Dear Crabby,
I’m the credit and collection manager at a small company and we manufacture designer paper bags for wine bottles. Our bags come in all kinds of very fancy patterns and textures, and they look beautiful when someone gifts a bottle of wine in them.
Recently, one of our new customers, a mid-sized gift retailer, ordered 10,000 bags with one of our custom designs. They approved the design and signed off on ten samples that we had manufactured. This was a very large order for us, and we were extremely happy with the additional sales.
The entire finished product went out several months ago. Half of the payment was made in advance with the balance to be paid in 30 days.
About 10 days after the bags were delivered and accepted, our customer service person received a call from the customer’s purchasing manager who said that the bags came in pink, but were supposed to come in at a shade between pink and red. Our customer service rep took down all the information and informed the sales manager. At this point, I was told to not call this customer for the balance until the complaint was resolved.
I kept checking in every 10-14 days or so to find out what the status on this account was and kept getting the curt response, “We’re working on it, and it will be resolved soon.”
Finally, after 60 days past the due date, I decided to really dig down and learn what the status was. The sales manager explained that they must do the order over again with the correct shade of pink and that we will have to credit out the balance on the original order.
I was rather shocked in hearing this because it just seemed to be too drastic of a move. Moreover, I was annoyed that the salesperson didn’t even ask me for my advice and if there were any alternatives to redoing the order over and crediting out the balance. In view of our cost, this loss will result in a cash flow crunch for us.
Sadly, this is not the first time I’ve been relegated to the sidelines, and although I’ve mentioned to him previously to include me, he just doesn’t seem to value what I can contribute.
Your thoughts on this situation will be much appreciated.
Signed: Left Out
Dear Left Out,
Regretfully, your situation is far from unique. I have heard from so many credit and collection managers that their input on disputes or claims against the product or service have not been sought. Apparently, there seems to be the opinion that a credit and collection manager cannot contribute to the resolution of a manufacturing problem that could easily lead to a cash flow crunch and other issues. The reality is that if your advice had been sought, I’m sure you would have mentioned the following:
- To what extent were the colors on the sample order that the customer signed off on and the actual shipment of bags different? Before getting into any conversation about redoing the order, the level of color difference, if any, needed to be confirmed. Since colors are numerically coded in the manufacturing process to avoid any subjectivity, any perceived difference may have to do with the kind of lighting under which the finished product is being viewed.
- If the color from the sample was significantly different from the color of the goods shipped, how did that happen and what precautions or adjustments in the manufacturing process are necessary to avoid that situation again.
- Instead of redoing the entire order, ask if the customer can still use the bags. If they can, why not suggest that the customer pay for this order but then offer a reasonable discount on the next order?
- If the entire order still needs to be redone, what about the order that was shipped, received, and accepted? Will that be returned?
- Have any of the bags that were shipped used by the gift retailer? If so, and they exceeded the amount of the payment made in advance, these should be paid for.
- Since the size of the bags are standard with only the designs being different from customer to customer, can the bags be resold to another customer at a discount?
You see, as a credit and collection professional, our experiences in grappling with all kinds of situations that can impede payment is how we become adept at thinking about potential solutions.
It’s always easy to start over but it takes some “creative brainstorming” to see if there are other ways that may fix a problem. I do hope that your sales manager will include you in the next problem since it really does take perspectives, ideas, and opinions from many people to come up with the best solution.
Dear Crabby is a credit, collection, and human resources advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!
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