Magazine article Business Credit

Paying Attention Can Pay Off: Customer Pushback and Third-Party Billing Platforms Are Becoming More Commonplace and May Impact the Relationship between a Buyer and Seller

Magazine article Business Credit

Paying Attention Can Pay Off: Customer Pushback and Third-Party Billing Platforms Are Becoming More Commonplace and May Impact the Relationship between a Buyer and Seller

Article excerpt

The days of doing business on a simple handshake are long gone. Contracts, third-party billing platforms and customer pushback have replaced this once trusted gesture. While businesses may be more technologically connected, the relationship between the buyer and seller seems to be drifting further apart.

Doing business "is becoming more electronic and you aren't getting the face time with these people," said Heidi Lindgren-Boyce, CCE, senior credit manager for Star Rentals, Inc., a company that sells and rents construction equipment. "I think it's pretty straining on both ends."

Over the last few years, Lindgren-Boyce noticed a change with some of her customers. Specifically, more of the large manufacturing companies try dictating the terms and conditions of a sale through their purchase order. Even longtime customers were suddenly--and at times, discretely--making adjustments for their benefit. One scenario, she recalled, occurred with a company that had been a reliable customer for more than 30 years. When their usual payment did not arrive on time, Lindgren-Boyce contacted the company's administrative department. She discovered the company adjusted their billing cycle and would only make payments on the first or 15th of the month. For Lindgren-Boyce, this alteration added an extra 15-30 days, resulting in a net 90-day payment cycle. "It's not what's in our contract," she said. "Usually you get some kind of letter explaining what's been changed, but I never got anything in writing. The only reason I know is that I asked."

Some buyers only place their terms and conditions online, instead of printing and mailing the documents to the seller. This emerging trend, Lindgren-Boyce explained, is not only frustrating, but also disconcerting since web content is always in flux. At times, the terms and conditions can be hard to find and difficult to understand, making it fundamental that a credit manager read through all of the details.

Lindgren-Boyce cited one occasion when a buyer referred her to the company's website to review their purchase order. After a thorough read, she discovered that the verbiage released the buyer from any responsibility if rental equipment became damaged. When she contacted the buyer to negotiate and modify the purchase order, they chose not to move forward with the rental. "With all of these pushback terms, it is changing the credit manager's job so they are almost like an in-house attorney," Lindgren-Boyce pointed out. "It's cumbersome; some of these contracts are multiple pages."

Unclear terms, customer pushback and a seemingly abrupt policy change can turn a healthy working relationship into a sour one. Ultimately, these situations can also lead to the seller questioning the worth of doing business with a client. "Some customers have become so high maintenance that when you look at the labor involved, you have to ask, 'Are we really making money?'" Lindgren-Boyce said.

Third-Party Billing Platforms

Many large, multibillion dollar manufacturing companies also use third-party billing, which serves as an intermediary between the buyer and the seller. For the buyer, this payment platform can help save money and streamline purchase orders; yet for the seller, the benefits are less obvious. "We pay an annual fee for the privilege of billing our customer," Lindgren-Boyce noted. She finds companies that use third-party billing are also more likely to push back on the terms of the contract.

The rate of third-party billing platforms can also be extremely high, costing a seller up to $10,000 per account, per year to simply maintain a record. The seller is required to pay the fee, which is chalked up to the cost of doing business. "There's a shift in who is financially responsible," Lindgren-Boyce explained. "We're definitely going to continue to see third-party companies shift the financial debt onto the supplier away from the buyer. …

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