RE: Giving Cash Rebates to stay in business

RE: Giving Cash Rebates to stay in business (Full Version)

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NorthernGent -> RE: Giving Cash Rebates to stay in business (12/20/2008 3:08:53 PM)
quote: ORIGINAL: OrionTheWolf The customer he is saving has not performed poorly, just made the wrong decision in his banking. What.....banking decisions aren't part and parcel of performance? quote: ORIGINAL: OrionTheWolf My client was given access to his customer's financials and project cost reports before he made the decision to rebate this cash. Well yeah, if there's £25k in it he'll bring out the china for the occasion. As said to CL, you'd have to get right into the business's activities and processes to understand why he's making the 'wrong' decisions. A few reports aren't going to tell the story.

celticlord2112 -> RE: Giving Cash Rebates to stay in business (12/20/2008 3:24:24 PM)
quote: As said to CL, you'd have to get right into the business's activities and processes to understand why he's making the 'wrong' decisions. A few reports aren't going to tell the story. Question: How many businesses do you/have you run, that you have such instant insight into the quality of the business decisions of others?

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/20/2008 3:43:37 PM)
quote: ORIGINAL: celticlord2112 quote: As said to CL, you'd have to get right into the business's activities and processes to understand why he's making the 'wrong' decisions. A few reports aren't going to tell the story. Question: How many businesses do you/have you run, that you have such instant insight into the quality of the business decisions of others? See Orion's 'wrong decision' post.

celticlord2112 -> RE: Giving Cash Rebates to stay in business (12/20/2008 3:47:06 PM)
quote: ORIGINAL: NorthernGent quote: ORIGINAL: celticlord2112 quote: As said to CL, you'd have to get right into the business's activities and processes to understand why he's making the 'wrong' decisions. A few reports aren't going to tell the story. Question: How many businesses do you/have you run, that you have such instant insight into the quality of the business decisions of others? See Orion's 'wrong decision' post. That is not an answer. How many businesses have you run? You speak authoritatively on this subject--I would like to know the manner and substance of your authority.

OrionTheWolf -> RE: Giving Cash Rebates to stay in business (12/20/2008 4:59:37 PM)
The decision was to rely on a credit line that was withdrawn due to the financial fiasco going on. Yeah bad decision made by about half of the companies here. That being the only bad decision my client could see this guy has made, he decided to assist with cash flow to keep this guy in business. Gaining new customers in this particular business is not so easy, but you already knew that. May a suggest a sojourn into the field and observations that may better assist you in understanding this. The alternative was to keep the $40,000 and watch the customer go out of business. That would mean at least an $800,000 drop in sales this year. By investing in the customers future, my client made an investment in his own. It could have been a loan, but that would not lower my clients taxes just below the next threshold and my client cannot have an investment in his customers due to governmental projects being done. Beyond this I cannot give more information, but I will keep everyone informed as the year goes by on whether this wound up paying off or not. quote: ORIGINAL: NorthernGent quote: ORIGINAL: OrionTheWolf The customer he is saving has not performed poorly, just made the wrong decision in his banking. What.....banking decisions aren't part and parcel of performance? quote: ORIGINAL: OrionTheWolf My client was given access to his customer's financials and project cost reports before he made the decision to rebate this cash. Well yeah, if there's £25k in it he'll bring out the china for the occasion. As said to CL, you'd have to get right into the business's activities and processes to understand why he's making the 'wrong' decisions. A few reports aren't going to tell the story.

celticlord2112 -> RE: Giving Cash Rebates to stay in business (12/20/2008 5:03:04 PM)
quote: Gaining new customers in this particular business is not so easy, but you already knew that. Does he? From his responses to me, I gathered he considered customer acquisition to be a piece of cake.

LadyEllen -> RE: Giving Cash Rebates to stay in business (12/20/2008 5:29:00 PM)
quote: ORIGINAL: NorthernGent Assuming your accounting regulations are anything like ours, a cash rebate wouldn't wash. Essentially, this is a gift and it could be construed as a bribe. There are strict guidelines around gifts here, that are underpinned by a code of customer ethics aimed at ensuring all customers are treated fairly; which blatantly isn't the case in the OP scenario. Quoi? UK customers regularly seek rebates and UK suppliers regularly offer discounts. These are not gifts and they are not bribes - they are competitive factors in contractual negotiations. There is no crime here. Whether such rebates/discounts are expressed by way of credit notes or by refund cheques or even cash is irrelevant except as the normal means of payment is expressed in the sector concerned. If such were illegal, then the car dealers of the UK must be charged immediately; they after all offer several thousand pounds cashback on the purchase of a car. And where do you get the idea that there is a strict code of ethics as if it governed everything? Some companies have such codes - or at least their PR does, but it is by no means the majority, still less universal. Whilst gifts to the likes of buyers are problematic under such codes, the offer of a discount to the purchasing company is not something I have ever heard of being prevented thereby. E

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/21/2008 2:53:34 AM)
quote: ORIGINAL: celticlord2112 You speak authoritatively on this subject--I would like to know the manner and substance of your authority. You can take it from me that I have worked enough years in the business environment to know what I'm talking about.

