How to get my customers to pay on time
February 22, 2018 12:23 PM   Subscribe

My husband owns a landscape and irrigation company. On the invoice it clearly states pay in 30 days or a $30 late fee will be added. He hasn't yet charged anyone this fee because he doesn't want to lose anyone. They do all pay eventually but still aren't paying on time. I would like to send a postcard to all his customers asking them to try harder to pay on time. Any ideas for wording it? We don't want to be too rude or impolite but we sure would like to get paid!
posted by shmurley to Work & Money (24 answers total) 3 users marked this as a favorite
Just raise all your prices 11% and then offer a 10% discount for paying within ten days.
posted by Slinga at 12:27 PM on February 22, 2018 [112 favorites]

I think that there isn't any magic words that will make this work. People are slow to pay because they open the mail, but it takes extra steps to get a check and an envelope (especially with more and more bills paid online.) A few alternates

- Could you set up online recurring billing with a $5 discount for setting up a subscription/direct billing (CC or bank transfer?)

- Could you get email addresses and send emails with link to online bill pay (via paypal or venmo or whatever?)

- Are these mostly for services delivered on a regular basis without direct contact with the homeowner? - if regular maintenance, then set up autopayment. -if onetime, could you use square to collect payment at the delivery of service?

Basically, I think you have to pull not push.
posted by mercredi at 12:29 PM on February 22, 2018 [13 favorites]

What if you instead sent a notification that you're now taking credit cards and/or enabling clients to pay via ACH, PayPal, etc.? That would read as a client service improvement--and it would make it easier to pay-- while still accomplishing the same objective, presuming the fee is worth it to you.
posted by carmicha at 12:29 PM on February 22, 2018 [8 favorites]

Just raise all your prices 11% and then offer a 10% discount for paying within ten days.

My oil delivery company does this and it works super well on me. I'm the type of person to pay my bills on time, but I occasionally forget. The time-limited discount really motivates me to not forget to send in the check.

I would, additionally, argue that it doesn't even need to be close to 10%; my oil company's discount is something like 2% and it is still motivating to me.
posted by Betelgeuse at 12:39 PM on February 22, 2018 [6 favorites]

I've seen a line included in the bill explaining the late fee that basically reminds them that you are a small business, and paying on time helps keep the lights on and the prices reasonable and thanks the client for their business. Its the right place to be reminded.

The general card in the mail would NOT go over well with me as a customer, especially if I normally paid on time, and I would likely switch to someone else.

It might also be worth setting up auto reminder emails for say, 21 days after the initial bill goes out, remind them they have one week left to pay? Those reminders help me so much!
posted by Sweetchrysanthemum at 12:45 PM on February 22, 2018 [15 favorites]

-- Early payment discounts.
-- Special deals (ie "Spring Cleanup!" "Fall Reseeding!") that expire if payment not rendered by XYZ date.
-- Prepayments -- payment by the year or the quarter that is due by the first date of that year/quarter/etc.
-- ACH (i.e., autopay from a bank account) and/or autopay via credit cards.

Problem clients: invoice them for the late fee, and then waive it if they seem to actually get the message. Some people will be habitually late, in which case you need to consider whether they should be fired as clients. Some people will outright stiff you, which is why you need to build a Bad Debts Expense into your books (usually the amount is a percentage of receivables), and in which case you need to decide whether you want to create a deal with a collections company and ultimately send them to collections.

In general: Find ways to make it as easy for people to pay as possible. Prepayments and autopayments are great for that. And if people just have a long turn-around time, then unfortunately, you also will just have to plan for your receivables to have a long turn-around time.
posted by rue72 at 12:50 PM on February 22, 2018 [3 favorites]

How are people paying?

Personally, if I can not easily click through on my phone to pay WITHOUT entering a credit card (anything other than paypal) or it isn't a recurring subscription, I can't get it together to take care of it easily.

That said, I would personally have this service set up as bill pay through my bank, so again a few clicks. Are you already set up to receive payments this way?

Any service with complicated payments (or anything using financial services that I don't use for payments like Squarespace) are not happening for me.

Hey! Maybe you can reverse the process by setting up service requests through Amazon - I think that's a thing, right? If I could schedule and pay via Amazon Prime I would probably do that.

There's a few things I want to pay/donate to/buy, and because I can't easily do this via paypal I just don't. YMMV, but I wanted to give you some insight into why customers might forget. The old ways are just too burly to deal with sometimes, I think you need a new system for delivering invoices and receiving payments. Something that is easy through a smartphone.
posted by jbenben at 12:50 PM on February 22, 2018 [2 favorites]

Are these typically regular customers or one-off customers? I don't know if spending the money to mail out postcards is worth it and I don't know that it would be effective either. I think you want reminders and nudges at the moment they will be paying or getting service. A spaced out general reminder seems easily forgotten.

