Prepay is the best cash flow tool a lawn treatment company has. Money comes in during the winter, exactly when you are buying product and equipment for spring and have little else coming in. Prepaid customers are also less likely to shop around in April. But prepay creates an obligation: you are holding money for work you have not done. Handle it carelessly and you end up with customers who think they paid for six rounds when your records say five, refunds you cannot calculate, and an income number that looks great in February and terrible in August. Here is how to sell prepay well and keep the books straight.
Price the Discount Like a Business Decision
The common prepay discount is somewhere between 5 and 10 percent off the season price. Before you pick a number, figure out what the cash is worth to you. If prepay money lets you buy product early at a better price, or avoid drawing on a line of credit in March, that is real value. If you would have had the cash anyway, a deep discount just gives away margin.
Say a customer's program is six rounds at $60, or $360. A 7 percent prepay discount is about $25, so they pay $335. If 200 customers take it, that is $67,000 in hand before spring and $5,000 in discounts. For most companies that trade is worth it. A 15 percent discount on the same book costs over $10,000, which is harder to justify.
When and How to Ask
Prepay offers work best when they go out with the renewal, in late fall or winter, while customers still remember the results from the season. Put the prepay price right next to the per-round price on the renewal estimate so the saving is obvious. Give it a deadline, such as the end of February, so it does not drag into the season.
Send the offer as an estimate the customer can approve online, with three automatic follow-ups if they do not answer. Most of the people who prepay will do it after the second or third reminder, not the first. The renewal post covers timing the whole renewal season.
Treat Prepay as a Ledger, Not a Balance
The mistake that causes the most trouble is keeping prepay as a single number on the customer, like "$335 credit." Then someone edits it by hand, or a payment gets recorded twice, and you cannot tell what happened.
The right model is a ledger. The prepayment comes in as an entry. Each completed round is drawn against it as its own entry. At any moment you can see what was paid, what was used, and what is left, and every change has a date. IndustryBossPro tracks prepayments this way on package plans, so a round completed in May draws down the prepay automatically and the remaining balance is never a number someone typed.
Cancellations and Refunds
Some prepaid customers will move, sell the house, or just get unhappy. Decide your refund policy before you sell prepay and put it on the estimate. The usual approach is to refund the unused rounds at the per-round price they actually paid (the discounted price), not the full price. Some companies keep a small fee; if you do, say so up front.
With a ledger, the math is easy. A customer who prepaid $335 for six rounds and got three has used three-sixths of the prepayment, about $167, and has about $168 left. Record the cancellation reason too, because a run of prepaid cancellations for "results" tells you something about your program.
Not Everyone Wants to Prepay
Prepay is one of three good options, not the only one. Customers who do not want to hand over $335 in January may happily pay $60 a round with a card on file that is charged when each round is marked complete. Others prefer a level monthly payment across the season. Offer all three on the renewal and let the customer pick.
The important part is that the program is the same no matter how they pay. A package plan holds the rounds, and billing can be per visit, monthly, or prepaid. The tech in the field does not need to know which; he treats the lawn and marks it done, and billing follows the plan.
A Prepay Customer Through One Season
Follow one customer to see how it fits together. In January she approves a renewal estimate and picks the prepay option: six rounds, $335, paid with her card. The payment goes onto her prepay ledger as $335 in.
In March, round one is completed. The tech marks it done and a draw against the prepay is recorded at the per-round prepaid value, about $55.83. Her completed alert goes out with notes and a photo, but no invoice for payment, because the round is already paid. Rounds two through four follow the same pattern.
In July she sells her house. She calls to cancel. The ledger shows $335 paid and four rounds drawn, about $223, so roughly $112 remains. You refund it, record the cancellation reason as moving, and her new buyer gets a friendly note from you about continuing service. Nobody had to dig through emails to figure out what she paid, and nobody had to argue. That is the whole point of keeping prepay as a ledger. The payment processing overview covers card on file and refunds in more detail.
Watch Prepay in Your Revenue Numbers
Prepay money is not earned when it arrives. If you look at cash in February and think it was a great month, you will be surprised in August when you are doing the work with no new cash coming in. Keep an eye on how much prepay is still unearned at any point in the season, and plan spending around the earned number, not the cash balance. Your accountant will likely want it handled the same way. A QuickBooks export of payments and invoices gives them what they need without retyping.
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