Bad Debtors: Do you realise the Damage to Your Brand and Reputation?
I have to thank a customer for the inspiration for this post. It is the customer who had for weeks dodged calls and promised to pay my invoice of $693, has failed to do so and has now been moved to the category of bad debtors.
There is always a first bad debtor
I have been running my own consulting firm for about ten months at the time and this customer was officially my first bad debtor! I have been thinking about this situation and what I could have been doing differently or better – as a good supplier should. The focus is always on customer service but as customers we also have to do what is right by our suppliers – and specifically managing supplier payments. Bad debtors are not good for anyone, is a waste of time and resources.
What is important to suppliers?
In a past life I was managing suppliers and facilitating the setting up of consistent supplier processes between the operations, procurement team and the suppliers. It was always interesting to hear supplier answers when I asked how we could assist them as an organisation:
- Pay us on time;
- Protect us from those who break the rules and make us do work outside the guidelines; and
- Just sometimes, listen to us because we know what we do.
It is something I still carry with me.
As suppliers know the customer is always right even when the customer is as wrong as the sun setting in the east or even when pigs start to fly on a carpet of money!
However, the end result is that suppliers end up saying no and more specifically:
In my case, the invoice is relatively minor but its impact can be significant seeing that I am a start up and have done quite a bit of self-investing in my first year of running my own company.
The question to ask is whether not paying $693 is worth the damage a customer does to its brand reputation. Especially when you are an organisation in the community care industry telling your customers that you do care.
Do you really care?
I don’t think so.
Bad debtors inspired me to share some lessons on managing suppliers and how bad supplier management impacts on your brand and your reputation.
When you have a problem with the service/products, speak up and do it timely.
In my case, I did not get any negative feedback. I was open and opened the gate for conversation about any improvements or complaints about the service.
In fact, the customer received so much more than asked for and so much more than the customer was billed for.
Ignoring the problem does not make it go away. Sometimes silence can even be interpreted that you agree with what you had been told. Therefore as a customer, when you do have an issue with the service or feel that you did not receive value for money, speak up but do so in a timely manner.
In the end, as suppliers we learn from our customers, even if it is what not to do as a customer.
When you commit to paying an invoice – you commit your organisation
Saying you will be paying an invoice, in fact even thinking that it had been paid when it was originally submitted, can be interpreted that you agree to the invoice.
Especially when you are the General Manager of your organisation, especially when you are in the community care industry.
Think twice when your words and correspondence do not reflect your actions.
Think twice about how you commit your organisation.
Issue a letter of demand to bad debtors
Thank goodness for my years of legal practice and the pain I went through as a youngster doing debt collection as part being in legal practice. A letter of demand is easy, simple – remember to send it registered post.
There is a point in time where you can no longer accept non-payment and have to step up to the next level.
More information on the Letter of Demand can be found here.
The debt collector does not care whether your bad debtor cares or not
The debt collector has time and resources to pursue bad debtors and I think debt collection is something best outsourced.
Reality is that when you are handed over to a debt collection agency, your non-payment is reflected on your credit record.
As a customer one really has to determine whether not paying an invoice on time is worth the drama of having to reverse a bad credit record.
You can find details of debt collection agencies in your area through Google – see the snippet below. It’s as easy as searching “debt collectors” and you will find many different and affordable options and packages.
How does the label “bad debtors” reflect on your brand and reputation?
When you don’t pay your suppliers for their services, what does that say about your organisation, its brand and its reputation? What does it say about the level of service your organisation provides to your customers?
I am certainly not happy about graduating in the area of having bad debtors. However, bad debt really is a poor reflection on an organisation’s brand and reputation.
The outstanding invoice amount is minor.
The consequence relating to brand damage can cost your organisation future work. It will damage your reputation with your customers and suppliers severely.
When a General Manager of an organisation commits to paying an invoice – the General Manager is the voice, the brand and the reflection of that organisation. In fact, the General Manager is a really poor reflection of brand and reputation.
Be grateful for good customers and learn from the bad debtors
I have a number of great clients, who pay on time or if they have a financial constraint, ask for paying in instalments.
I even had a client who told me to invoice for more hours since I worked more hours but decided I was going to invoice for less.
For these customers, I am very grateful and I thank you sincerely. You are a great reflection of your brand and your reputation and a pleasure to work with!
To my bad debtor:
The sun does not set in the east nor do pigs fly, not even for $693.
If you have any questions about supplier management and/or how to manage bad debtors, please contact us.
Have a great day
Article refreshed March 2017.
PS. The bad debtor went into voluntary liquidation during March 2017. Sadly, a number of their employees are on the list of creditors too.
Celia Jordaan is procurement and risk consultant at Ichiban Commercial Solutions, Perth Western Australia. With over 20 years experience, Celia has worked in different countries, locations and cultures. She worked in the areas of procurement, supply chain, contract management, law and risk.
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