Item 1: Over the years we've received very few product returns. Maybe one or two of our widgets were returned within any given quarter. The owner, aka my boss, has strived for 25 years to maintain a good reputation in the business and he takes it personally when a customer isn't satisfied with our widgets. So we offer a 30-day money back return policy.
The returns are way up since March. The techs and I inspect the RMA packages and we can all see that these people are using the crap out of our widgets for a week or two, then returning them. On a business level I think this is a really slimy practice. So after 25 years we are about to end our generous return policy and introduce restocking fees.
Item 2: As of June 22, all orders from government agencies in California are to be paid by COD cashier's check, wire transfer or credit card. We do not accept PO's Net 30. IOU's are not acceptable forms of payment.
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8 comments:
Kinda like the credit card companies changine people's terms before there is a reason, just an indication and poof..new terms and conditions. Oh well in a few months any state that voted blue will get government bailouts so Cali is all set, besides its soverign debt AAA+ what more could you ask for.
Lou's not saying that they're changing the terms on what people bought already -- just on what they will be buying. That's perfectly legit.
NoVa the credit card companies are legal too, but changing game is changing the game and in both instances it is based upon anticapated future events aka willingness to take risk at what price. Walks like a duck and quacks like a duck. Putting someone on COD on their next transaction is a significant change of T&C from the previous transaction. Since the credit card company makes money from financing same rather than markup on a product (don't know if the company in question has in their T&Cs with respect to past due charges), in both instances they have to price and manage risk appropriatly.
Walks like a duck, quacks like a duck... HUH? What?
The credit card companies aren't just changing interest rates on new purchases -- the big outcry is that they are raising rates on balances that already exist for things you bought last month or last year.
Lou's firm is NOT changing terms for what you already bought. You buy on Jun 21st? Your 30-day invoice is fine. You buy tomorrow? Only then does the new rule apply.
Now on a related but differen topic, to be fair to the credit card companies, in a lot of the cases that I've seen, people DO NOT HAVE TO PAY the increased interest rates on their card. Seriously. Except in the case of late-payment-induced increases, the customer can simply call the credit card firm, close the charge account, and pay off the balance over time at the original terms. I've had that happen to me before. Nobody in the yellow press seems to mention that EVER as a way out.
Being credit worthy is the essential item. AAA+ gets credit but C- does not, now in this instance Cali still has AAA but due to press reports an enterprise decides to down grade Cali's rating. Credit card company has floating rate interest financing and based upon information decides to downgrade a consumer's credit rating and raises the rate from that paid by AAA to that paid by C- and perhaps reduces unused credit or what ever is allowed by contract. Sure looks a lot alike to me. Call your bank ask for an unsecured pay option line of credit using just a credit score, etc...and see what kind of terms they want if they get wind that your credit score goes down or if inflation goes to 20% or if they just want out.
Extending credit is a tough business, one bad call wipes out a boatload of good ones. And in a time is money business that works off of a couple of points spread over cost of capital you gotta have an quick trigger finger.
Ain't in the biz but that's my view. Best of luck.
Anon, what NoVa said. Of course we don't change the payment terms midstream. These new terms apply to new orders from the State of California.
What would YOU do if you were running a company and a customer said publicly that in a few days they won't pay within 30 days but will instead issue IOU's?
Of course, the State of California will complain about companies refusing to provide vital items for free, accusing them of hastening the demise of the once great state. Of course, The State of California just can't understand why they should borrow a lot of money from a few banks rather than a little money from a myriad of small, non-bank, companies, that also have bills to pay.
The car companies have been on 90-180 day terms for years, according to people I know who work for suppliers. Every time GM needed to conserve cash, it just cranked another 15 or 30 days into payment terms.
Lou, I hear ya and I completely understand your stance. I too sell to CA, but I have been through this before and am not worried about getting paid - eventually. But then again the state makes up less than 1% of my sales volume in that business.
I would just be careful about damaging your future revenue stream from them by going COD.
Good luck and hang in there.
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