Rock, Scissors, Contract

You’ve heard it said that “good fences make good neighbours”?  Well, there’s a commercial analogy: “Good contracts make good biz relationships.”

Does this come as a surprise to anyone?  I doubt it.  I think that every vendor business worth its salt understands that, ideally at least, there needs to be some form of document outlining who’s going to do what for whom, when, where and at what price.  It doesn’t need to be “constitutional” in length or complexity.  And while it’s never a bad idea to run a contractual format by a commercial lawyer to make sure that you’re crossing the “T”s and dotting the “I”s, most small businesses with simple product or service propositions can construct their own common-sense, holographic contracts.  Cover the bases, embed the details, obtain signatures and file diligently so that the papertrail can be found if/when needed.  To employ the tired but serviceable vernacular: “not rocket science”.

We know what the “ointment” is: documentation.  But don’t forget the “fly” in that ointment.  We heard the beat of fly-wings in the proviso in the previous paragraph: “…ideally at least…”  Entrepreneurs may have a best-of-all-possible-worlds appreciation of the importance of a standard contract in frontend operations, but too many fail to take the “ideal” and make it real.  Too many businesses provide products or services on credit without haven taken prophylactic measures and secured even the simplest contractual proof of their commercial arrangements with their customers.  That’s highwire work – and no net below.

So why is that?  Where are the constraints, the blockages?  And what creates them?  Since ignorance is never a good excuse, I discount as a matter of principle the “rationale” that entrepreneurs don’t know or understand that a contract (or reasonable facsimile) is a necessary safety net for supplier and customer alike.

So let’s move on…

Suppliers ignore the vicissitudes of a contract because…

• …they can’t be bothered
• …they have no ability to execute a standard contract
• …they’re devoted to “easy” sales with no “negatives”

Let me deal with these one by one…

• Can’t be bothered?  Too much work?  Hel-looo out there on the rim of the Galaxy of Creditors!!  How’s that no-cash, no-oxygen atmosphere?!!  Contracts – even minimalistic, holographic ones – are an integral part of the business process.  They’re not “extra” or “unnecessary”.  Lose a few thousand bucks because your papertrail was non-existent or just too thin, and you’ll see how “extra” they are!  Working without contractual safety net due to laziness or a lack of interest is not smart business.  There’s no nice way to say it.  It’s just plain dumb.  Would any supplier be that lazy or disinterested regarding product or service safety?  Well, it’s the same order of magnitude.  Contracts reduce risk and enhance predictability.  Being commercially safe is always good practice.

• Don’t know how to board the contractual choo-choo?  A standard contract template for your industry may be available on-line.  Alternatively,  your competitors’ or vendors’ contracts may provide you with a decent template or a set of basic ideas you can pilfer.  Or you can draw up your own basic contract in your own words and have it vetted and standardized by a commercial lawyer, contract-savvy paralegal or anyone experienced in contract admin.  Fact is, you have viable options here.  No one has to play the “party-of-the-first-part” game.  This isn’t a Marx Bros. sketch.  A legally binding contract can be short, sweet, un-evasive, simply drawn and still do its job.  And remember, the cost in time and money is nothing compared to the time and money costs of disastrous no-contract “misadventures”.

