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TiedemanLLC
01-31-2012, 04:41 PM
Imagine you have a dog, that has been with you since the beginning. You are nice with the dog, play with, and let it go out to run. It seems like more and more that you let it outside the dog takes longer to return to the house. You are tired of the dog running off over and over again. You have had enough. Finally, one day you let the dog out of the house, but the dog doesn't realize you have installed an electric fence. He starts to run off again, and then "ZAP!!!!". He runs into the electric fence that he was never used to. He was used to running freely, and doing whatever he wanted to and coming back to the house whenever he felt like it....until today. You finally put your foot down, and decided to restore some decipline.

So what does a dog have to do with business? Well, I finally put my foot down with a client of mine (has been a client going on about 12 years) in regards to his choice of when to pay his invoice.

This client has been around since the beginning, and is a full service client. Lately though he seems like he has been taking advantage of our long standing relationship and my lenient payment terms with him.

Before we get into any more detail, I will spell out the payment terms. All invoices are due within 21 days. If the payment has not been received on the due date a phone call, email, or past due notice is sent to the client. If still no payment is received after 7 days past the due date, a late fee is charged, and we can shut down all service until paid in full. It's in our contract, and spells it out exactly on the invoice. After 60 days we send it to collections.

Now back to the client...the last three years it has been horrible with the amount of times he has been late. He is normally 3 days to one week past due, all the time. Last year we actually got into a yelling match because he said we "keep on dropping the ball with snow plowing" in which my reply was "if you want to talk about dropping the ball, how about you never paying your bill on time"

The last few months I have to send him reminders of his invoice due date is upcoming. It's like I have to babysit him. I have never charged him a late fee or ever stop service with him. I feel like he knows I value him as a client, so he has been taking advantage of me. With it being a start of a new year, we have started to get firm in holding our clients to these late fees and stop in services.

So of course his invoice was due on the 22nd of this month. I send out an email on the 19th informing him that his invoice was coming up due. Didn't hear anything or receive a payment. Then the 23rd rolled around (since the 22nd fell on a Sunday I would wait until the Monday), didn't hear anything and no check in the mail.

This is where it gets interesting. I head up north to do some snow mobiling and we received a 3 inch snow storm on the 30th back at the business location. I left my wife in charge of the office, in which she called up the subs to fill in for me since I was 4 hrs away snow mobiling. She informed the subs "do not do Mr. Smith's (named changed)" Later in the evening when I call up my wife to check up on the snow situation she informs me that she tells the subs not to do his snow plowing. Which I was perfectly happy with, and I told her she did the right thing.

I get back home, and decide to call up the client the next day

"Mr. Smith, your payment is 9 days past due, and I would like to do your snow removal today for you but until you pay your bill I won't do it. We are cracking down on clients that are late paying their bills by stopping service until paid in full."

"Is that why my snow hasn't been done yet, because I haven't paid my bill? We have had a long standing relationship, and you pull this. This really p*sses my off!" Mr. Smith says.

"Mr. Smith, I have sent you notices warning you about the bill upcoming, and also after the due date. I am babysitting you enough, that we are done doing this anymore. If you don't pay your bill, then services will be stopped"


The phone conversation basically ended, and that was that.

But the lesson is, don't let your dog run off too far. Maintain order, rules, and discipline. Because if you don't, one day you you will have to install an electric fence, and he will get a "ZAP!" that he never expected.

SECTLANDSCAPING
01-31-2012, 05:34 PM
Nice analogy, metaphor, whatever it is. I was wondering where you were going with this.

I have one client like this also. I send the invoices by the first due by the tenth. On the 30th I get a phone call that the check is in the mail. The client says they were out of town for 3 weeks. I inform them that I was just getting ready to double bill them with a late fee. He tells me thats not necessary just send the new invoice. I double check his payment history and the earliest payment was 12 days late and the latest 38 days.

It would be nice to cut off services to this guy. If he wasnt paying over a $1000 a month I would.

TiedemanLLC
01-31-2012, 06:20 PM
Nice analogy, metaphor, whatever it is. I was wondering where you were going with this.

I have one client like this also. I send the invoices by the first due by the tenth. On the 30th I get a phone call that the check is in the mail. The client says they were out of town for 3 weeks. I inform them that I was just getting ready to double bill them with a late fee. He tells me thats not necessary just send the new invoice. I double check his payment history and the earliest payment was 12 days late and the latest 38 days.

It would be nice to cut off services to this guy. If he wasnt paying over a $1000 a month I would.

