Get the Credit!
A careful payables clerk or frugal owner can always find a dollar here, or a few dollars there, on the invoices of suppliers and vendors, which are inconsistent with the terms of the underlying transaction. Sometimes a real spendthrift will hit pay dirt, finding a substantial issue where the invoice does not match the agreed terms of the transaction.
Vendors, desiring to keep your business, many times, will mitigate small nuisance fees to enhance customer relations. Salespeople, desiring future commissions, will be quick to tell you to short pay an invoice and leave them to fix it on their end. Any business that would not jump at the chance to pay less for the things they use should just file a home-rule charter and become a government. A serious liability may be building, however, if the beneficiary does not require a credit memo from the offender at the time of the admission.
Everything could be great, for a while, when a continuing nuisance fee is reversed and a correction is promised, making the amount expected from the customer less. This good feeling fills the relationship between buyer and seller creating harmony. This harmony could have a few sour notes ahead, however, if months later a past due statement shows up listing the mitigated charges and demanding payment. A call to the company call center, even if the representative speaks English, can be frustrating when it is learned that the salesperson or manager who promised the correction is no longer employed or does not remember the tune they sang when the commission was good.
Especially during this time of economic uncertainty, with prices rising and falling like the stock market, there are overcharges, surcharges, and finance charges that get invoiced incorrectly, without regard to the circumstances. Even when a vendor promises to void an incorrect or duplicate invoice and issue another, an error may be left on the accounts receivable ledger of the vendor.
Another issue concerns the larger companies who have cut back on periodic statements to save postage and preparation expense. This can be the perfect storm when no credit is demanded at the time the charge is mitigated by the vendor. Many times these mitigated charges are left to be corrected on the books at a later time, after memories fade and principals move on. Tempers flair when the statements are finally sent, with the incorrect or mitigated charges and stamped past due to boot. The damage is done.
If the charges were left to build, the substantial write-off is not as easy to part with, especially when the vendor is strapped. For many busy entrepreneurs this situation is simply nothing to worry about, but it is one that happens to exactly those who diminish the threat. Even if the vendor mitigates the larger amount after significant time has passed, their ignorance of the initial situation, handled by others, can sour that once productive relationship, causing stress and attempts to recoup the write-off through aggressive pricing strategies.
If it is true that "Good fences make good neighbors", and "good contracts make good clients," then it must also be true that good credit memos make good supplier relationships. There is no question or assumption when the credit memo spells out the overcharge and corrects the accounts receivable ledger. There is a credit memo number to give to the Asian call center representative, that is easier to understand than English. There is an explanation for a new account representative from his company�¢??s own records, and there is an entry for your accounts payable ledger to properly offset a lingering balance. A proper credit memo should be a must for the detail-oriented manager of your vendor payables.
