Let’s resolve to improve our cash flow this year. Getting customers to prepay and auto pay is a great method to improve cash flow in your business.
This past year, my company churned out a record amount of spring production. That was the good news. The bad news: This surge was accompanied by a rising number of accounts receivable issues. It didn’t take long for me to realize if we could encourage customers to prepay or auto pay for our services, we could improve cash flow and that the easiest and most logical time to do this is at the point of sale.
Since we already collect email addresses, phone numbers, etc. from customers at this time, why not also ask for a credit card or bank ACH (Automated Clearing House) number. Have you ever tried to collect any of this information months after you’ve started service to customers? It is nearly impossible.
Collecting annual prepayments or monthly auto payments at point of sale has many benefits for your company. The most important one is that it helps close your cash gap and improve your cash flow, creating operating capital for your business. Customers who prepay or auto pay also tend to remain customers longer than customers who pay service to service. If you can increase the average life cycle of customers, even by as little as six to 12 months, this will substantially increase your company’s revenue and overall value.
To implement this business practice, start by making it mandatory for all employees to collect any new customer’s credit card information at the point of sale. To encourage this, change your sales commission policy to pay bonus checks only to sales people who collect customers’ credit card information or bank ACH numbers. When making such a policy change, have a meeting at the start of the year. Explain to your sales people why you are implementing this policy, and how it will benefit them and the company.
This meeting also provides a great opportunity to teach and train your team on how to ask customers for their credit card information. Start by reminding your team that other professional businesses, such as plumbers and fitness centers, regularly ask new customers for this kind of information.
Consider the following techniques to help get you started:
It’s not what you say, it’s how you say it. Train your team how to ask the customer for their credit card information. Your sales people must ask the question with confidence, and the words need to roll off of their tongues with ease. Instruct them that once they receive confirmation from the customer to schedule the service they should say, “Now that you have agreed to our services, Mrs. Smith, what type of credit card would you like to use to start the service?” Urge your team to keep the credit card request short and sweet and stay away from having them explain the whys to the customer.
Offering an exemption from your company’s annual price increase will encourage some customers to prepay.
Scarcity and exclusivity
Have your sales team remind your customers that there is a finite amount of clients your company can service in a timely manner come spring. Communicate to customers who prepay that this guarantees them a slot on the lawn technician’s route. This adds urgency to motivate them to prepay. Let them know there is a short window in the early spring to treat their lawns so they remain weed-free, green and beautiful.
By incentivizing customers to prepay for your services you reduce the paper statements you must print and send out. This is environmentally friendly and many people inherently want to do the right thing for the environment—especially when it saves them time and money.
Time and hassle
Remind your clients of the time and hassle they will save themselves by prepaying. By making one payment for the year or autopaying monthly, they will have all of their lawn care needs fulfilled. This eliminates constant check writing, credit card payments and invoices for what is typically a small ticket item in terms of price.
These are some workable techniques to get more of your customers to pay for your services upfront and increase your company’s cash flow going into the spring season.
Read more: Do You Accept Credit Cards?