Who ultimately pays the finance charge?

Thea Dudley credit

Thea Dudley


Dear Thea,

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Wondering if you would have some guidance on how to “nicely and respectfully” let customers know that the finance charges they incurred are due and legit. It’s on our credit application that they signed and agreed to. Many times I hear, “Our company doesn’t pay finance charges,” or, “With all the money we spend at your place… yada, yada,” or finally, “Well, I paid some invoices early so…” HELP!

— Who is financing who?

Dear Who’s Money,

This IS a favorite. I love when a customer says they don’t pay finance charges but they pay late. Well, cowboy, where does that leave us? The “With all the money we spend” comment is another frost on my flakes. Yes, and we provided you with product, on-time delivery, and a short-term loan. YOU chose to forego the arrangement. Try that with your bank. By the way, taking your business elsewhere affords the opportunity to experience finance charges elsewhere if your payment structure remains the same.

The question becomes: Is your company’s credit culture going to support the enforcement of those charges? If you make the push, however politely to collect said fees, are your leaders going to support you or roll over?

Once you have established company support of your policy, my responses range to fit the mood of the conversation. In some instances I have flat out asked if we lived up to our end of the agreement. How would they react if I delivered their products the way they pay? Late and without any consideration? Yes, it is over the top and perhaps snarky to some. Said correctly, it works wonders and sets the tone for a pretty good conversation. Some of my best customer relationships started out as a bit of a bumpy ride. You have to be prepared for the lame comments, excuses every credit manager has heard, and is both amazed and baffled by. Approach it with logic and a calm demeanor. Remind them that, while you appreciate their business, this is a business transaction, and just as we deliver on our commitments, we expect them to do the same. We agreed to short-term financing. For us to maintain our ability to offer quality products and service at excellent pricing, we have to pay our suppliers within discount long before the customer in question gets that product from us. If customers do not pay as agreed, we have to borrow money on our bank line of credit, and that costs money. Customers always think dealers are making “bank.” Fact is, we all have obligations.

Offer a concession to first-time offenders by offering to “absorb” one time and ask that they adhere to the policy in the future. Word to the new: never give something away for free. In short, if you are going to write off a finance charge, make sure the customer knows you did. People do not value what they don’t know about. If you have written off countless finance charges and now you’re so done, your customer has no idea this is the fifteenth offense you have written off and the reason you are huffy. Make them aware.

Some repeat offenders will need it spelled out for them many times over. I have put very few customers on hold for past-due finance charges, but it happens, and gets their attention. Stop dragging it around. Get it sorted out: pay on time, pay the price for lateness, or make a business decision to turn the fees off and stop feeling like a mustache-twirling villain for asking.

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