Thats the same with this guy. He averages around $925-$1000 per month in revenue.

Steve
02-01-2012, 03:37 AM
Back in 600 B.C. lived a Greek Philosopher named Aesop.

He is credited with the following fable:

When first the Fox saw the Lion he was terribly frightened, and ran away and hid himself in the wood. Next time however he came near the King of Beasts he stopped at a safe distance and watched him pass by. The third time they came near one another the Fox went straight up to the Lion and passed the time of day with him, asking him how his family were, and when he should have the pleasure of seeing him again; then turning his tail, he parted from the Lion without much ceremony.
"Familiarity Breeds Contempt"

I think it is true then as it is today. The closer a person gets to you, the more contempt can develop.

In this situation, which is a great learning lesson Troy has shared, it really sheds light on the issue.

Customers over time have a tendency to want to screw with you more. It seems to especially apply to those paying more because they get the idea you owe them more and they own you more. However it can happen with the cheap customers too.

Heck, look around and you might find this behavior in your friends or family.

Do you have a friend who only stops over when he knows you have food? Did he used to thank you and then get to the point where he felt it had become a common occurrence and he no longer needed to thank you?

Troy in this situation, did you sit there and weigh the pros and cons and decide it just wasn't worth putting up with his crap regardless of the cost? Or what was your thought process?

TiedemanLLC
02-01-2012, 09:38 AM
Back in 600 B.C. lived a Greek Philosopher named Aesop.

He is credited with the following fable:

When first the Fox saw the Lion he was terribly frightened, and ran away and hid himself in the wood. Next time however he came near the King of Beasts he stopped at a safe distance and watched him pass by. The third time they came near one another the Fox went straight up to the Lion and passed the time of day with him, asking him how his family were, and when he should have the pleasure of seeing him again; then turning his tail, he parted from the Lion without much ceremony.
"Familiarity Breeds Contempt"

I think it is true then as it is today. The closer a person gets to you, the more contempt can develop.

In this situation, which is a great learning lesson Troy has shared, it really sheds light on the issue.

Customers over time have a tendency to want to screw with you more. It seems to especially apply to those paying more because they get the idea you owe them more and they own you more. However it can happen with the cheap customers too.

Heck, look around and you might find this behavior in your friends or family.

Do you have a friend who only stops over when he knows you have food? Did he used to thank you and then get to the point where he felt it had become a common occurrence and he no longer needed to thank you?

Troy in this situation, did you sit there and weigh the pros and cons and decide it just wasn't worth putting up with his crap regardless of the cost? Or what was your thought process?


Well said about the friend situation. I have one friend in particular that is like that more and more, and I completely avoid him.

In regards to the client, we came close last year to dropping him after the first major argument. We have actually been bouncing it around lately. The only issue with him is that he is co-owner of a business which provides us with around $750 a month in revenue. So if we drop him, then we are sure the business will be dropped too. We are looking at around a $1,750 a month loss in revenue. It might not seem like much, but for a smaller business that is a lot. Keep in mind too that they are on flat monthly rates. So 12 months x $1,750: $21,000 per year in lost revenue.

If the money wasn't the issue, then yes he would be gone in no time.

Steve
02-01-2012, 01:23 PM
It is fascinating. Everyone has their breaking point and this customer seems to be right there on the edge.

I think there are a lot of people who love to put themselves into situations where they feel they are needed, just so they can screw around with others. This customer seems like he is one of them and I bet he does this to everyone he can.

TiedemanLLC
02-01-2012, 04:17 PM
It is fascinating. Everyone has their breaking point and this customer seems to be right there on the edge.

I think there are a lot of people who love to put themselves into situations where they feel they are needed, just so they can screw around with others. This customer seems like he is one of them and I bet he does this to everyone he can.


What I have found out over the years is the clients with more money, and are the full service clients are normally the ones always complaining, paying their bill past the due date, and want a price break

Steve
02-02-2012, 02:46 PM
Do you wonder if such clients aren't paying enough? Would it be more worth while to charge them more and still put up with this behavior or would it ultimately be better to replace them with new customers?

TiedemanLLC
02-02-2012, 02:59 PM
Do you wonder if such clients aren't paying enough? Would it be more worth while to charge them more and still put up with this behavior or would it ultimately be better to replace them with new customers?

I personally feel that charging more money would not solve the situation. You will still have the headache of him not paying his invoice on time. Give me the older lady, that only uses my services a few times each year, and pays her bill within a day of receiving. Those are my most favorite clients.