Interview with Kirsty Dale

Interview with Kirsty Dale, proprietor of Rollingdale Winery, in Kelowna, BC, Canada

Hello Kirsty, when did you realize that collecting from debtors was easier in kind, than in cash?

Kirsty: In 2008 we found that restaurants were having a hard time paying us in a timely manner, and that was in turn affecting our ability to pay our suppliers on time. It was a hard realization to be caught in the middle. The domino effect was very real and we were experiencing it first hand.

At first we would simply patronize those establishments that were closest to us, to spend down the debts with those customers. Eventually though, the number of debtor restaurants grew to the point that we could not eat and drink our way through all the debt! Plus, that did not help us pay down our suppliers.

At that point, we would ask for Gift Certificates to the restaurants, which we would use to settle up with our creditors where possible. Of course, not all of our creditors were able to accept restaurant scrip as payment, they needed cash. But the restaurants were more than happy to square up with us in GC's, and several of them began offering us a premium in GC's to settle their debt this way. This allowed us to arbitrage the GC's for cash at a discount, in effect allowing us to collect $1 for $1 in cash, from a business that doesn't have enough cash flow to pay their bills.

The debtor's viewed this additional premium as a marketing expense, because the GC's returned with customers who usually spent over and above the value of the GC's, if they came back, as some GC's don't return at all.

Why not just send the debts to a traditional credit collection agency?

Kirsty: If we sold those debts to a traditional credit collection agency, we would be getting back very little, perhaps 10 cents on the dollar. It would definitely burn the bridge with those customers. We prefer to empathize with our customers.

The fundamental problem of our delinquent accounts is a lack of traffic, so by allowing them to settle in kind, we are sending them traffic. We work with our customers, so that we are part of the solution not part of the problem. We consider this a true win-win scenario, and we build loyalty with our customers in the tough times so that we will still have them as customers when the economy picks up.

Once you have sent their debt to a collection agency, you have ensured that you will never again have the privilege of their business in the future. Sending them to a collection agency is a last resort measure reserved for those that will not work with us to creatively clear the debt. If they don't return our correspondence, we no longer value them as customers, as they no longer respect us as suppliers.

What percentage of the debt owed to you were you able to collect in kind?

Kristy: We were able to collect almost all of the problem accounts, with the only exceptions being the restaurants that had closed.

How long did it take you to sell the gift certificates for cash and will certificates sell faster by utilizing the CCS program?

Kristy: We are always collecting some receivables this way, so we are always sellling off some GC's. Sometimes they are sold within 24 hours, sometimes we get lazy and sit on them for a few months until a friend comes along and asks if we have any more deals on GC's. They usually clean us out!