Credit Matters Newsletters

This month has been caught up with other issues and so unfortunately there is nothing to report at this time. However our development continues and we hope to present new information shortly.

Advertising via Credit Matters

If you are interested in reaching a wider group of business prospects, contact Kim to see what we can do for you. There are many different opportunities to advertise your business. The benefit of advertising with Credit Matters is we offer one of the few opportunities to reach a broad marketplace of customers with financial risk management issues.

This month we are plugging our own services via the attached flyers. If you have any questions about how we can support your business, please contact Kim at kim@creditmatters.com.au

My father use to say "If you owe the bank a million dollars, you have a problem. However if you owe the bank a $100 million dollars, they have the problem."

In business it is no different. If you have a small debt, it is the customer's problem. If the debt grows to be a large debt, your business has the problem.

It is interesting how many suppliers allow their customers' small debts to become big debts and do little to resolve the situation until the problem becomes so damaging, it cannot be ignored. In such situations, the small debt which was the customer's problem to resolve has become a big debt and is now the supplier's problem.

The costs of repairing a big problem are usually disproportionate to the costs of resolving a smaller problem. Furthermore, the costs of resolving a large problem can be a material issue for the supplier.

Your conundrum in business is always about when to act. Do you spend time trying to stop the debt becoming your problem when the cost is not material or do you wait until the debt becomes a material issue with associated costs?

Only you can decide to act. Common sense dictates however, that in the long run, it is more practical to incur small costs rather than large ones.

Too often we see how one group of good customers are poorly serviced and rewarded for their custom even though they often pay promptly. Meanwhile, other customers with poor trading performance and are deemed to be "good customers", are treated rather better.

What is the difference between these two scenarios?

In the first example, it may be these good customers are not big spenders or did not have a "name" and increasing sales was not possible due to the size of their business. It is because of such perceptions by the sales department, they are often not classed as "good customers". Such perceptions of course rarely take in to account that many of these customers pay within terms and still provide a better than average profit per dollar of product sold. 

For the second type of "good customers", it is all about the size of potential sales, the ease of getting the next sale, or because the customer, might have a "name". There may also be a perceived bias by the sales team, supported by management, that they are deemed to be "good customers" by the size of their sales orders despite any poor operational issues.

Alternatively, the sales team are encouraged by poorly structured remuneration packages to "sell" but not "service" their customers' needs. In such situations, you will also probably find that management are on similar inappropriate remuneration packages to build scale and make the business look successful.

What happens over time is the good customers stop buying and / or stop paying until service problems are rectified. If the problems are not fixed, they start moving their business to other suppliers. Meanwhile their gradual defection is usually not noted until too late because they were not deemed to be a "good customer" by the sales department.

As the dissatisfied customers leave, and with access to social media, many of these customers may also start blogging about their dissatisfaction with your business's lack of service and care. There is also nothing like that sort of news to draw the attention of your competitors and encourage them to make fresh bids for your customers' custom.

Meanwhile, the perceived "good customers" favoured by sales and management, do nothing to promote your business or say how they value your service. These customers don't really care about the quality of service; they just want your product. Then to add insult to industry, you usually find the same customers repeatedly raise unfounded claims or credit deductions and then pay late, if at all.

Should you belatedly realise your business model is not working, you will have many problems in turning matters around. The two main reasons will be:

(i)  the shear cost of trying to rectify problems is prohibitive, and

(ii) trying to create a quality customer service culture and respect for customer needs when previously there was none, will be almost impossible with the same group of employees.

In the coming years, a business model which does not include an ethos of seeking and keeping good customers, is probably doomed to failure. These businesses may appear to succeed in the short-term. However, in time their sins of bad service and poor customer selection, will probably mean they may not survive over the long-term.