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The Customer Is NOT Always Right

Writer's picture: John ParsonsJohn Parsons

YGTMedia Blog - Not always right

While it is a widely accepted mantra that ‘the customer is always right’, sometimes this is not the case. Small business owners often encounter difficult customers who withhold payment or create reputational damage. It can be a daunting experience for entrepreneurs who put their heart and soul into their business. The problem is that such customers can lead to cashflow problems, which can leave the business owner unable to pay suppliers or staff or even themselves. Therefore, it is essential to handle such situations carefully.


To minimise the risk of financial loss and reputational damage, here are some tips that can help small business owners. Firstly, try to stay calm and composed while handling the situation. It is essential to understand the issue and gather all the necessary information. Secondly, communicate with the customer in a polite and professional manner. Try to understand their concerns and work out a solution that is beneficial for both parties. Thirdly, document everything, including conversations, emails, and agreements made, to avoid any misunderstandings in the future.


Lastly, if all else fails, it is essential to know when to cut your losses and walk away from a problematic customer. It may seem counterintuitive, but sometimes it's better to cut your losses than continuing to engage with an uncooperative customer. By following these tips, small business owners can protect themselves from the impact of difficult customers and reduce the risk of financial loss and reputational damage.


Other points to consider:


1. Qualify potential customers -

Before you agree to provide a product or service to a customer, check for warning signs. Is the customer from a sector, or industry that you’ve previously had problems with? Anything concerning in a Google search? Can you find them on Companies House to get to know exactly whom you’re dealing with?


2. Use terms and conditions that a solicitor has prepared for you -

Don’t use terms and conditions downloaded from the internet. Bespoke terms and conditions aren’t cheap, but the investment could easily be worth it if one day they make the difference between being paid or not paid.


3. What and when -

Ensure your terms and conditions clearly state how things will be handled if the worst happens, including timescales so that problem cases don’t drag on for longer than necessary.


4. Associated fees and costs -

Ensure your terms and conditions reserve the right to apply late payment fees and collect costs associated with debt recovery. These clauses will allow you to incrementally increase pressure on the problem customer and hopefully get paid before going all the way to court.


5. Get a signature -

For higher value transactions, ensure you and the customer sign and date the terms and conditions – ideally hard copies, or via secure legally approved systems such as Adobe’s eSign service.


6. Keep your side of the deal -

Deliver your products and services exactly in accordance with your terms and conditions. If you haven’t kept your side of the deal, then why should your customer?


7. Keep records -

Ideally your IT systems should record what was delivered and when so that you can produce an audit trail if required by your solicitors, e.g., when preparing a solicitor’s demand for payment letter.


8. Deliver incrementally -

By breaking a project down into periodic deliverables and using staged payments, or even up-front payments, you can reduce your financial exposure significantly.


9. Use Direct Debit if appropriate -

With a mandate in place to collect money from your customers you are no longer reliant on them to do the work of paying you and your fees avoid becoming ‘yet another thing on the to do list’ and are less likely to go overdue, and you’re therefore less likely to have to exercise your provisions. GoCardless is a popular option.


10. Talk to your solicitor -

If it looks like things might be going wrong then talk to your solicitor sooner rather than later. Ideally, talk to the same solicitor who drafted your terms and conditions. They will be able to talk you through the costs of taking legal action and the likely outcomes.


11. Communicate with your customers throughout delivery of the product or service -

Customers can be such a rich source of information about your product or service is perceived and how effectively it does or doesn’t solve their problems. That feedback can be a goldmine of opportunity to make your product or service the best in your industry. And of course, if you continually ask for feedback, you will stand a better chance of spotting a potential problem. You can then take action to put things right sooner, and hopefully reduce the chances of a full-blown dispute arising.


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