thinking about switching over to pre-payment only

Discussion in 'Business Operations' started by marley, Sep 18, 2002.

  1. marley

    marley LawnSite Member
    Messages: 91

    I did a search today on customer pre-payment/contracts. For 4 years now I have billed everybody at the end of the month for what was done at the account. It has worked out pretty well for the most part but a recent thread got me thinking there is probably a better way. Here is my question. How many of you make your customers stricktly pre-pay once a year with or without a small discount? How many of you do that with also the options to pre pay every 6 or 3 months with no discount? How many of you just add up the yearly cost of mowing, divide it by 12, and then let the customer make 12 monthly payments over the year and put extra on the bill if extra work is done? Who out there has made the switch from billing like I did to only accepting pre-payment and how did it work out?

    Here are a couple of pros and cons that I can think of, please give me your input. This would be a pretty serious change in the way I do business so I want to do it right.


    - Eliminate slow payers or people that just want to screw you over

    - Increase cash flow

    - Simplifie my life and my customers lives


    -Scare away potential customers

    -Be forced to drop customers that can't afford to pre-pay(elderly)

    As always your feedback is greatly appreciated, thanks.
  2. marley

    marley LawnSite Member
    Messages: 91

    Could really use some help on this one!
  3. TurfGuyTX

    TurfGuyTX LawnSite Senior Member
    from DFW
    Messages: 648

    I couln't think of doing prepay only. It would definately scare some away. I think of offering it with a small discount would be good. The ones that can afford it, would be easier to get to do it. I hope others will offer help on this one for you. Good luck.
  4. jeffyr

    jeffyr LawnSite Senior Member
    Messages: 876

    I'll give my .02....since you asked.

    I have a sort of hybrid billing system going. It won't scare away potentials with a true "pre-pay", but gives me the startup money and consistant payments throughout the season. Everyone is on a contract that states X # of cuts + all extras (chem, cleanups, aeration, thatching, mulch, shrub pruning, etc.). I take that nut and divide it by 10 and that is the monthly payment over 10 months starting March 15 due by the 30th. I bill the same amount each month on the 15th (+ additional work added if applicable) through December 15th. I start out a month ahead, which is eaten up with the first cleanup. Everyone is then on schedule again paying about what the 4 or 5 cuts per month balances out to cost in the spring, until the cutting slows in the summer. Then I am ahead again until the fall aeration and leaves. It has worked out well for me and gives advanced notice of supplies needed for upcoming jobs. This works best for my time management having advanced notice.
    I have read where others have 12 monthly payments, which sounds great since there is no period when a customer may think "who should I get this year to take care of the property" and gives year round income. One year just rolls into the next, but I don't think the people I have would like paying for 2 months I don't come.

  5. marley

    marley LawnSite Member
    Messages: 91

    Do all your customers get aeration thatching etc. no matter what? Your way sounds pretty good. I too can not see people writing out a check to me in the heart of the winter when I am not around, even if I did explain to them about how thier yearly cost was averaged out over 12 months. Maybe I need to open my eyes or get tough or something, wish more guys would reply.

    LAWnENFORCER LawnSite Member
    Messages: 65

    I can't see pre-payment working for all new customers. I think it may be possible with customers that have been serviced for years. These customers know your work and trust you. I leave it up to the customer and give them the option. Some of them I invoice, and other just pay me in person. Most of mine are elderly or middle income and could not afford pre-pay anyway. I have thought about a "first and last month" payment for new customers. I think this would eliminate non-payers and help with the cash flow. Just my opinion!

  7. bobbygedd

    bobbygedd LawnSite Fanatic
    from NJ
    Messages: 10,178

    this is how we do it. full serve customers, these r the customers thar recieve spring and fall cleanups, fert programs, weekly mowing. add up total cost of season, divide by 10. so, if their package costs $2000 , we get 10 payments of $200 each. the first one is due no later than march 1st. pros: since we dont start till about march 25th, we have one payment in our pocket, another is due april 1st. so, we are 2 payments up on them. why? helps with startup, and u will never, ever get boned out of money. FOR fert customers only, payment in full before any work is done. WHY? i am not dealing with the **** that comes with fert programs, they dont water, they blame u for crappy looking grass, and dont want to pay the bill. PROS: u will never get boned out of money. for mowing only clients, the bill for the whole month is due by the 15 th of said month. EXAMPLE: we start april 1st, we cut the 1st, the 8th, and on the 15th, get paid for 1st, 8th, 15, 22nd, 29th. PROS: eliminates having to wait several weeks to get paid, helps with cash flow, and, u can never get boned out of too much money. anything else(trimming, planting, etc) is due upon completion of project, if materials are needed, we get about half up front. only one person gave us a hard time with the full serve pkg. they thought it was unfair to have to pay anything in advance, i said call someone else. on may 18th, they finnaly gave in and said they wanted us, i made them pay back payments that were due on march 1st, april 1st, and may first. then we started service.
  8. strickdad

    strickdad LawnSite Senior Member
    Messages: 544

    ours is real simlar to bobbys except we have them on a 12 month payment, this is also more attractive to the client because monthly payments are lower on the 12 month plan...
  9. ProMo

    ProMo LawnSite Bronze Member
    Messages: 1,468

    I was invoicing at the end of the month and started invoicing on the first of the month as soon as I get a new accouynt the invoice goes in the mail due by the end of the month Im getting about 50% on time fixing to add a late charge to see if I can get the other 50% to pay on time
  10. Tyner Lawn Service

    Tyner Lawn Service LawnSite Senior Member
    Messages: 328

    I have used prepay in the past and it works out well. Most people accept it. Now if we could get commercial accounts to prepay! After all places like apts and rental space get a month upfront.

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