Avoid these 3 payment mistakes HVAC businesses make

If it ain’t broke, don’t fix it.

That phrase is easy to apply to physical things, like an HVAC system. But what about something like your HVAC business? What if you were making mistakes, or a process was “broke,” and you didn’t even realize it?

It’s easy to get into bad practices and habits, and a lot harder to change them. Let’s look at three common payment mistakes HVAC businesses make so you can avoid them. Hopefully, one of your practices isn’t on this list, but if it is, we have suggestions for fixing them, too.

MISTAKE #1: LEAVING WITHOUT PAYMENT

Asking for payment can feel awkward. Most places rely on the customer to initiate the action: you take your groceries to the cash register, you ask your server for the check, you click the button that says “Checkout” online, and so on.

But instead of the customer coming to you at your place of business, you’re going to their house. You’re already a guest, and you have to ask them for money before you leave. It’s much less awkward to leave them an invoice and trust them to pay later, or even send the bill after you’ve already left, right?

While many customers will still pay their bills, you’ll still have many who won’t. Maybe they forgot about it, thought the other homeowner was handling it, or thought they could get away with not paying. No matter the reason, you’re left without money for the job after paying for the equipment and labor. Now, you have to spend time trying to get the money or count it as a loss. And neither of those are good options.

The easiest way to avoid this mistake is to set the expectation of payment when you give the quote. Let the customer know that the technician will collect the payment at the end of the appointment. A set expectation makes things slightly less awkward when your technician asks, “Are you paying with cash, check, or card, or would you be interested in one of our financing options?”

Some may still pull the good old, “I didn’t know I had to pay today” or “Joe has the checkbook, can we pay you later?” Hopefully, these exceptions will be few and far between. In the future, you can either add a deposit for these customers so you at least have some compensation if they don’t pay, or you can just let them go and spend your time with customers who value your services.

MISTAKE #2: OFFERING CASH DISCOUNTS

Offering cash discounts has been the standard in HVAC for years. They’re a great incentive for homeowners to feel like they’re getting a deal, and you get paid in full immediately without dealing with any credit card or dealer fees. We know it’s hard to break old habits, especially ones that seem to work, but hear us out. 

Cash Discounts Are Not Profitable

Let’s get straight to it: cash discounts are not profitable. You offer cash discounts because you don’t have to worry about credit card fees or dealer fees when a customer pays in cash. But is a cash discount the best way to address those pesky fees?

Let’s look at two companies: Company A, which offers a cash discount, and Company B, which doesn’t offer a cash discount. In this scenario, both companies have the same equipment and labor costs; the only difference is how they apply their fees.

Company A has a 3% credit card fee and a 7% dealer fee, so they add 10% to all of their jobs, and customers who pay in cash get a 10% discount. Company B uses our buydown fee formula and figures out they can add 2.25% to every job to account for the fees. But because they do this, they don’t offer a cash discount. 

Company A is 7.75% more expensive than Company B for customers who can’t pay in cash. By offering these cash discounts, you’re limiting incentives to people who can afford to pay cash — and quite frankly, probably don’t need the discount. A 2.25% difference in price isn’t a big deal for your cash customers, but 7.75% is a big deal for customers who need to use another form of payment.

Cash Discounts Are Not Practical

Cash discounts are just not as practical as they once were. In the past, cash discounts have been used as an incentive for customers: they can pay 10% less if they pay in cash than if they use a different payment method. They get a discount, you get paid immediately, and everyone is happy.

But times have changed, and so has the economy. Over 50% of Americans can’t afford a $1,000 emergency expense, and just under 50% of credit cardholders carry debt from month to month. How will they pay for your services in cash if they can’t afford to pay off their credit card?

Instead of cash discounts, explore other incentives you can offer your customers, such as loyalty discounts, service contracts, and financing options.

MISTAKE #3: NOT ACCEPTING MULTIPLE PAYMENT OPTIONS

Accepting only cash and checks is an easy decision to make. You don’t have to worry about third-party vendors or working fees in your prices. But as mentioned before, offering one or two payment options isn’t practical. Customers want multiple options to pay their HVAC invoices.

You should consider accepting credit cards if your HVAC business doesn’t accept them yet. Cashless payments make up over 50% of transactions, and you could lose business by not offering that payment option, especially with the current economy.

But credit cards aren’t the only cashless option you should offer. Credit cards may not be enough to cover services depending on the size of the job and the cardholder’s credit limit. Financing options, like installment loans, can help make cashless payments more affordable. These loans are broken up into monthly payments over a set period with a fixed interest rate, so your customers don’t have to worry about their credit card interest accruing interest while they’re paying it off.

Plus, loans can positively affect your customers’ credit scores by adding variety to the types of credit they’re using. And if you’re using free loan programs like the ones we offer at FTL Finance, you won’t have to worry about fees.

BREAKING BAD PAYMENT HABITS

It’s hard to break habits. We get it. However, collecting payment at the time of service, not offering cash discounts, and accepting multiple payment options can help your business in the long run.