Ed Persons gets custom chopping income almost year-round, charges no interest and has no accounts receivable.

He's one of a small but growing number of custom harvesters who collect monthly payments for their services starting before the harvest begins.

“It's a different way of doing business, but it's lower risk, and to me it's all about risk,” says Persons, of Clymer, NY. “I love what I'm doing, but I'm not in it to get into trouble with a lot of money on the books.”

He chops 6,000-7,000 acres per season, three-fourths of which are three cuttings of haylage. The rest is corn silage. He also offers raking and bunker packing. His clients are on a 10-month payment schedule that starts in February.

“They'll be ahead of us three months on payments this spring, but next fall they'll be three months behind,” he says. “I've never charged any interest, but we require full settlements by the first of December.”

That hasn't been a problem. It's easier for customers to pay their bills when the amount owed is spread over several smaller payments. Persons says he's able to charge lower rates because he has no bad accounts.

His system is mandatory; he would refuse to work for anyone who wouldn't accept it. Occasionally, a new client resists it, but usually comes on board after Persons explains the advantages.

During the first two weeks of January, he visits with all of his clients to find out how much work they want him to do the coming season. Using their acreage and his rates, he estimates the total billing for each client. By Feb. 1, his clients each have an estimated billing and a certificate of insurance proving that he has liability insurance.

“It's all done out of season when it's a slow time for everybody,” he points out.

Each monthly payment is one-tenth of the total amount. After several years of operating this way, his estimates usually are fairly accurate. But changes are made during the harvest season, if necessary.

“We do a billing right after each crop is done, and if things look like they're off, we make adjustments right then,” he says.

“You have to use a lot of common sense to make this work,” he adds. “The wrong person could really screw it up. And you've got to be careful who you're doing it with. If I were a dairy producer, I'd be really careful who I'm paying 90 days ahead.”

Persons has operated this way since his second year of custom harvesting. He had collection problems the first year, and wanted to spend less time and energy on that. At the same time, clients asked him to do something to improve their cash flow situation.

“This makes their lives a lot easier, and it's less stressful for us,” he says. “It really works smoothly.”

A client request led Bill and Dick Kraus, Elkhart Lake, WI, to initiate a similar system several years ago. The brothers chop haylage and corn silage, and also do custom planting and manure hauling.

“He said, ‘We pay all our other bills monthly, and the milk check comes twice a month,’” Dick Kraus recalls. “He was getting a big corn silage bill from us and right after that, a big manure hauling bill. He wanted to spread that out, and we thought, ‘Great, it'll help our cash flow, too.’”

It worked out so well that the Krauses now offer a 2% discount for paying that way. Most of their main clients take advantage of it. Two corn silage-only clients are among those who don't.

“They don't see the value in paying us in January and February and we're not even going to be on their farms until August or September,” says Kraus.

Contracts normally run from January through December. No interest is charged if total billings are paid by Dec. 31.

“So they're paying ahead a few months, but then at the end of the year they can hold some of that money for a couple of months without interest,” Kraus points out.

For return clients, estimated billings are based on records from previous years.

“We usually have a pretty good idea of what their bills will be,” says Kraus. “But if somebody picks up another couple hundred acres, or something like that, sometimes it's a big guess.

“Sometimes we hit it real close and sometimes we're off,” he adds.

Clients understand when preseason estimates aren't on the money.

“That part has never been a problem,” says Kraus. “There's give and take.”

Like Persons, the Krauses send invoices after each job so clients know where they stand as the season progresses. They also get receipts for each monthly payment. Then, when the year's work is done, they get statements showing the amount still owed, with a reminder that they'll get the discount if the balance is paid by Dec. 31.

Finally, Persons and Kraus both mention that monthly payment plans help them plan their season-long workload.

“If a client starts paying us in January, it gives us some security in knowing we'll be doing his work this year,” says Kraus.