$200K Can Turn into $700K when Compensating Returnable Pallets
Peter Dickey
B2B Support | Looking at Pallet Control through the Management Lens i.e..... Finance & Operational Strategy | Software & Product | Full suite Analytics for Pallet Pooling.
When Compensating Pallets to a Provider, it is important to understand and Manage this process tightly, particularly if you are a Small Business. If you are a larger Corporate, Business Managers and Directors be aware. This is a black hole for Financial loss.
A Power Mismatch is clearly apparent particularly when a Small Business or Family Enterprises are involved, and extends to larger Businesses and Corporates in the form of the knowledge gap and, Strategic Partnerships where both the Provider and Customer have Trading Partners in Common.
Despite the wording within the Terms of Trade, compensating for lost pallets, it is important to understand that generally Pallets are not lost. The equipment in question is likely to be in the possession of the Provider, or another account holder, or an unauthorized user.
Returnable Pallets that you cannot account for, under the signed and agreed Terms of Trade your Legal Liability is for full replacement cost, plus all related accrued hire, plus Interest if negotiations are protracted.
At $35.00 per pallet plus GST, it is not so much the Compensation that hurts It’s the Accrual. When dealing with Lost pallets the backdating is normally on average 2-3 Years. Therefore, any extended Compensation negotiation is likely to be added if not concluded quickly.
So here are some tips to help when negotiating a Pallet write off, of substance.
Written Loss declaration should be submitted quickly. As the Suppliers Terms & Conditions are complex and the Monetary Value is significant, we suggest that you channel this through your Legal Counsel.
Effective Date. This is important. Be very clear that, within the Declaration of loss, the effective date is the date of the letter. This means if the Loss Declaration negotiation is protracted, you are not liable for ongoing hire charges whilst the matter is in negotiation.
Time Frame … Set a date of no longer than a month to finalise and close the Negotiation; and if exceeded withdraw and seek immediate Legal support. There is significant legal precedent to cover unreasonable charging and in addition, extended Compensation negotiations whilst the clock continues to tick.
Provider's approach to penalties can lead to ballooning of the related debt, so it's in your best financial interests to invest in the appropriate legal Support and have a clear well-Managed Process that is visible to all Management including Board/Business Advisory.