Cylinder deposit vs cylinder rent: what to charge

Why charge for the cylinder at all

Cylinders are costly to replace, and many remain the property of the gas company that fills them rather than the distributor or the customer. Depending on your supply agreement, a cylinder that never comes back can cost you money.

A cylinder sitting at a customer who no longer buys from you is also stock you cannot use. Charging for the cylinder gives customers a reason to return it, and gives you a way to cover the ones that do not.

How a deposit works

A deposit is a one-off charge when a customer takes on a cylinder they did not have before. It is refunded, in full or in part, when the cylinder comes back.

The detail that matters is exchanges. A customer swapping an empty for a full cylinder of the same gas type is not taking on a new cylinder, so no new deposit is due.

• 3 out and none back: 3 deposits.
• 3 out and 3 back: no new deposit.
• 5 out and 3 back: 2 deposits.

Deposits suit domestic and occasional customers. They are simple to explain and simple to charge.

Their weakness is that once paid, a deposit gives no reason to return a cylinder. One held for 5 years costs the customer the same as one held for 5 days.

Decide your refund policy before you start and write it down. The usual choices are a full refund, the deposit less a fixed handling amount, a percentage, or no refund at all.

How rent works

Rent is a charge for each cylinder for each period it is held, whether that is a day, a week or a month.

The fairest way to count it is in cylinder-days. 3 cylinders held for 7 days is 21 cylinder-days. A customer who takes cylinders part-way through a billing period pays only for the days they held them, and rent stops on the day a cylinder comes back.

Rent suits commercial customers who keep stock on site: pubs, caravan parks, farms, restaurants and building sites. It encourages them to send spares back, and your income follows the cylinders you have out.

It asks more of you. You need accurate records of what is out and since when, and it belongs on a regular weekly, monthly or quarterly invoice rather than on each delivery.

Choosing between them

Some distributors use both: deposits for domestic customers and rent for commercial ones. To decide, ask:

• How long do your customers usually hold a cylinder?
• Do they keep spares on site, or only the one in use?
• What does it cost you when a cylinder goes missing?
• How often do you invoice them already?

Whatever you choose, apply it consistently and tell customers in writing before they are charged. A rent line nobody expected is the quickest way to an argument.

What to charge

There is no single right figure. Weigh up what a lost cylinder costs you under your supply agreement, what other distributors near you charge, and what it costs you in time to process a refund. Set the charge by gas type, with exceptions for particular sizes where they genuinely cost more.

Tracking is the whole job

Both schemes rest on one thing: knowing how many cylinders of each gas type and size every customer holds. Without that, deposits cannot be refunded fairly and rent cannot be charged at all.

• Record every delivery and every empty collected, every time, including collections with no delivery.
• Count empties at the door with the customer, not later in the van.
• Check your records against a physical count from time to time. A customer who has apparently returned more than you ever sent them usually means the opening figures were wrong.
• Follow up with customers who have stopped ordering but still hold cylinders.