time to do the little extra a lot of people will just go by dollars and cents logic.

    I am thinking you may have something there to give 3 percent and chalk it up as customer acquisition cost to keep a customer.
     
  8. axitguy

    axitguy LawnSite Member
    Male, from Ontario
    Messages: 24

    Thank you for your input. Every little bit is helpful towards making a decision either way I think 3 to 5 percent is not so bad as a customer acquisition cost for getting and keeping that customer for a season and hopefully future seasons.
    My biggest issues are the customers who try to stretch out cutting frequency to pay the least they can as few times as they can and wanting it for a weekly or biweekly price. when you get there the weeds and lawn are out of control and up to knee height.
    I was hoping with pay up front I could actually work off a schedule and do less driving around wasting time and fuel not to mention if I have an employee next season that I'm paying him or her for unproductive time.
    This would benefit both the customer and myself.
    I had a few customers in May and June until school was out and only called me back once school has started again. I thought that just maybe a seasonal agreement might weed those people out even though I am grateful for what ever amount of business they gave me, I would like to know I have a more secured clientele threw the entire season.
    Thanks again for your thoughts and advice
     

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