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Old 05-11-2010, 01:12 PM   #1 (permalink)
 
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In house credit? Are we salons or banks?

This is only our second month in the tanning business in which we purchased an existing salon. I am puzzled on this one and was trying to figure out if norm in industry or just the way previous owner had set up for himself.

In house credit. So there are dozens of clients dating back as long as 5 years ago that were given in house credit because they did not have enough money on them at the time or worked out some type of payment plan with salon.

As new owners now every day we have accounts pop up that owe money. Some dating back years and others months. As the new owners we are asking now and insisting that people get caught up on their accounts that are past due. Some of these accounts again are from 2008 & 2009. The responses we get are "We do not remember the salon letting us do that or giving us credit."

Needless to see from speaking with the employees that have worked at salon for a long time, they informed us that for many clients they would allow them to pay part or some of what was owed that day if they did not have it all and continue to ask for it when they came in.

We cut off giving anyone in house credit any longer. Some of the clients are looking at us as the bad new owners. However, these are the same clients who have been paying off on accounts for years.

I get it. As long as the pay keep them happy. No way! We are not a bank. I can not goto local restaurant every week, expect to eat and drink, pay a portion of bill and tell them that I will be in at end of month or next pay period to pay off my tab.

I am wondering if there are many salons that will allow your client to buy a package today (that is giving them a discounted rate on tans due to quantity) and only pay 25-50% of what is owed. Then let them tan all month and hope and expect that they will bring in the other portion owed when they get paid at end of month?

Sounds like a bad idea to me unless I am holding some type of collateral. Maybe I am missing what is norm in industry, but in my other businesses if you want to purchase a product or service, you need to pay today. If you want a discount for buying in bulk, we will give to you, but not a payment plan.

It sucks that these customers were used to it in the past, but when I go through books and see over $1000 that is still owed to salon from past, not the road I want to travel.

I am missing something or just bad business?
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Old 05-11-2010, 01:28 PM   #2 (permalink)
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Re: In house credit? Are we salons or banks?

Just bad business. Do not run in house credit for anyone. All transactions must be paid in full at time of sale.

This is probably the major reason that you own the place now. It is hard to pay the bills and turn a profit when so many customers owe you money. To be successful in business you must be firm but fair.

Tell them that if they don't have money that you gladly accept credit cards. Set prices accordingly and offer a discount for cash which is actually what you would make on your pricing. Set the prices a little higher and offer a discount for cash. You can discount prices for cash but you cannot charge extra for fees imposed on credit cards as this is a violation of your merchant services contract. Also, you cannot refuse a sale under a certain amount or require a minimum.

I know that you see this everywhere that reads such as: $10 minimum on credit card purchases as an example but that is also a violation of your merchant agreement. You can be reported and lose your privileges for posting signs like that. Whenever I see this and coerced to pay a minimum charge then I just simply tell them that I also am a business owner and fully understand the rules of merchant services and that they are urged to process the charge to avoid such problems with their account. The charges get processed. Read the fine print.

Set up your pricing to cover all expenses and make what you want after the fees are assessed.

I realize that this was a little off topic but still pertinent information to the merchant.

No more in house credit.
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Old 05-11-2010, 01:36 PM   #3 (permalink)
 
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Re: In house credit? Are we salons or banks?

Well put and all part of same topic. Thank you.
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Old 05-11-2010, 01:43 PM   #4 (permalink)
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Re: In house credit? Are we salons or banks?

We don't offer credit. If you just bought the business the best thing you could do is forgive all of the past due money owed. You didn't count on it when you bought the salon and trying to collect it could cause you more harm than it's worth.
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Old 05-11-2010, 01:45 PM   #5 (permalink)
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Re: In house credit? Are we salons or banks?

^^^Yup, clean slate but no more credit moving forward.
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Old 05-11-2010, 01:49 PM   #6 (permalink)
 
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Re: In house credit? Are we salons or banks?

We use our in house feature sparingly- for our EFT clients.

If I run a mbrshp that has been declined the EFT client has 7 days to bring the account current or it is terminated/fees assessed.

I have one client that holds a base level mbrshp and always upgrades- he runs balances frequently for his upgrade charges and pays it every other time he tans.

I do not authorize my employees to use the in house feature, but it has been handy in many circumstances. In hansam's instance it obviously got out of hand and it is all too easy for an employee to issue credit because it's not their wallet.
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Old 05-11-2010, 01:51 PM   #7 (permalink)
 
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Re: In house credit? Are we salons or banks?

Quote:
Originally Posted by DB Hottie View Post
We use our in house feature sparingly- for our EFT clients.

If I run a mbrshp that has been declined the EFT client has 7 days to bring the account current or it is terminated/fees assessed.

I have one client that holds a base level mbrshp and always upgrades- he runs balances frequently for his upgrade charges and pays it every other time he tans.

I do not authorize my employees to use the in house feature, but it has been handy in many circumstances. In hansam's instance it obviously got out of hand and it is all too easy for an employee to issue credit because it's not their wallet.
I agree there is a time and a place for it. Not often though and owner approved. We didn't let get out of control as new owners, just trying to get in control without too much backlash. It will all come around with time.
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Old 05-11-2010, 03:32 PM   #8 (permalink)
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Re: In house credit? Are we salons or banks?

Wipe everyone a clean state like others have said and start fresh. Your the new owner there is no more credit. However everyone has a new fresh start. Do not turn clients away simply because they owed the old owner for tanning or lotions.
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Old 05-11-2010, 04:02 PM   #9 (permalink)
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Re: In house credit? Are we salons or banks?

Ditto to all the above - we do it on a case by case basis, sometimes, but usually for long term clients and just until the next time they come in (e.g. forgot wallet, ...).

Wipe the slate and no more credit going forward
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Old 05-12-2010, 06:32 AM   #10 (permalink)
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Re: In house credit? Are we salons or banks?

We opened a salon in a space where another guy went bankrupt in and ALOT of his old customers are coming back (good thing).

We've raised the prices in some areas and lowered in some. The point being is the bottom feeders are whining that we're higher than x was and they want the lower price.

I tell them, there's a reason he went bankrupt and we're operating the business more responsibly, pay the price or go to our comp.
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