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/21/2008 3:03:19 AM)
quote: ORIGINAL: OrionTheWolf That being the only bad decision my client could see this guy has made This can't be ascertained without your client auditing the business, which renders the decision to give the customer some money in the hope of keeping him afloat, a blind decision. The chances are that where there's one bad decision, there'll be others. I was going to say the client is a risk seeker, rather than being risk averse, in risk terms; you need to weigh up the risk, however, in order to be a risk seeker, and from what you've relayed here your client is guilty of not undertaking the necessary risk analysis. quote: ORIGINAL: OrionTheWolf The alternative was to keep the $40,000 and watch the customer go out of business. That would mean at least an $800,000 drop in sales this year. I fully understand the logic. I think his methods are slapdash, however, as they do not account for the probability of the customer staying in business (based on the customer's internal workings). I certainly wouldn't have done it without gaining a sound understanding of the customer's internal workings, but as you mention further down - the proof will be in the pudding.

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/21/2008 3:22:26 AM)
quote: ORIGINAL: LadyEllen UK customers regularly seek rebates and UK suppliers regularly offer discounts. Discounts and cash rebates are offered on a purchase. This is not the case in Orion's scenario - the client has simply handed over a cash sum, which is a % of all purchases during the year. quote: ORIGINAL: LadyEllen If such were illegal, then the car dealers of the UK must be charged immediately; they after all offer several thousand pounds cashback on the purchase of a car. Cashback is an upfront discount on a purchase, i.e. an inducement to purchase, as opposed to a cash payment at the end of the year on the grounds that a customer needs it to stay afloat. They are not one and the same. quote: ORIGINAL: LadyEllen Some companies have such codes - or at least their PR does, but it is by no means the majority, still less universal. Any company that is audited, will be expected to operate under accounting regulations that govern gifts and donations.

LadyEllen -> RE: Giving Cash Rebates to stay in business (12/21/2008 6:43:48 AM)
As managing director, I am at full liberty to do what the hell I feel is best (within the law) to fulfil the aims of the company. If I feel tomorrow that smashing all the office furniture with hammers and throwing the PCs out of the window will help to fulfil the aims of the company - that is my decision to take. If I feel tomorrow that allowing a certain customer - lets say BMW, an extra 60 days credit on what they owe us for payment at end December, will help to fulfil the aims of the company - that is my decision to take. If I feel tomorrow that providing BMW with a full credit for all outstanding invoices due at end December and January will help to fulfil the aims of the company, that is my decision to take. So how you find anything odd in what the OP discusses I do not understand. What the OP discusses is the provision of a credit as per the last example or the provision of a rebate. Again, as managing director I am at full liberty to agree rebates with customers as I see fit in fulfilling the aims of the company. The level of rebate is up to me to decide, whether that is 1% of annual spending or 100% or anything in between. This is not a gift or a loan - it is a commercial decision which I am at liberty to make with a view to the future commercial success of the company. I am answerable only to the law - and I have broken no law here in what is normal day to day commercial decision making - and the shareholders for my conduct and the overall performance of the company. As for auditing, which applies to companies over a certain size only, this does not in any way affect the ability of the directors thereof to determine pricing, discounts, rebates, credit periods or any such commercial factor as is discussed in the OP or here. To have a law which affected commercial decision making in this way would be wholly incompatible with the market economy. Now, unless you can quote the particular provisions of the Companies Act as amended or other legislation to support your view that the exercise of powers by company directors in determining the marketing and commercial positioning of their company in these regards according to the aims of their companies are illegal, we should perhaps leave it there? The law of contract could be an issue of course; it is not possible to change the conditions of a contract once that contract has seen full performance from each party, as may be the case in the OP - although it is within the powers of the directors to agree a credit in part or in full for the contract concerned. However, directors are at liberty (with the agreement of the customer) to amend a contract which has not yet seen full performance whereby a rebate/discount or longer credit term might be arranged, or to make a new contract whereby a rebate/discount or longer credit term might be arranged in respect of agreed future spend by the customer. It is for the directors to decide at which point a rebate/discount might be applied, once the existing contract is amended or the new contract concluded - whether that is at a certain point in time (day 1 to day 365 as is commercially desirable), following on from a certain spend ($1-00 or $1 million) or other criterion. E