For the current late/close-to-late customers, if you don't have too many, could you just call them and say, "I noticed you're past due/your payment deadline is soon and we don't want to charge you a late fee - can we process payment now over the phone/do you need any help with the payment instructions?" Are email reminders possible in your current system?

In the future, I would consider getting a Square card reader for your cell phone and processing payments after the work is completed or getting them to sign up for automatic payments when you bring in new customers. Sounds to me like you don't have a system that allows automatic payments and you need one. But I do also like Slinga's idea of a bonus for paying on time. My cell phone provider does this - if you pay on time, you get more data - so I have it set to automatic billing.
posted by AppleTurnover at 12:52 PM on February 22, 2018 [8 favorites]

You have to start taking credit cards and just do an annual or 6 month contract or something like that. Make it as easy as humanly possible and keep their info on hand so you just charge their card.
posted by Toddles at 1:07 PM on February 22, 2018 [2 favorites]

Best answer: In the long term mercredi's ideas seem fantastic--but in the short term, I'd just call up the late customers and be as "small businesss-y" as possible. Write yourself out a script for the call, and for the message you'll leave if no one answers. Be personable so it's obvious you're a real person and you're calling because the landscaping company isn't a faceless mow-and-blow op but an actual family business. Like "Hi there. It's so-and-so from Landscaping Co., and I'm just trying to chase down a couple last payments before I submit payroll this month!" That way it's legitimately personal on both ends, and the client knows/thinks they're part of a small group of late payers.
posted by tapir-whorf at 1:12 PM on February 22, 2018 [15 favorites]

I don't think a postcard would help. I'd find it insulting if it were sent to me.

I think he needs to be more proactive. As a homeowner, most services need payment upon delivery. I either write a check or give them a credit card when they're at my house. If someone is ordering the service and won't be home, then ask for a credit card up front (run it through after service is rendered).

If these are regular accounts or commercial accounts, then a monthly invoice should work fine. Change the terms to 15 or 20 days. When you send then next monthly invoice, then just add on the fee from the previous month. After 2 late payments, make a call to get a credit card number on file.

I know that as a small business, you probably don't want to pay the cc fees, but think about the time spent chasing these accounts. Shop around too, there are lower rate cc processors.
posted by hydra77 at 1:40 PM on February 22, 2018 [2 favorites]

Consider (A) a discount (% or flat rate) for payment on delivery but also (B) make that payment as easy to collect as possible. Checks are awful for everyone, and cash can be equally burdensome, but even considering the risks, consider accepting Venmo, Square, Paypal, Zelle or other mobile payment platforms. There's some minimal time required up front to get the accounts set up, but it's an investment in getting your money now, and also in customer experience, because the customer won't associate you with oh shit I really have to pay that guy. It would certainly protect you from people like me, who are liable to run out of checks, forget to hit the cash machine, and keep on remembering to mail you a check when I'm driving or in the shower but not when I'm looking at the checkbook.
posted by chesty_a_arthur at 2:00 PM on February 22, 2018 [3 favorites]

I would be quite annoyed by a postcard... I don't like being scolded.
I suggest you put the reminder or incentive right on the invoices instead, and maybe mention it verbally or in email as you give the client their bill.
posted by pseudostrabismus at 2:33 PM on February 22, 2018

If working for individuals, see if you can get payment on the spot. It's my preference as a customer; I hate writing a check, finding an envelope, finding the address and a stamp, blah, blah. It's not actually difficult, but everybody who says make it easy is right.

I have owned a small business, and getting a discount would get me to pay promptly. Some businesses pay late as a matter of course, and they will be hard to budge. Rather than a late fee of $30, I'd charge 1.5% per month and compound it.

Send the bill. On the 1st of every month, send a statement. Send a printed addressed envelope. You can keep track of who doesn't use them and stop wasting envelopes on them, but the envelope helps me get a bill paid. When an account is 60 or 90 days overdue, call them, be very polite, and ask for prompt payment, and a commitment to pay.

I had a lawn person do my lawn. His wife was the bookkeeper, would not take a check on the day of service, was quite aggressive, and made me feel like an embezzler. I wouldn't hire them again for anything, ever. When I pay late, and I do, I am polite and pay any charges. Make your personal relationship friendly, but be firm and businesslike about money. Do you have billing experience? Talk to people who do billing/ receiving so you understand the terms and typical practices.

Dover Publications had a standard dunning letter to the effect of
Dear name
A collection letter should be short, courteous, and effective. We made it short, we intend it to be courteous, you can can make it effective!
Thanks for being our customer, etc.
$ details.

It included an envelope and was pretty effective.

Small business isn't easy. Best of luck.
posted by theora55 at 2:50 PM on February 22, 2018 [1 favorite]

Be sure to check your local laws. For instance, in California, straight late fees are "disfavored," but a finance charge up to an annual rate of 18% is allowed, because the fees must be related to the actual damages incurred. I am not a lawyer, but I infer that the courts feel that the % over time captures that better.

