[TowerTalk] Business ethics...
Mon, 22 Jan 2001 21:28:49 -0600
I'm an accountant by profession. All this pain I see on towertalk is very
typical of customers doing business with a vendor that has failed and
refuses to admit it. I also own three businesses. In each of these
businesses, taking advance money is standard practice and necessary to
ensure the customer is "committed" to the transaction.
The basic difference between responsible administration of down payments and
theft by swindle is this:
Any down payment must be held in trust by the receiving party. Failure to
deliver goods as promised must result in a full refund -- no "restocking"
charges when not the customer's fault. Restocking relates to transactions
when the customer backs out without cause--15% restocking is often
inadequate to compensate a vendor for a failed order (particularily if it is
special ordered or custom goods). Failing to meet delivery promises are
certainly "cause" to cancel. Customers should be aware that any charge on a
credit card should be consumated (delivered) within a 30 day period
following the charge. Any charge related to an undelivered goods beyond the
30 day limit should be immediately reported to the credit card company as a
"disputed" charge. Failing to timely report a dispute can jeopardize a
reversal of the charge.
Many products take more than 30 days to deliver. Under these circumstances,
the seller should request a letter of credit from the customer's bank to
"guarantee" the payment on delivery. International transactions are always
facilitated with an irrevocable letter of credit, which dictates the terms
under which the third party (usually the issuing bank) is authorized to
release the funds -- often delivery or clearing of customs. Business
transacted in this manner are "bankable." These letters of credit are used
in many businesses to secure short-term loans to complete the projects.
Taking money from customers prior to shipment is serious business. When
these transactions occur accross state lines, serious criminal consequences
can result. Just last week, a local travel agent went to jail when the
airline refused his credit to fly a plane load of people to Los Vegas. They
had paid the travel agent, he failed to deliver the flight, wrote bogus
checks to refund the customers, all of which bounced. Go directly to
jail--do not pass go and do not collect $200. The court ordered restitution
Most businesses using dealers to deliver products require that the dealer
purchase the goods from the manufacturer. Money talks, bullshit walks in
most dealerships. The dealer must secure financing for the goods. Some
manufacturers do have financing floor plans, but the inventory belongs to
the manufacturer. Any dealer should be leary about taking money on
"backordered" goods. The 30 day rule still applies.
Likewise, customers must be aware of the need to finance their custom made
products. Anyone who has built a home understands this. The builder buys
the land from the customer (who must usually already own the land). He
builds the house, and sells the whole thing back to the customer. This
transaction takes money. Money in the builder's pocket. Construction loans
are procured for the construction period. The bank baby sits the deal and
the builder adds the interest incurred to the total cost of the new home.
The towers are expensive and time consuming to build. That is a problem for
the manufacturer, the dealer, and the customer to work out. Most customers
choose dealers who have their financing in order and don't need to bother
with interim loans -- cars for example. The dealer buys the cars and pays
COD. Money talks, bullshit walks.
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