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Random Thoughts (Blog)

Truth in Billing

Posted on November 22, 2011 at 4:45 PM

I dealt with an issue last week that seemed to ultimately boil down to an unwinnable, lose-lose outcome for me. I could either dig in because I was right, or give in to appease a customer. And afterwards while going over everything and having a reflective, “What can we learn from this?” moment, I’m still not totally sure. While I was reminded of the importance of some things that I should have already known and should have done, the ultimate “solution” to the problem is something I really consider distasteful and unpalatable.


The snowball started its downward descent two weekends back when I e-mailed a client their final invoice. In the e-mail I recapped some of the many – MANY (ie: this home is built on the cursed and scorned burial ground of several different Indian tribes and Salem witches!) – issues we experienced on the job that accounted for a lot (like days) of unforeseen labor. Thus why my original proposal is clearly labeled “ESTIMATE.” But the system is now complete and I hope it provides years of entertainment and pleasure and thanks for selecting us, blah blah.


The client called a bit later…Unhappy. He felt my bill was “outrageous” and wanted me to come up and go over it with him “line-by-line.”


Of course, I wanted to get paid, and that meant agreeing to meet with him -- which meant another 45 minute one-way drive to his home. And while I’m utterly confident in my billing and my ability to go over, discuss and defend my bill – for this job I have roughly 30 worksheets detailing all the work that we did each day, who was on the job, and the parts we used down to the last bell cap, so I lack nothing for documentation – this is never the most pleasant of processes. I did not become a custom installer because I love a good billing confrontation. And in my time at CTA I’ve only had to go over an invoice in detail on one other occasion; and that was for a $250,000 job where the guy just wanted to confirm the previous deposits he’d made and the changes that occurred to his system during the near year of construction.


As I’m driving to his home, I’m kind of mentally preparing for the discussion; reminding myself to stay calm, let him talk, listen, don’t be reactionary, Use the Force, Luke, etc. So I get to the house and the client starts off by saying that he understands that we’re tied at the hip now and that he wants me to continue servicing him and that he knows he is going to need me for years going forward. This seems like a mental step in the right direction. In not so many words, he's telling me that he doesn’t want to kill the Golden Goose today, because he’s gonna need some of my Goose-powers to keep his system working going forward.


So we start going through the bill and it appears the crux of his issue is with an entire surround sound system that was not on the original, 5 months ago proposal, but that was added mid-project.  A system that the home owner had asked the builder about, the builder had told me to do, and that I did. Bing-bang-boom! I'm thinking. However, the homeowner never realized just how much this “Just do it!” item was going to add to the final line.


Now, admittedly, I should have known better. I should have known that clients NEVER remember all those little "Just do it!" changes when it comes to getting and paying their bill. They remember the original, MUCH smaller number you wrote down for them -- and somehow ALWAYS seem to keep in a handy folder somewhere, ever ready to dramatically whip out and point to, while saying, "See this number?! That's what I'm expecting to pay!" -- WAY back at the start of the job. And while they might understand that adding ten $750 things equals $7500 tangentially, they don’t REALLY associate it with actually adding $7500 to THEIR bill.


This was definitely partly my fault. I *should* have worked up a proposal for the new work, got him to approve it and then got that change order signed BEFORE doing the work and WAY before showing up weeks later to get the check. My bad. Stand on the shoulders of Sciacca, other installers, and learn so that you don't have to repeat my errors.


Then, brandishing all of the pages of my bill in his hand, he says, “Look, I just have to take your word that you did the work that you said you did.”


I pulled out my folder with my stack of 30 worksheets. “The work is all here. I can go over all of it with you. Each day, exactly what we did, which of my employees were here and for how long and the parts we installed.”


He waved the offer away and said, “Look, you’re saying the balance remaining is 17 thousand. I’m offering you 15.”


“I'm not just 'saying' you owe me that much. I can detail for you every penny of that 17 thousand dollars; every part, every hour. It isn’t a figure that I just conjured. You are just arbitrarily picking a lower number because you want to pay less.”


“Yes, I am. I want a deal.”


And this is one of those issues we face in the custom installation world; the perception that we have SO much money in a system, that there is *literally* thousands of dollars to shed from the bill. And that our price isn’t really a price but rather some suggestion or starting off point.  I'm not a car dealer and my invoice -- especially for merchandise that has already been installed and services already rendered -- is not open to your horse-trading.


