Collections and Contracts

Hello everyone, and welcome to LancyBusinessCourse.com podcast. Today we're talking about contracts and we're talking about collections. Let's talk about collections first. So what do you do when a customer doesn't pay within the 30 days or the 15 days or whatever you put at the bottom of your invoice, like we talked about in the last episode about billing and invoicing, what do you do though, if they don't pay within that amount of time frame and you already have added this $10 fee for their invoice being late, what do you do? What we do is every single quarter at the end of the quarter, we send those to collections. And so typically it's going to be from like a small claims creditor's office and they're going to take 25 to 35% of that invoice amount once it is received. Now this is the beauty of it is every single time at the end of each quarter before we send it to collections, we send it like that, we send the invoice again and we just say, hey, if this isn't paid within 14 days, it's going to be going to collections. And almost all the time people will pay after that one warning. And if they don't, obviously you send them to collections. We've only had to do that one time. And so I think I probably sent 20 to 40 of those warnings that it's going to go collection. So having your back pocket and actually doing it when you do need to, like we did on a job that was like, I think like a thirteen, fourteen, hundred dollar job and they didn't pay. And so even after lots of back and forth with them and they just weren't, they were actually, they actually weren't satisfied with the job they felt like they had. Well, it's a long story, but the wife essentially wasn't there during the estimate and so she thought something else was totally different was getting done. However, what ended up happening is we did have to send them to collections in order to get payment now, but like I said 20 to 40 times I've probably sent those warnings about going to collections and they've paid up. And usually a lot of times it's just like they haven't, they've been out of town or they haven't been checking their email. And so I don't, I never assume that they're trying to evade paying us unless they've contacted us and they're like kind of hostile about it or something. Then obviously, you know, they don't want to pay. But typically they just have forgotten about it. They've put it off and procrastinated and you just kind of need to give them a kick in the butt to do it. And that's by sending that warning of saying, okay, if you don't get this paid, it's going to go to collections. And most people don't want that to happen because it affects their credit score. So that's kind of how we take care of our collections and overdue payments. As far as contracts, so there's a big debate. Should you have contracts, should you not have contracts for when it comes to residential lawn care maintenance? I do not believe in the contract model. I believe in like the a la carte. And the reason for that it really depends on where you live. If you're mowing someone's yard 12 months out of the year, you know, fantastic, that's great because it's good for cash flow. But typically you're going to have an off season. So we have, we have three months where the grass doesn't really grow a whole lot. Well, yeah, like two and a half, three months. And so what we have found is if you did a contract where someone's paying throughout the entire year, you lose so many people during those two or three months because they just get of sending you this check when you're not even showing up. And so my philosophy on residential is if you do not show up during the winter, make them pay a la carte. In other words, make them pay per visit or per mowing or per service and break on the estimate. Everything should be broken down like a menu and they can choose what they want weekly, bi weekly service and if they want trimming a couple times a year or however that works. Now if they want service throughout the winter, like if they want tree service during the winter, or they want their beds continually and they wanted weekly and biweekly vids throughout the entire year, even if we aren't mowing, then I would consider a monthly contract where they have a 12 month. But the thing is you need to be on their property throughout the winter and throughout non growing months if you're gonna charge them during those times. Because I just find that the turn, the amount of times that people just drop you or try or they'll go, essentially they'll start shopping come spring because you left a bad taste in their mouth just by the fact that of collecting when you don't show up. And obviously on our end as business owners, like hey, this totally makes sense for you, you might even save more money for the consumer might save more money because they're on a 12 month payment cycle. However.

That two, three, four months in some places is enough to kind of just leave a sour taste in their mouth so that come spring they start looking elsewhere. And so I would not recommend it for residential contracts unless you're doing work for them throughout the winter. When it comes to commerc accounts, they are typically looking for a standard budget 12 months out of the year. So they're going to be looking for a contract. And so in your contract we will talk about this another time about what you need to include in your contract. However, for commercial accounts, so this is multifamily apartment buildings, complexes for shopping strips, malls, hospital clinics, things like that. There are like any sort of commercial real estate, essentially, there's. They are anytime you're sorry, anytime you're really dealing with a property management company, all of those like, they're looking for a standard budget to fit in every single month. And so if you can have that 12 month cycle, it's better. And typically the owner of the property isn't on site, so they're not going to worry or care as much during the winter when they don't see you physically with your truck and your crew and all that showing up. So they're looking more for a standardized budget and to know that things are going to be taken care of year round, even if they have a storm or something during the winter. So I would definitely highly recommend those that you use the contracts for the commercial accounts because they're going to be looking for that standardized budget line item that they can pop into the landscaping and maintenance line each and every year. So that's it for today. Mike Andes on the Landscape businesscourse.com podcast.