View Full Version : Service contracts

29-04-2010, 11:14 PM
Hello all.

I am looking at the way we offer PPM, it accounts for less than 5% of turnover........but causes 100% of late payment problems.

At the moment we do PPM on an "ad-hoc" basis, every six months we book in the service and then invoice on completion. From what I can gather a lot of companies offer this service on a pre paid contract basis, how does this work?

Can anyone point me in the right direction?



29-04-2010, 11:37 PM
Times have changed. I worked for a big OEM who did this prepay ppm and they have lost a lot of big contracts in the past few years. Another fair way of charging for ppm is to see your accountant and have a clause put into the contract where there is a penalty for slow payment like 2 - 4% per month. And you could pay your accountant to chase up those unpaid invoices then you can focus on your busness. If a cusomer has too few funds to pay all the bills and some of those bills occure penalties gues which ones are going to get paid on time.

30-04-2010, 06:37 AM
There are 3rd parties who will handle a direct debit system for you.

Depending on the total value of what you would switch accross to direct debit this can be worth while. IIRC its about 30 quid a month and this gives you your own portal to log in and set up the DD's. so you have complete control.


30-04-2010, 12:53 PM
One off my mates runs a 2 bloke company. He had a lot of trouble with late payers. Then he got fed up & appointed a debt collection agency. Ok, they take their cut, but it frees up his time, and gets the money in much faster!
Note I said it's him pus one. You don't need to be big to use a debt agency. ;)

30-04-2010, 09:05 PM
take the annual amount and apply it to a direct debit, paid over 12 months, tiny amount to customer but regular cash flow to you, banks love to see this and makes it easier to apply for increased credit if needed,

We have customers dropped by other companies over non payment, i signed them up to direct debit, if debit bounces no service that month and 2 payments the following month,works a treat.


monkey spanners
30-04-2010, 10:34 PM
I do a few service contracts for dairy farms, some of the milk buyers require them to have a writen service agreement for their equipment, they pay at the start of the contract for the year and then get two visits to service and clean the equipment.
Any parts that i find faulty or don't think will last till the next visit get changed and billed seperatly.

Jon :)

01-05-2010, 04:06 AM
For PMC [ preventive maintenance contracts ], go for monthly prepaid in advance. They don't pay, you dont do.
The midnight leak and flood generally reminds the client of actual situation.
As a service provider, you have the advantage from a financial veiw point. Once you reneg you have lost the advantage.

08-06-2010, 10:22 PM

With regard to 24/7 contracts, how much do you charge as a retainer for on call engineers and do you mark up massively on the routine maintenance visits to cover the response times.