Collecting Payments – The Process of Getting Paid

Creating a good credit and collections process is always hard for any small business, especially a service business like heating and cooling. Whenever an HVAC company runs a service call and does not get paid immediately after performing the repair, then they have extended credit to a customer. And when you extend credit to a customer you give that customer a loan, just like a bank gives a loan. You have become a bank for your customer, and when you give that loan there is no real timetable for when you will get paid or if you will get paid. Therefore, having a credit and collections process is vital to the financial health of any HVAC company.

A good credit and collection process starts with having a consistent approach to collecting your money. This guarantees that your process for extending credit and collecting payments is the same for every customer. The best way to be consistent is to write down your processes and communicate that information to your employees and customers. Below I’ve laid out a list of some of the best processes you can use to aid your business in becoming more consistent in collecting payment for products and services your company has provided.

  • Collect payment when work is completed

  • The first and most important process is to collect payment on all service calls as soon as they are finished. Strive for at least a 90% collection rate (95% is better) on every service call. This same practice will also apply to all replacement sales the day they are finished. This can be accomplished by having your installers pick up the check when the job is complete; or, by requiring your salesperson to do a final job walkthrough and collect on the job upon completion. The key to collecting on replacement sales is to tell the customer in the beginning when they sign your sales contract that you will need to have full payment upon completion of the job. The main focus here is to ensure your employees know to collect payment as soon as the work is complete.

  • Accept credit cards as a form of payment

  • Accept all major credit cards. By accepting credit cards you can expect and get payment at the completion of any job. We live in a world where almost everyone pays by using a debit or credit card. There is a cost to your company for accepting credit cards, usually around 3 to 4%, so just build that cost into your pricing. Frankly, if you don’t take credit or debit cards in this day and age, your potential (and current) customers will not do business with you.

  • Don’t delay mailing out billing statements

  • If you need to send out a bill for a service call or replacement system, send that bill within two days of completion of the work. The longer you delay in sending out your billing, the longer the customer will take to pay you. Just realize that as soon as you send that bill you have said to your customer it is ok if you take up to 30 days to pay you. Is that what you really want? Instead, always collect upon completion.

    If you do send out bills, your credit terms (when you expect normal payment from your customers, usually 30 days or less) need to be clearly stated on every work ticket, sales contract and invoice so that your customers have no confusion about when payment is due. Your billing statements must also specify a time frame when those bills will become past due. Normally the due date is 30 days from the invoice date. If the customer has not paid you within those 30 days, then you should immediately call that customer and arrange a SPECIFIC time when the bill will be paid. In some instances it may help your ability to collect by offering to pick up the payment from the customer’s location.

  • When to submit past due statements to collections

  • Determine a time when a customer is so far past due that you no longer do work for that customer until he has paid his bill in full. Normally, that cutoff date would be 60 days. If you are not paid in 60 days after repeated attempts to collect your money, then stop all current and future work immediately. If after 60 days the customer has not paid his bill, send a formal letter to the customer stating that he has 15 days to pay his bill before he is turned over to collections. If 15 days has passed without payment, contact your collection agency and turn over the collections to them. The collections agency will charge to collect your past due bills, but that is better than getting nothing for them. Choose a collections agency that only gets paid when they actually collect the amounts owed to you.

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