Lastly…

• The contract as sale impediment…We all want easy, breezy sales with no negatives, hiccups or roadblocks.  Right, and I also want to win the next Lotto Max mega-jackpot!  Look, I’ll be uncategorical and unsympathetic about this.  Any supplier of goods or services who thinks that vendor sales potential will be jeopardized by the formality of asking a customer to sign-off on a print rendering of the details of the proposed sale is in desperate need of an attitude change.  Think about it.  If you’re going to become my customer, it’s because you value the product or service I’m going to supply.  If I ask you to confirm and sign a clear, simply-executed, non-controversial quote, deal memo or contract that articulates what’s being supplied, at what price, when, where and governed by which industry-standard terms and conditions, are you really going to balk?  Are you going to refuse my confirmation request and take a long walk, seeking out a different vendor who “can’t be bothered” with businesslike certainties?  I don’t think so, and the reason I say that is because you already understand that the prophylaxis offered by a contractual process cuts both ways.  It protects supplier and buyer.  But, and I mean this, if you do take that long walk, then I’m going to let you.  I’m not going to run after you as your stride toward the exit.  I’m not going to compromise my requirement for a contractual safety net just to make you a non-compliant “customer”.  Instead, as you walk out my door, I’m going to breathe a sigh of relief because I’ve just had a narrow escape with someone who, from the very get-go, showed every indication of becoming a problem client somewhere down the road.  In this scenario, the contractual process becomes a potent customer-qualifying tool.

Paper Wraps Rock

I’ll call it “the problem of the rock”.  A customer has refused to pay and, in doing so, has dropped a dispute in your lap.  That’s the rock – the rock that’s now balancing on your knees.  What happens next?

Sorry to be the bearer of bad tidings, but you can’t just pick up the phone, call your client – whom we’ll call “Mr. Rockmeister” -- and say: "Listen, Rockmeister, you owe what you owe, so pay up!"  That's not going to fly.  No way, no how.

In the previous post, I asked you to look at a customer relations landscape where the client is in the right and the rock is a legitimate objection.  Now, let’s do a 180 and take other position -- the hair-on-fire view.  In this scenario, Mr. Rockmeister is wrong.  Dead wrong.  Wrong in refusing to pay, and wrong in platforming a meritless, malicious or mistaken grumble.  The Rockmeister’s rock exists to break your head, nothing more.

What do you want?  You want to get paid.  And if at all possible, you want to keep the customer, too.  Good plan.  But if you want your plan to work, what you can’t rely on now is a he-said-she-said encounter.  Precious little will be proven by the counterpoint of charge and counter-charge.  No cash will voluntarily change hands in your direction.  If the text of a vendor-client conversation consists of lobbing verbal mortars that say “no, I didn’t” and “oh, yes, you did”, that won’t buy bupkis at the A&P (although it may run up your long-distance bill and raise your blood-pressure commensurately.)

The point I want to make here is that verbal argument has efficacy only when it’s backed up by hardcopy.  Documentation.  Documents with details.  Documents with signatures.  Email strings that serve the same purpose.  It’s all about proof, certainty and what the law allows.  ”Paper wraps rock.”

You’ve heard this said before, I’m sure:

“The race isn’t  always to the swift nor the battle to the strong – but that’s the way to bet.”

I agree.  And I’ll add to it…

If a client is merely blowing smoke, even if it’s only smoke-in-error, then winning the commercial argument is always a better bet when there’s a contractual papertrail to wave around.  That’s the moral and legal highground.

It’s a commercial paradigm.  Sometimes you must have a documentary narrative to get paid.  What does that narrative do?  Well, it “narrates” the commercial tale.  The papertrail supporting a product sale or service order is a way of recounting the history of that transaction.  It’s factual, coherent, tactile and incontrovertible.  Ka-ching!

Suppose you own a newspaper.  You make money by selling ad space.  Assume you’ve run a pricey series of ads on the basis of a verbal agreement with Advertiser X.  But now Advertiser X doesn’t want to pay.  Maybe Ms. X claims that no agreement was ever reached.  Perhaps she says she phoned back and cancelled the order.  Well, who knows for sure?

What’s the problem here?  It’s all talk-talk -- unless you’ve got all your calls taped.

The litmus test of any dispute between supplier and client is what's in the papertrail and what a supplier can prove -- in court, if necessary.  If that supplier has a bulletproof case backed by substantive documentation (eg. a contract or deal memo; fax/email confirmations; shipping, delivery and service sign-offs; invoicing, etc.), then it can go the distance in trying to get paid.

