Dear Crabby,
I’m the collection manager at an elevator maintenance, repair, and installation company. We’re a small organization but have been around for decades in a major metropolitan area. We’ve developed a reputation for servicing those small businesses that find it difficult to afford the high maintenance fees that are charged to the big condos and office buildings. I’ve been here for several years, and I have to say that I think the owner is a wonderful person. Even in his 80’s, he stops by many of the customers and schmoozes with the owners who are still around.
The owner does some collection work for me when he makes his rounds and sometimes, I’ll be very surprised when he comes in with a check from a customer that I had been trying to collect from for several months. I gladly accept that his warm personality is key to resolving the problems that are often impeding payment. That said, recently, the president accepted the customer’s product in lieu of a cash payment against our receivable. Let me explain.
One of our customers is a meat packer and they process and package all kinds of poultry and pork products. After installing a few of their freight elevators many years ago, we’ve continued to maintain and service them on a regular basis.
So, about two months ago their forklift was accidentally driven right into one of the elevator freight doors, knocked it completely off, and it fell a few stories down into the pit causing a great deal of damage to the underlying equipment. This resulted in almost ten thousand dollars in repairs.
Although the customer submitted a claim to their insurance company, there appears to be some kind of coverage issue. Honestly, it’s not our problem and I really don’t want to get involved in it. They have asked us to revise the invoices in a certain way so that the repair work reads more in line with what seems to be acceptable by their insurance company, which we have done, but again, not our problem.
The president went over to the customer’s location a couple of weeks ago to “schmooze up” the owner and find out what the payment status was. When he returned to the office, he told me that they will make a partial payment shortly and it should come in a day or two.
To my surprise, a truck showed up at our loading dock with about 100 twenty pound “organically raised” turkeys which was to be used as partial payment against a $10,000 receivable. Our warehouse manager called me to find out what we should do, and I turn got on the phone with the president. He gave the order to accept them and so very reluctantly I did.
Since it’s not so cool here at the moment, I rushed to have everyone take home 2-3 turkeys so that they would not spoil and without question, they were delighted. Personally, I’m also kind of happy to have a couple of turkeys for the holidays but what about the A/R? In all the years that I’ve worked here, we’ve never accepted payment by receiving the customer’s product. I just feel this is not the way for us to get paid as it could set a bad precedent for the future.
Your thoughts will be most appreciated.
Signed: Stuffed with Turkey
Dear Stuffed,
Your president sounds like an absolute gem, and I admire that warm handshake type of businessman. Sadly, his personalized approach to maintaining a customer relationship is quickly going by the wayside. We’ve certainly seen over the decades how you can’t even talk to a person anymore. You either must navigate a very complicated maze of options on the phone or you communicate through a chat box.
The first question is however, can you accept the turkeys as a partial payment? Well, the answer really depends on what the president and your customer decided the value of the turkeys would be. Generally speaking, whole “organic” turkeys sell for about $3.00 per pound. At twenty pounds, that is $60 per turkey. With 100 turkeys, that’s $6,000. Is that approximately what was settled on? So again, that’s the first question.
The next question is, will this kind of settlement set a precedent? Perhaps. As I said above, your president is a gem but sometimes as people get older, they may get a little softer in their negotiating prowess and especially with this customer, it may happen again. Since I don’t know the depth of your relationship with the president, but assuming that you and he are on very good terms, you may want to mention your feelings to him. It sounds like he will be open to your thoughts on this and hopefully, it won’t come up again. But if it does and a pattern develops, then more assertive support and communication on this issue with others may become necessary.
In addition, when it comes to revising your invoices for insurance purposes, I’m a little confused on this because I’m not sure if you revised them so that they still legally and correctly represent the work you performed. If everything is still worded properly, no problem. But if something now on the invoices can be misconstrued, it’s not a good policy to have and could have legal repercussions. I understand that many small businesses will do things a little more liberally, but in this day and age when everything and everyone gets sued if we look just the wrong way, you really should be very careful on that idea.
The last thing I would ask is, what is the future leadership of your company? Is there a succession plan in place? At some point the president may want or need to retire, and hopefully there is a designated heir apparent who can take over the reins. Customer relationships may not be nurtured as warmly as the president has done so for all these years, but other improvements may compensate accordingly.
Enjoy your Thanksgiving, Christmas, and New Year’s holidays ahead.
Crabby
Hector the Collector 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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