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Jim@Garagecleaning

Jim@Garagecleaning

banned
We have been blessed with 20 years of working in a Parking Garage. According to some agencies who issue permits for discharge, we have achieved over 80% of the garage cleaning contracts in the east bay.

However, we have been noticing late payments. Payments that usually took 14 days to pay just 3 years ago are now 120 days in the most extreme cases. We are talking 10's of thousands of dollars.

This is resulting in loss revenue for those days. When we do a garage, our costs can be as high as $25,000. That means that 25k is loss interest and revenue for our company to use. This may slow us down in lining up garages one after another because of slow cash flow. We simply do not have 125k+ for the five garages that we can line up in a 120 days without paying some type of interest on the money borrowed to complete the jobs at hand. Paying this interest is unacceptable, however it may be the cost of doing business. Should this cost be passed onto the customer? And if so, how would you implement it?

What do you think?
 
Your cost of goods sold has gone up and you alone can/must decide to continue to do business with these customers and eat the additional cost or move on! Of course you can raise your prices but you may loose some of the business.
 
You should start doing house washes, most of those pay right on the spot!;)
 
15 to 30 day net on all my commercial accounts, 10% of balance late fee accrues each and every 30 days past due. So far, so good, less than 10% of my accounts have ever paid past 30 days.
 
Most larger vendors in construction operate with a discounted timely pay.

2% discount if paid within 30 days.

No discount 30 to 59 days.

1% per month after that. (or whatever your state allows)

The only problem is if you don't enforce it. Some will pay 40 days and still take the 2% discount. If they do keep billing the balance and compounding interest. If you don't intend to charge it don't offer it.

My only other advice is don't let them get too far ahead of you. A couple of bankruptcies can hurt you with that kind of capital outlay.
 
Jim Cooney said:
15 to 30 day net on all my commercial accounts, 10% of balance late fee accrues each and every 30 days past due. So far, so good, less than 10% of my accounts have ever paid past 30 days.
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I used to get that 2 years ago. I needn't even start making calls to property managers till after 60 days anymore.

Two bad checks from property managers last month, first time ever.

Car dealerships demanding 15% off starting now or cancellation.

$3500 in cancellations that were due this month. (We can't afford to change our filters, call us back in the fall.)

$1500 in cancellations that are due next month.

Thank the Lord we've gotten a more than that in new business, but we won't be paid for it till next month, or the next.or the next....:mad:
 
Jim@Garagecleaning said:
We have been blessed with 20 years of working in a Parking Garage. According to some agencies who issue permits for discharge, we have achieved over 80% of the garage cleaning contracts in the east bay.

However, we have been noticing late payments. Payments that usually took 14 days to pay just 3 years ago are now 120 days in the most extreme cases. We are talking 10's of thousands of dollars.

This is resulting in loss revenue for those days. When we do a garage, our costs can be as high as $25,000. That means that 25k is loss interest and revenue for our company to use. This may slow us down in lining up garages one after another because of slow cash flow. We simply do not have 125k+ for the five garages that we can line up in a 120 days without paying some type of interest on the money borrowed to complete the jobs at hand. Paying this interest is unacceptable, however it may be the cost of doing business. Should this cost be passed onto the customer? And if so, how would you implement it?

What do you think?
Click to expand...

No S**T Welcome to my world!! I have had that problem for 15yrs...:cool:
 
Jim Cooney said:
15 to 30 day net on all my commercial accounts, 10% of balance late fee accrues each and every 30 days past due. So far, so good, less than 10% of my accounts have ever paid past 30 days.
Click to expand...


Jim check your state laws on what you can charge in interest.In Ga. I'm only allowed to charge 1.5% compounded monthly.I have threatened slow payers with as much as 10% penalties,but I doubt I could have ever collected and if I had sooner or later I suspect a customer may have found out what was legal and asked for money back.
 
First I would directly contact the clients and explain to them what the problem is and ask them if they can fix it by paying in a timely matter, this alos puts a friendly face on the effort rather than form letters about payment. If they can not or will not change the issue you need to have a contract and collection process in place before the work begins. I woul dexplain how the fees will be set and the potential costs for them being late.
 
As far as charging the interest, It would be impossible to collect from the larger companies. They simple ignore them. We do have them in our contracts as allowed by law. They basically say, "If we are require us to pay the interest, that will put you on a black list and you will be band from any work in the corp.

Multi Billion dollar companies who do charge interest, do not allow you to charge them interest
 
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