Are you sitting down? Because I've got shocking news for you. That automatic banana polisher that you bought at 3 a.m. on Channel 388 really didn't cost $19.95. It was $19.95 plus $5 shipping and handling.
What does "... and handling" mean? Is this something that was invented by those people who sell banana polishers, Ginsu knives and other essentials on late-night TV? And how come whenever you buy one of those electric cat-painting tools from one of those commercials, the shipping "and handling" charges are a flat amount, like $15 or $25? Is it really that perfectly exact?
But the national marketers have figured it out. They've got it down to a science. They ship millions of robo-vacuums, laser-guided toenail clippers and organic hair-growing kits every year. They don't want to waste time calculating shipping costs. And they certainly don't want to pay for shipping costs, either.
These guys are always looking to shake a few more pennies out of the sale. That's because producing a gumball-cleaning device for $1 and selling it for $19.95 is just not profitable enough. So what do they do? They round up the shipping and they charge for "handling," too - all in a nice flat fee.
What a bunch of ruthless, cold-hearted, callous jerks! Now that we got that out of the way, how can your clients be just like them? And how can you get the credit?
As a public service, I thought I'd walk you through how your clients can calculate the "handling" costs in their businesses. It's a great service you can provide.
First, take the annual cost for people working in shipping and add it to the annual cost for people working in your office. Then add to that the annual cost of supplies and postage needed, plus the annual cost of their golf club membership. And don't forget the annual cost of that vacation home in Margate. Now they've got the total handling cost. Next, divide this amount by the number of products shipped each year to reach the cost per product shipped.
Finally, plug this amount with whatever number necessary so you can arrive at $25. Because most people pretty much pull this number out of the air anyway. And there you have it: your clients' handling charge.
Are your clients wary of doing this? They shouldn't be. No customer is going to ask them for an actual calculation of this cost, especially if it's in the range of what they're used to paying elsewhere. Some of their customers may balk. If this becomes a sticking point, then tell your client that they can use this opportunity to show how gracious they can be. They can show their customers their good faith and "how much they value their relationship" by reducing or waiving the fee.
Let's face it: Most customers, like you and me, will shrug and accept the charge. And if that's the case, then there's an extra $25 your client can be earning per shipment. That may not sound like a lot, but if you do just 10 shipments a week, that's an extra $13,000 per year. That should cover at least 10 percent of your annual fees, right?
Now that you're clued in about these handling charges, you've got to ask your clients if they're clued in, too. If we all know how the system works, then why are your clients still paying them? The next time they get this billed by a vendor, instruct them to jump up and down. Scream. Complain. Threaten to take their business elsewhere. You know, the way they treat you when you present them with their estimated quarterly taxes.
Tell them to be penny-pinchers. I bet many, if not most, of their vendors will cave and reduce or waive the charge. That results in even more savings for your client.
Now they can take that $25 and buy another banana polisher.
Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsized businesses.
(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.
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