Announcement

Collapse
No announcement yet.

Are pre-payments bad?

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • Are pre-payments bad?

    Going over our 2011 season I noticed that 16% of our income was from services that were pre-paid. The funny thing is, the pre-payment of services was also our best marketing technique used in the 2011 season.

    Now with us, and pre-payment we always give great discounts. Anywhere from 5% up to 25% (25% is when more than three years of service are pre-paid). But we are starting to wonder whether allowing clients to pre-pay is actually hurting us in the long run.

    Are we just concentrating on pumping cash into the system NOW instead of looking at how much money we are losing down the road?

    What are also the pros and cons of pre-payments?
    Twitter
    Facebook
    LinkedIn
    Website

  • #2
    Going over our 2011 season I noticed that 16% of our income was from services that were pre-paid. The funny thing is, the pre-payment of services was also our best marketing technique used in the 2011 season.

    Now with us, and pre-payment we always give great discounts. Anywhere from 5% up to 25% (25% is when more than three years of service are pre-paid). But we are starting to wonder whether allowing clients to pre-pay is actually hurting us in the long run.

    Are we just concentrating on pumping cash into the system NOW instead of looking at how much money we are losing down the road?

    What are also the pros and cons of pre-payments?
    i used to do that when i had residential accounts but i would offer a 10% discount for monthly auto pay with a credit card and i would give a 20% for pre payment of the entire season.

    25% is a little too high even if they paid for the whole season in advance.

    but now i bill ahead instead of behind so i have eliminated any discounts like that.

    Comment


    • #3
      Getting your clients to pre-pay is awesome.

      Getting your clients to pre-pay in order to eat your profits, sucks.


      A discount of 25%, you're most likely paying the tax on their bill and more.

      Comment


      • #4
        There is no reason to discount for pre-pay. No need to apologize to customers about your policy.

        This is your business. Run it and bill how you choose. If a customer doesn't like it so be it. The only thing you need to explain is that 'this is the way that has worked best for our company so this is how we will continue to bill clients.' Your main goal is to stay in business. Cash flow is a key ingredient of that.

        I can't tell my trash collector that I don't like pre paying. They would tell me to go find another trash collector then.

        Again.....DON'T APOLOGIZE FOR PRE-PAY.
        DON'T OFFER DISCOUNTS.
        PAYMENT IS DUE BEFORE WE CUT YOUR GRASS.....PERIOD.

        Comment


        • #5
          There is a difference between fast food and fine dining. You pre-pay for one.
          Boughter's Lawn Care Services Mowing and Fertilizing in New Castle, PA

          Comment


          • #6
            There is no reason to discount for pre-pay. No need to apologize to customers about your policy.

            This is your business. Run it and bill how you choose. If a customer doesn't like it so be it. The only thing you need to explain is that 'this is the way that has worked best for our company so this is how we will continue to bill clients.' Your main goal is to stay in business. Cash flow is a key ingredient of that.

            I can't tell my trash collector that I don't like pre paying. They would tell me to go find another trash collector then.

            Again.....DON'T APOLOGIZE FOR PRE-PAY.
            DON'T OFFER DISCOUNTS.
            PAYMENT IS DUE BEFORE WE CUT YOUR GRASS.....PERIOD.
            that is why i chose to bill ahead instead of behind and when the customer frets about it i tell them i am not bank of america financing homeowners dreams.
            if you want to go with the finance plan i suggest you put it on your credit card or go borrow the money from your local bank and work it out with them.

            and if the account is not up to date they get no service until it is.

            Comment


            • #7
              Currently my two options are "Pre-pay", or "at time of service".

              I don't offer discounts, I offer options - one or the other.



              My mother didn't offer incentives for me to eat my dinner when I was a kid, she gave me two choices: Eat what's in front of you, or go hungry.

              Comment


              • #8
                Pre-pay is a good way to target the slow payers or potential non-payers before the growing season ends.

