With a business to run and bills to pay, no one has the time to send out multiple invoices or otherwise communicate with late-paying customers. In the same breath, few owners can afford to simply “give away” services.
Green industry consultant Jeffrey Scott also co-owns a landscaping company in Connecticut. He has experienced plenty of late-payers over the years. Scott has two-fisted advice for owners in this predicament: 1) Try to avoid the dilemma by training customers to pay on time, and 2) Be systematic about collecting on overdue bills.
Train Your Customers to Pay
Scott describes four customer types: the happy pay-on-time customers, the unhappy late-payers, customers in trouble and deadbeats. Of the four, only the last two will cause problems.
You can’t do much about customers in trouble, other than stand in line with other bill collectors or ease their debt burden by allowing them to pay in smaller installments. Forget the last category, deadbeats, notes Scott. “Some people are just trouble from the very beginning.”
On the other hand, you can make unhappy customers happy again, as long as you can find out what’s bothering them. In fact, their late payment is their way of sending you a signal that they are unhappy and want attention.
Having said that, however, Scott says you can train customers to pay on time. “First, set payment rules early on,” he explains. “Inform customers that you will stop working if they stop paying you. Be sure to give the message a positive spin: ‘To keep the work flowing we just need you to keep the payments flowing on time.’ It’s too easy to keep on mowing and maintaining late-payers’ properties in the hope that they will eventually come through for you. In the meantime, they’re getting their service for free and your profit margin is going south.
“After you set the rules, don’t bend them,” Scott continues. “If customers stop paying, stop mowing, but give them a warning and a reminder of your rule: ‘As you may remember, for me to keep the work flowing you need to keep the payments flowing; I am going to have to stop work next week without payment.’ This way, your clients will actually respect you; they have jobs that require good business skills and they will respect yours.”
Of course, there are exceptions to every rule, and good customers can hit a bump in the road, Scott relates. Try to work with good customers, but continue to be vigilant about collecting payments from them. They need to stick to an agreed-upon revised payment schedule. One of the best ways to avoid the late-paying hassle is to encourage customers to pay by credit card. Setting up a credit card payment program has become easy and now only costs a couple points. This way customers are not using you as their bank when they want to buy services on credit.
When All Else Fails
Once in a while a customer or two will fail your training program. Even after the 35 years his family’s business has been around, Scott says he and his brother still get burned every so often. But they’re also better today at recognizing problem customers than they were a decade ago.
Scott offers a couple of tips for collecting past-due accounts. “Tacking on interest can help motivate customers, but we rarely collect the interest,” Scott emphasizes. What may be an equally effective strategy is what he terms “employing an escalation process.” First you speak in person, then you write a letter, then you stop services, then you have your controller/accountant/ lawyer write a friendly, but stern, letter, and then you hand the account over to the collection agency.
You can shorten this process if you want, or mix around the order a bit, as long as you are consistent in your follow-through. “In my state you can put a mechanic’s lien on your client’s home, which usually motivates a client to resolve an issue,” Scott points out. “Check your state’s rules regarding liens.”
The best way to deal with latepaying customers is to avoid the problem in the first place, Scott reemphasizes. In this regard, it pays to train customers to pay on time. “Clients are like children,” Scott relates. “If you set down the rules up front and you are consistent in applying them, you will limit your problems and increase your fun.”
Jeffrey Scott is co-owner of Glen Gate Pool & Property in Wilton, Connecticut. He speaks internationally on “Captivating your clients, building your brand and growing your business.” Got a marketing problem? Email him at jeff@jeffreyscott.biz.
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