Customer Service and the Accounting Department (#273)
/In this podcast episode, we discuss the role of the accounting department in customer service. Key points made are noted below.
This episode is based on something that happened to me a couple of weeks ago, and I thought it provided a good lesson about how accounting can improve relations with customers, or screw them up.
The Need for Customer Service
But first, for the general concept. Some organizations focus almost exclusively on customer service, because their main interest is in the lifetime value of a customer. They don’t just want to generate a profit from the current transaction – they want customers to keep coming back, over and over again. And on top of that, they want customers to be so happy with them that they keep sending out recommendations to their friends. In short, their target is to have such over-the-top service that customers are completely amazed by it.
There aren’t very many companies that really attain this level of service, but you probably have a few of your own. I like to focus on airlines and hotels. So, Thai Airways and Singapore Airlines are awesome, and if I have a choice, I fly with them. But the real champion for me is the Mandarin Oriental hotel chain. They’re fabulously expensive, so we can’t stay with they very much, but the service level is incredible. Just one example out of at least a dozen is what I like to call the grape wars.
We were staying at the Mandarin in Bangkok, where there was a complimentary fruit bowl in the room. So, I ate all the grapes in the fruit bowl – and then went downstairs to see what my wife was up to at the pool – turns out she was having a complimentary ice cream sundae. And then I went back to the room after an hour, and found that the grapes had been replaced. So I ate them again. And then went out to lunch. When we got back, the grapes had been replaced – again. And so on. All day long. As near as we could tell, as soon as we left the room, ninja housekeepers snuck in through the ceiling, slid down on silk ropes – because that’s what ninjas do – and replaced the grapes. There’s no other reasonable explanation. Based on that level of service, we routinely check to see if there’s a Mandarin Oriental hotel anywhere near where we’re planning to travel. Which is exactly what they want, of course.
Now I know what you’re thinking. Isn’t this podcast about accounting? Or maybe, why didn’t I eat some other fruit in the fruit bowl? As for the first question, we’re getting there, there is an accounting point. As for the second question, oranges are messy.
Now, for the more specific customer service experience. My wife and I have been scuba diving for many years, and decided to finish up after just one more trip, for medical reasons. My wife has gotten at least 15 ear infections from diving, and I’ve started having trouble equalizing my ears underwater. So for our 30th and final trip, we decided to go to Wakatobi, which is a resort located in Indonesia, and which is routinely listed on surveys as one of the best dive resorts in the world. To be accurate, we actually bypassed the resort and went straight onto their liveaboard dive boat, which is the Pelagian, and which is routinely on the top ten lists of best dive boats in the world.
And the customer service was first-rate. A good way to see how successful they were is that, of the nine divers on the boat, six were returning for at least the second time, and every one of those six was scheduled to transfer back to the Wakatobi resort and stay there for another week. Which is pretty much unheard of.
Which brings us to the event. We finished up a week of really great diving and returned to the Wakatobi resort, where we disembarked and went over to their restaurant facility for breakfast, while they transferred our luggage to the pier. Which is where they dropped my suitcase into the ocean. The one with my laptop inside, that contained a few hundred underwater videos from the trip. Or to be more precise, they put the suitcase down on the pier, but made the mistake of putting it down on all four wheels. So while no one was watching, it rolled away on its own and went over the side. This was obviously a perfectly honest mistake, and I can’t really fault them for it. It’s not like they were having an Olympic hammer throwing event and trying to see how far they could chuck everyone’s luggage off the end of the pier.
Once they fished the suitcase out of the ocean, their customer service function really got into high gear. They had a staff person parked on top of the laptop, blow drying it with a hair dryer – no luck, it was dead. They pulled all of my wet clothes out of the suitcase and ran them over to their cleaning facility, which returned everything in a half an hour, cleaned and pressed, and even in a Wakatobi tote bag. And two managers apologized profusely, and offered to pay for a new laptop. And at the end of a nearly three-hour flight back to Bali, they had another person waiting for us at the gate, who apologized again. This is all pretty amazing customer service – and overall, I definitely have to recommend them to anyone who wants great service and an excellent diving experience.
The Involvement of Accounting in Customer Service
But that still leaves the accounting issue. I bought a new laptop and e-mailed Wakatobi a receipt for it. Through this point, I’d only been dealing with their customer service staff, which was obviously quite good. The trouble is, their accounting department was responsible for reimbursing me, not the customer service department. And so far, I’ve been waiting 10 days for payment. Now, international bank transfers can take some time, but even so, it’s pretty apparent that there’s not the same sense of urgency in their accounting department.
So, enough of my combination of mostly complimenting and somewhat bashing Wakatobi. The actual point of this podcast is that the accounting issue I’ve just described is probably nearly universal. The only goal of the customer service department is to delight customers, while the accounting department is more concerned with keeping costs down and being as efficient as possible. This means that any payments promised to customers for things like refunds and reimbursements will probably be delayed in order to be more efficient, which drives away customers.
Customer Service Activities for Accounting
What would work better? Probably a different measurement system for the payables department, where the expectation for making payments to customers needs to be in minutes, not days. That means dropping everything and issuing a payment on the spot. If the customer is still on the premises, then hustle over and pay the customer in cash, right there. If it’s a check payment to an off-site customer, then using an overnight delivery service should be the required approach. Now that might seem expensive, but let’s get back to the concept of the lifetime value of a customer. Interrupting the normal workflow of the payables department and paying an overnight delivery service are really minor inconveniences, compared to the prospect of losing a customer.
The other point of interaction between the accounting department and customers is obviously collections. This is a tough one. You want to get paid, but without taking the more extreme steps of getting really aggressive with customers on late payments. There isn’t an ideal solution. When the lifetime value of customers is a major focus of the business, you’ll probably want to back off of being too aggressive, and might accept a larger bad debt expense instead. On the other hand, if customers rarely come back to make repeat purchases, any collections technique at all might be considered acceptable.