(But agree with the others - raise prices and give a discount for early or cash payment, and offer automatic CC payment - many services for small business are now available. I use paper checks only for a few service people now, and I'm dreading having to re-order when we run out. Also make sure you bill regularly; we've got one provider that forgets to bill us for months, and I hate getting the one big bill.)
posted by troyer at 2:53 PM on February 22, 2018

I pay my bills on time except for the ones where I have to write a check and mail it. Do you have PayPal or similar? That's huge for me.
posted by Knowyournuts at 2:54 PM on February 22, 2018

Response by poster: All his customers are aware that he takes credit cards, it's on his invoice and his truck. Husband is reading all your responses and there are definitely some things we can do. Thanks everyone!
posted by shmurley at 3:00 PM on February 22, 2018 [1 favorite]

Tell your husband to watch Stan Genadek "Dirt Monkey University." YouTube videos. Pretty well all of them. He covers lots of topics that he deals with in his landscaping company including more than a couple on how to get paid.

This video: will open his eyes on how a successful contractor structures payment. 50% when he arrives and the balance before he leaves the site. While you are on the site you are still in control and the customer relates much better to your presence than a mailed invoice.

As a contractor we invoice before the final day as well to remind the customer the amount owing and we will expect payment tomorrow.

Discounts, late fees, raising prices (?), collections letters are all avoiding the main issue which is having a process to get paid in person when he is there. Being upfront about payment is critical in this type of relationship and providing a successful outcome.
posted by ashtray elvis at 3:47 PM on February 22, 2018

Best answer: As someone who uses a small landscaping service, I'll just note that my guy makes his bills due in 15 days. I pay them monthly via credit card on his site and feel guilty because that means there's always an invoice that's a few days to two weeks late - BUT, that guilty feeling means I do almost always pay monthly (which I suspect is all he wants anyway, as I've never been charged a late fee.)

But here's a suggestion: if you have to, charge the fee. If a regular calls about it, say you'll waive it once as a courtesy. If you can keep track of your customers well enough, you'll know which are bad customers, which are people who'd rather pay fees than be on time (so charge 'em!), and which just need a poke now and then to remember to pay the bills.

Nthing all the suggestions to make lots of payment methods available.
posted by Medley at 4:01 PM on February 22, 2018

Can you look at dropping your terms down to 7 days? For a small service business I'd really look to getting paid on the day if possible, maybe offer a discount if they do.

If you have your heart set on 30 days then only offer that to people that have proven to be reliable customers. People have a tendency to put anything not due for 30 days in the I'll pay it sometime maybe basket, then forget about it.

Don't send postcards about overdue accounts as they are too open for everyone to read & embarrassing to people. If you're going to send anything make it a statement of their account. You currently owe x this much as 30 days, this much at 60 etc. If anyone says anything, you've changed software & now send out statements monthly to people with balances, then no one feels attacked. Yes this adds a monthly postage expense but it will dramatically improve your cash flow.
posted by wwax at 4:35 PM on February 22, 2018

7-day terms are irritatingly short, IMHO, and make it look like the business is struggling. Ten days or two weeks is much better. Hand written post-it notes affixed to the invoices of late payers is also very effective.
posted by carmicha at 8:39 AM on February 23, 2018

For this type of service taking place at my home, I would expect to pay with either cash or a portable credit card machine on the day of service. Is there any way to switch to that model? We recently had a bunch of tree work, and they offered a discount for paying cash, so that could be something to look into too to push more folks into paying cash vs. credit card.
posted by rainbowbrite at 9:34 AM on February 23, 2018

If you are working with non-business clients on domestic jobs, there is no reason why you need to offer them credit terms and not just take payment on the spot for the services. Get a card terminal and take payment on the day that the services are rendered. I'm not in the US, but at least in Australia this is completely normal.

For business clients that you do want to offer credit terms, there is nothing wrong with a polite and direct reminder to the client if they haven't paid.
posted by ryanbryan at 3:31 PM on February 23, 2018

Best answer: The right answer will depend on what kind of business your husband has and relationship with customers. Is he doing mostly big jobs with an estimate, a schedule and completion date? Small one-off jobs? Regular weekly clients who get billed monthly?

For monthly clients, I think if people are significantly late you need to bring it to their attention and ask them to pay. Call them. Put a post on the bill saying "this bill is x days overdue"

For the more typical slow but pays eventually, you could include a slip of paper in ALL invoices saying "Reminder: Payment is due within 30 days of invoice. There is a $30 fee for late payments" Don't charge the $30 fee that month but then start including it regularly the next month.

I'm guessing a regular client will complain before they just quit. If they complain, offer to waive the fee this one time "because you are such a good client" but at the same time, tell them that you are a small business - you need clients to pay on time so you can pay your bill so you appreciate their prompt payment in the future.
posted by metahawk at 5:10 PM on February 23, 2018

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