Get Paid on Your Terms: Establishing a Customer Payment Policy

Collecting money from customers is a difficult task for most pest control operators and small business owners. This problem often lingers as the business becomes more established. To ensure you’re getting paid on time, start by implementing a customer payment policy that is strict but also fair.

In past articles, we’ve explored how technology has impacted how payment policies are structured. Obviously, if you’re just starting your pest or lawn company now, now is the best time to define what your policy is going to be. If you’re an established business, making the change can be daunting. Whatever stage your business is in, let’s discuss the best attributes of a customer payment policy so you can get that money!

Key attributes of a customer payment policy

There are different ways of enticing customers to pay on time and ensure you ultimately get paid. This varies for residential and commercial customers, but you can and should use many of these strategies for both.

These attributes are all part of a great customer payment policy structure:

• Credit card/bank on file – This is probably the core characteristic of any customer payment policy for it to be effective.
• Timely invoicing – To get paid, an invoice needs to be generated so the customer knows what work you completed and what they owe. Automated invoice e-mailing through a routing software has made this tremendously efficient.
• Early payment discount – Offering terms such as 2 percent net 20 days, meaning customers get a 2 percent discount if they pay within 20 days, is a great incentive to get a commercial account to pay quickly. The internal rate of return built into these discounts prompts accountants to advise their clients to take them.
• Late payment penalties – Interest and penalties added to invoices for not paying on time will help thwart customers from delaying payment.
• Credit holds – After a certain level of unpaid invoices is met, customers go on a credit hold that pauses services until their account is paid up.
• Follow-up procedure – Creating a procedure that follows up with customers who start to meet a certain criterion should encourage customers to pay.
• Collection agency – Developing a plan for when to send overdue customer accounts to an outside collection agency is a good idea to continually get rid of old accounts receivable that will likely be noncollectable.

Small business payment policy and procedure

Step 1: Develop your customer payment policy. Taking this step to define your company’s payment policy will incorporate how you want them to pay (for example, installments, prepayments, etc.). Ensure it reflects the key attributes listed above and enforce it.

Step 2: Develop an implementation plan. Put your policies and procedures to paper and make sure everyone understands his or her role.

A:  If you’ve been in business and are just starting to implement a new policy, draw a line in the sand with your new policy and enforce it from that point forward.

B:  Generate a script for customer service representatives (CSRs) to read from so the message is consistent and customers get the same story.

Step 3: Hold people accountable for adhering to the new policy.

Step 4: Measure feedback from CSRs and customers to adjust where needed.

As a business owner, it’s extremely important to make sure customers pay you on your terms. Develop your customer payment policy and incorporate the above items to help you get paid and reduce the stresses of a growing accounts receivable.