February 2020 - BAY OF PLENTY BUSINESS NEWS

12 BAY OF PLENTY BUSINESS NEWS February 2020
Mate’s rates pitfalls
CREDIT MANAGEMENT
> BY NICK KERR
Nick Kerr is Area Manager BOP for EC Credit Control NZ Ltd.
He is also a director of International Private Investigations Ltd.
Nick can be reached at nick.kerr@eccreditcontrol.co.nz
Mate’s Rates are more expensive than you think!
Of the debt situations that
I see in my role, one of
the more troubling yet
increasingly common occurrences
is F&F or friend and
family debts. These seem to be
more prevalent in the trades,
but we are seeing it across all
industries.
These kinds of debts have a
particular set of challenges that
we see time and time again.
They include emotional
leverage, lack of documentation
and lack of adherence
to policy. In this article, I’ll
look at why these issues are
often not conducive to good
business.
With F&F transactions, the
work done is often unquoted as
there is a feeling of “they will
look after me”. And it’s often
when the invoice arrives and it
is more than was expected that
the trouble begins.
Not having a quote – or better
yet a rage of quotes – means
that there is no defined value of
works, making it impossible to
ascertain what constitutes a
“good” deal.
If you keep business business and
friendship friendship, you should be
able to keep one without it being at the
expense of the other.”
Accurately assessing the
value of work done after the
fact, especially without market
comparisons, is very difficult.
Auditors and quantity
surveyors train for years to be
able to do this and still cost
overruns and miscalculations
occur even with this level of
expertise.
How then can a layperson
be able to know whether their
mate “Bob” has looked after
them or fleeced them. In cases
like this, it often depends on
the mood or current state of the
relationship.
No matter how selfless or
generous a person is, we all
have a ledger in our heads of
favours done for and received
from F&F.
And often the view on the
deal received has more to do
with the state of this mental
ledger, rather than the true
value received.
When preparing clients
for disputes tribunal hearings
against F&F it is always a
struggle to keep the focus on
the situation at hand without
“well I gave him this (water
blaster/ car part/ trailer, etc) so
should we mention that?
If a quote and terms are
received and accepted, these
uncertainties are removed
from the situation and it
doesn’t have to severely affect
or even possibly destroy the
relationship.
In larger organisations that
have dedicated accounts or
credit management staff, we
see accounts for F&F of the
owners or directors sitting
outside of the normal credit
procedure. This is usually because
there is a fear of causing
offence to the debtor or their
F&F within the organisation.
Depending on their involvement
in the credit management
procedure, the first
time that the director or owner
hears of the overdue account
could be 60 or 90 days down
the track, making for a more
uncomfortable conversation
than is necessary as the debtor
may not have received any
reminders that could have resolved
the issue.
In summary, if you keep
business business and friendship
friendship, you should
be able to keep one without
it being at the expense of the
other.
Just a thought.
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you to deliver endto-end
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services to help
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