But alas, if the opposite is true -- if the supplier has done the deal on a verbal basis only, has no paper with which to wrap the rock and cannot credibly prove to the customer or a court that said customer has received proper supply or service and now owes precisely what the supplier says is owed -- the end comes pretty quick and nasty.  It’s not a happy end.

The client shuts the money-door, and the vendor is left with no way to open it.  The vendor wins the rock – but that’s about all.

No cash.  No good.

A GOOD DAY IN THE “CUSTOMER BEEFS” DEPARTMENT

It’s a contentious world out there.  As any newspaper on any day of the year will amply prove, we are an argumentative, disputatious and litigious lot.  To be human is to agitate and complain.  So it’s not exactly a stupendous newsflash that in the edgy world of business we often fall victim to disagreement.  Do we have to like it?  No.  But there’s no point in sticking our heads in the sand, either.

Conflict is a normal, ubiquitous part of commercial life – and, okay, it’s not much fun.  When a supplier and a customer tumble into a dispute, it’s hard to pretty-up the process.  A pig in lipstick remains a pig -- until we change the channel.  Like any human difference of opinion, the only way to get through a nervy business hassle is to go through it.  How a vendor and a client accomplish this “going” will determine much about the eventual outcome.  If there’s a forum for businesslike discussion and a fast-track for good-faith resolution, a dispute will dissolve quickly.  Supplier-customer harmony will be restored and a stronger business bond may even result.  But if there’s undue argy-bargy, and especially if it’s intemperate and “personal”, the likely result will be corpselike.  “Alas, poor Yorick!”… The commercial relationship will be D.O.A.  Forget the thumping CPR.

No matter the outcome of a vendor-client quarrel, a supplier company with its ears and eyes open will learn a great deal from customer complaints and become a better-managed business because of it.  Unhappy customers with legitimate gripes are canaries in the coal mine of every profit-driven business.  They focus urgent supplier attention on a range of operational shortcomings, whether these concern a product damaged on delivery, a service that didn’t do what it was supposed to do or something as innocuous as incorrect tax coding in an invoice batch.  Ferreting out those pesky procedural glitches with a little intestinal fortitude and a willingness to make amends when in the wrong can create valuable opportunities for company improvement, as well as renovated customer confidence.

Having a bad day in the “Customer Beefs” department?  Think again.  Maybe it’s really a “good” day.  Gotta love those brickbats. They may hurt at first, but they’re all lessons-at-school.  Good lessons, good business education.  Good day.

CONFUSED ABOUT CASH?

CONFUSED ABOUT CASH?  LEAVE THE “SALESTHINK” IN THE SALES OFFICE.

One of the main confusions in the small and medium-sized business sector is the result of “salesthink” applied to the task of getting paid.  Salesthink occurs when a business is operated solely on the basis of sales ideology – to the exclusion of other ways of thinking.  And it’s certainly the wrong prism for looking at payment problems.

Getting paid is a hardnosed proposition when voluntary payment is what’s not happening in your business.  Time-honoured scraps of selling doctrine like “the customer is always right” or “don’t aggravate the customer” are unhelpful and misguided when applied to receivables.  Let’s explode the first fallacy right now.  The customer is definitely not “always right”.  In fact, customers are often totally and spectacularly wrong.  Some misunderstand the contracts they’ve signed or the nature of the supply or service they’ve secured; they need patient education.  But others are just downright dishonest and dissembling in their bobbing and weaving over payment.  As a result, “aggravating the customer” is sometimes an inevitable and a necessary consequence of following-up vigorously on payment issues.

After all, who’s really aggravating whom in the non-payment scenario?  If a supplier is experiencing needless and unwarranted payment aggro, then turnabout’s only fair-play.  If non-paying customers create a situation where they feel “aggravated” by a supplier’s efforts to get paid, whose fault is that?

Feeling guilty for chasing your own money?  Don’t.  Ever.

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