People go into stores like Best Buy, Wal-Mart, and Home Depot every day, see a price and then, you know, pay it. They don’t question it. They don’t take an armload of stuff up to the counter and then say, “Well, I think this should be less, so I still want ALL of this stuff, but I’m only gonna pay you this.”


They also don’t’ expect to have a van load of gear delivered to their home after paying only a small, upfront percentage of a deposit, use the gear for some length of time, make changes and additions and then bill-withholding demands of, “Well, I’ll pay you if you just come back one more time and show me how to do this.” However, it is almost unheard of for a company to be able to demand -- and receive -- full, 100% payment of all materials prior to install. (After asking for a 75% deposit from one client he told me, "I don't give ANYONE 75%! You can Google me; I pay my bills!" I responded, "I already have Googled you. And you can Google me as well; you'll see I've been around for a while and am not planning on going anywhere with your money.")


Why is it that our industry is so devalued in people's eyes that many of them feel that it is their right to barter with us over pricing? And while homeowners understand that we’re IN business to make money -- and they want us to remain in business so we can be around to help them in the future -- they just don’t necessarily want it to be made on THEIR job.


These kinds of losses – real, monetary losses – lurk around every corner in the custom installation industry. There are the cost of doing business losses like the money paid for employee taxes and insurance and vehicles and gas and tools and business licenses and shipping on merchandise and on and on. The cost of travel time and load in/load out and unforeseen obstacles and "would you mind just doing this real quick while you're here?" and other random bits of “I can’t justify billing them for that.” Or the costs of write-downs and those “just come back one more time” and it’s just not worth fighting, let’s just take our losses, get our check, and move-on.


I consider myself a very honest person. I report all of my taxes, I’ve never shoplifted, I’m not gonna say you’re not here when you’re really sitting right next to me. All that stuff. And I am the same way with our billing and invoicing at Custom Theater. My partner, Al, and I have this shared philosophy that you’re never gonna regret doing the right thing. And I think it is one of the small things that have helped us to stay in business lo these 15+ years. I like to give someone a bill or an estimate – a fair and honest write-up that reflects the work that we did and the equipment that we installed – and have them, you know, pay it.


Really, I don’t think my client actually cared about the total-total, final number on the bill. Sure, it was more than he was expecting, but had it been $30k or $10k, he would have still offered less. He only wanted a deal. All the hours of labor and miscellany that I wasn't billing him for didn't have any value in his eyes because they weren't reflected in the bottom line he was seeing. Usually though, this kind of negotiation happens at the front of a job; a time when you can choose to say, "Thanks, but no thanks. That's my price and we can either rework the proposal to be more in your budget or you can look at finding another installer." Now, trying to renegotiate a deal on the back-end leaves me with far fewer options; I could sturbbornly dig in, demanding the money that I could prove I was owed, or acquiesce, give up some profit and hopefully “invest” in a better future client-installer relationship.


Negotiated up front, is one thing. If you feel that you need to bargain for a better price, haggle away until you start to see my jaw clinch and I say, "Well, I think that maybe we're not the right company for you." But at the END of the job, it's totally uncool. And this shouldn't be a decision that is forced upon any business person. 


The obvious solution to me is that I could have just inflated my bill. Told him that he owed me $20k to start with and then said, "Hey, cause it's you, I'll knock some off! You're killin' me here, but I'll take $17k and call it a day."


But I don’t want to play games like that with the bill. That seems skeezy and underhanded. I don’t want to artificially inflate it so I can then artificially reduce it; telling you something is $1.25 then give you a 20% “discount” so you feel like you’re getting a special deal and I get the actual $1 that I really wanted all along. That seems like a manipulative trick. I want to just tell you that something ACTUALLY costs a $1 and you say, “OK. That sounds fair. Here’s a $1.” And I know that there are companies out there that do this; we've lost jobs to these bids where people will tell us, "But this company is giving me an XX% discount!" Never mind the system is inferior and the starting point was like some "original manufacturer's price marked down 85%!!!" you see at those cheesy jewelry outlets.


And even though he was saying, "A deal is only a deal if it's good for both parties," he wasn't listening to me when I was saying this deal that he was offering sucked for me. Instead he responded with, "You can't tell me you're not making $2000 on this job."


Ultimately, we settled at a number somewhere in the middle. Some would call it a compromise, but it certainly feels like a loss.

Categories: November 2011, CTA, Rants

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1 Comment

Reply Mark Buzzard
6:56 PM on November 25, 2011 
That sucks! I deal with this all the time. Did you ask him which part of his system he wanted you to remove for the $2000 short pay?