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/21/2008 10:45:00 AM)
quote: ORIGINAL: LadyEllen As managing director, I am at full liberty to do what the hell I feel is best (within the law) to fulfil the aims of the company. No you're not. You have accounting regulations, health and safety regulations etc to adhere to. In the event you do not, you will have a fine (at best) on your hands. quote: ORIGINAL: LadyEllen If I feel tomorrow that smashing all the office furniture with hammers and throwing the PCs out of the window will help to fulfil the aims of the company - that is my decision to take. As you're not breaking any regulations, you are indeed entitled to smash up your business. This is an entirely different matter to treating one of your customers favourably, and, as stated, the cash payment could quite easily be construed as a bribe -considering the flimsy logic of: "we want to keep you in business". quote: ORIGINAL: LadyEllen If I feel tomorrow that allowing a certain customer - lets say BMW, an extra 60 days credit on what they owe us for payment at end December, will help to fulfil the aims of the company - that is my decision to take. We are not talking of extended credit days; we're talking of handing over a cash payment, which is far removed from your example. quote: ORIGINAL: LadyEllen I am answerable only to the law - and I have broken no law here in what is normal day to day commercial decision making - and the shareholders for my conduct and the overall performance of the company. Your shareholders will be fully entitled to demand to know why you're jeopardising their investment by treating one of your customers favourably (with the possibility of losing other customers when they find out what's going on). Were I an investee in your company, and you were undertaking such practices, I'd be selling up and investing elsewhere.

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/21/2008 1:28:40 PM)
quote: ORIGINAL: LadyEllen If I feel tomorrow that smashing all the office furniture with hammers and throwing the PCs out of the window will help to fulfil the aims of the company - that is my decision to take. You have a strange attitude for someone responsible to shareholders. I doubt they'd be pleased when they find out you're smashing up their equipment - I'd estimate you'd be out of a job.

LadyEllen -> RE: Giving Cash Rebates to stay in business (12/22/2008 3:47:19 AM)
Thank you for such a fine and categorical refutation of my points and the stringent avoidance of the main one. It would seem you dont have a clue what youre talking about, as was surmised by another in this thread. E

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/22/2008 4:01:51 AM)
quote: ORIGINAL: LadyEllen It would seem you dont have a clue what youre talking about, as was surmised by another in this thread. That's an interesting approach, Ellen. While I'm engaged in discussing the points, you're resorting to sweeping statements without explanation: this speaks volumes.

LadyEllen -> RE: Giving Cash Rebates to stay in business (12/22/2008 4:05:08 AM)
Sorry, but you didnt answer the main point, merely commented on the lead ups and circumstantially similar situations, and you provided no evidence for why I might not do any of the things I described as long as I stay within the law. It was a non answer, indicating to me that whilst you can talk around the subject, you are unable to comment directly upon it. E

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/22/2008 4:12:40 AM)
quote: ORIGINAL: LadyEllen Sorry, but you didnt answer the main point, merely commented on the lead ups and circumstantially similar situations, and you provided no evidence for why I might not do any of the things I described as long as I stay within the law. You know what Ellen, you should highlight the parts of the post that you want others to ignore and the parts you want to be considered as the 'main points'. Better still, why don't you exclude the parts you believe to be irrelevant? That would make sense eh. Well, anyone answerable to shareholders, which by your own admission you are, who thinks she can go 'round smashing up their equipment, is not quite grasping the relationship between owner (shareholders) and employee (you). Go ahead and smash up their equipment, Ellen, and you'll soon have your 'evidence'.

OrionTheWolf -> RE: Giving Cash Rebates to stay in business (12/22/2008 2:58:00 PM)
~FR~ As an added portion, my client has added an older business tactic as well. He offers a 2% discount if outstanding invoices are paid within 10 days, rather than in 30 days.

NorthernGent -> RE: Giving Cash Rebates to stay in business (12/22/2008 3:24:16 PM)
quote: ORIGINAL: OrionTheWolf ~FR~ As an added portion, my client has added an older business tactic as well. He offers a 2% discount if outstanding invoices are paid within 10 days, rather than in 30 days. Yes, the idea being that a 2% discount is offset by the gain engendered from narrowing the working capital cycle. In contrast, handing over a cash sum is detrimental to the working capital cycle.

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