In the receivable management world, we see the good, bad and ugly of both business and human relations. While we have touched on this topic before. we believe it is a good time for another review. Let's review the secret to good business.
When I was a kid, my dad had a saying whenever I got into trouble. He would say “What are you in the doghouse for this time?” As we work through our clients disputed receivables and consult with prospective clients, my dad’s question still rings in my head. Approximately 40% of the cases assigned to our firm in the last 24 months have not been a result of the customers inability to pay, but rather a dispute with delivery, quality, supply chain disruption, unfulfilled promises...and the list goes on. In these situations our firm acts more as a mediator than professional debt collector.
There is a way for creditors and their customer to stay “stay out of the doghouse” and that is to not be afraid of tough conversations. Addressing tough issues head on without your pride or ego getting in the way is difficult. For some, admitting mistakes is tough. Creating an environment where staff and customers can fess up to mistakes can be equally challenging. Trusting your boss to not crucify you for making a mistake can be tough.
So What Do You Do?
A young Jewish man was once quoted by his friend John as saying “… the truth shall make you free.” As was true over 2000 years ago – the same is true today. Phone your supplier or customer and admit you screwed up. While the recipient may not like the message initially, they will come to respect you for admitting the mistake.
Taking this approach will accomplish two things:
1) Position yourself as a person or company of integrity, and/or;
2) Establishing yourself as someone who can be trusted during a difficult negotiation.
The best way to position yourself as a person or company of integrity is to talk about the “tough stuff” up front. As mentioned earlier, if everyone did this, 40% less receivables would end up in third-party collections and business relations may be stronger than ever! The best way to minimize these troubles is to do your due diligence on your vendor supply chain and customers at least once each year. Check their credit rating, review their warranty claims, review their track records.
If you need assistance with the due diligence process contact our business partner Credit Process Advisors Inc. to obtain information such as credit information, bank checks, builder lien information, law suits, and receivable monitoring.