Dear Ms. PACA:
I recently sold a load of peppers to a customer. The PO was filled in its entirely. The customer signed for the product, and no notations for quality or shortages were on the signed bill of lading. The customer did not report any problems or discrepancies even after delivery.
I sent an invoice to the customer. Several weeks later when the customer paid, the check was short. When I inquired about the short payment, the customer told me “we lost 10 cases of peppers and forgot to mention it”. The same customer did the same thing a few months back.
While working for another company, we had a similar situation with a customer. When we talked to other vendors, we learned that the customer shorted its payments to them as well. Each deduction averaged around $250. My former company didn’t even try to recover the losses – just felt it was a cost of doing business with that customer.
Is there a way to really draw the line and stop this from happening? I know we can fight it, but then we also risk losing the customer.
Sincerely,
Tired of it in Tampa
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Dear Tired in Tampa:
I’m sure that your experience with this customer is one that is familiar to many of our readers. While each individual transaction doesn’t add up to a significant amount of money, if you have multiple customers who are doing this regularly, the amounts do add up. I also hear your concerns about the principle of the issue. It’s just not right! While you have every right to file a claim with the PACA branch of the USDA to recover this shortage, it’s not practical to do this with every clipped invoice, and as you mentioned, you do run the risk of ruining the relationship with the customer.
With the dawn of a new year, this provides you with an excellent opportunity to let this customer know what your company will and will not accept in the event of a claim moving forward. In order to prevent (or at least to minimize) abuses like this in the future, I would send a letter or email to all customers reminding them of your company’s policies with respect to claims, rejections, shortages and quality or condition problems.
Whatever your company’s policies and expectations are with respect to claims, the first step is reminding the customer of these terms in a letter or email. It will keep your honest customers honest, and open the door for a conversation with those who may be not so honest.
After sending the letter or email, the next step is to follow up with your customer. Call your primary point of contact and let him or her know that your company’s management is tightening up its policies in 2019. Emphasize how much you appreciate the business, but also be clear that moving forward, the customer must comply with your company’s written policies regarding claims. Confirm that they received and understand the policies. By doing this, you are not necessarily singling out this customer and creating an adversarial situation, but are instead creating an opportunity to revisit and reemphasize your company’s trading terms.
When preparing the letter or email, pay careful attention to what is written on your company’s credit application, invoices, bills of lading, payment terms letters, web site, statements, and other documents such as confirmations of sale. For example, many companies include language on their invoice or bill of lading such as:
Buyer must notify seller of claims within ____ hours of delivery
Claims must be accompanied by a USDA inspection
Claims must be accompanied by photos
Sale is subject to Company’s claim policy
Seller’s terms and conditions of sale, available upon request or on Company’s web site at [insert web page address]com are incorporated by reference in this invoice
Be sure that the terms listed in your letter or email exactly mirror the terms that may be on these documents. Any discrepancy between a term in your letter or email and these other documents can render them unenforceable, potentially creating more hassles for you than the one that you are trying to solve.
Good luck, and let me know how things go!