                Pre-pay discount would only be offered by us to give the customer an option to capture last year's rates. Other than that I would not offer any other discounts for pre-pay. This is a good way to keep income rolling through the winter season, especially when spring start up $$ is needed.
                08 F250 Ext Cab/04 Chevy 3500
                05 F350/04 F350 Diesel/12 Ram 4500 Dump
                4 -60 Toro Zmaster/Lesco 48
                3 -8'2" Boss V-Plows
                1- Hiniker 9'6" V-Plow
                20' Enclosed trailer
                18' Skid & 16' Open Trailer
                2012 - S185 Bobcat


                Comment


                • #9
                  Has anyone looked at the difference in cost between their monthly insurance payments and if they prepaid it for the year? What kind of discounts are you seeing? Could a similar discount % work for lawn care?

                  Also, is it best to keep the max time to 1 year? Does 3 year lock you into something where you might not want to be performing a certain service that far down the road?
                  - Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
                  Download your Free trial of Gopher Lawn Care Software.

                  Comment


                  • #10
                    Has anyone looked at the difference in cost between their monthly insurance payments and if they prepaid it for the year? What kind of discounts are you seeing? Could a similar discount % work for lawn care?

                    Also, is it best to keep the max time to 1 year? Does 3 year lock you into something where you might not want to be performing a certain service that far down the road?
                    I was waiting for someone to finally ask this question, thank you. Even though you are getting 3 years of cash pumped into your system is that three years worth of cash actually good for the long haul. It may be a short term gain, but does it actually hurt you?
                    Twitter
                    Facebook
                    LinkedIn
                    Website

                    Comment


                    • #11
                      right now my customers are pre-paid month to month with a few that I mow that pay me when I show up.

                      dpld....if you don't mind me asking....are your customers paying by check or cc or both? I believe sometime this season, we will be using a cc payment option. Might just be thru paypal....don't know yet. I'm real particular about making choices when it comes to offering this new way of paying (cc), we're checking out different rates, etc. My brother in law (my accountant extraordinaire) suggested maybe collecting for the month on the last Monday of the previous month. It's still a work in progress with decisions that need to be made by the end of Feb.


                      anyhow....billing clients ahead of time and collecting "as we mow" has probably been the single most important way I have kept my business operating in the black with no debt.

                      Comment


                      • #12
                        Have a plan to protect you from clients who cancel service, and request a refund.

                        Getting money early, means you might spend it. lol. That's the only issue really...

                        Comment


                        • #13
                          right now my customers are pre-paid month to month with a few that I mow that pay me when I show up.

                          dpld....if you don't mind me asking....are your customers paying by check or cc or both? I believe sometime this season, we will be using a cc payment option. Might just be thru paypal....don't know yet. I'm real particular about making choices when it comes to offering this new way of paying (cc), we're checking out different rates, etc. My brother in law (my accountant extraordinaire) suggested maybe collecting for the month on the last Monday of the previous month. It's still a work in progress with decisions that need to be made by the end of Feb.


                          anyhow....billing clients ahead of time and collecting "as we mow" has probably been the single most important way I have kept my business operating in the black with no debt.
                          Check into merchantanywhere.com you can use it through a smart phone and they have a bluetooth reader/printer option also.
                          Plus, they can set you up for part of the year. Ex. our season around here runs from Mid April - Nov, you only get a monthly fee for the month you operate your business. In Dec you get a yearly fee of $99, and the monthly fee was $24.95 (Apr - Nov), plus any transaction fees. I am also looking into inuit payment processing. They are sending me the reader to see if it will work on my phone.
                          http://www.lunchesruslawncare.com

                          Comment


                          • #14
                            I think many of you are missing my point with the pre-payments. When I am referring to the pre-payments I am not taking a week or a month in advance, I am talking about an entire year ahead of time, sometimes with me it's years in advance.

                            Now with the pre-payments will do have a "no refund" clause in our contract. All you can receive is credit towards services (not products).
                            Twitter
                            Facebook
                            LinkedIn
                            Website

                            Comment


                            • #15
                              To me, money is money. In advance, during service or at the end of the month is all the same.

                              I could see where having someone pay in advance would be a good thing if it locks them in and you can pre-order the products without worrying that they'll cancel. No refund would have to be the rule. The discounts are too steep though. I'd say 6% to save the tax or 10% tops no matter how far in advance they pay. I've not offered discounts for pre-payments but I may for the fertilizer treatments, never for mowing.
                              Last edited by mark123; 01-27-2012, 08:31 AM.
                              Boughter's Lawn Care Services Mowing and Fertilizing in New Castle, PA

                              Comment

                              Working...
                              X