Don't Get Sloppy Over Callbacks
While a number of evaluations can tell you what callbacks cost, the first step is to track them.
Some companies set up a job account and code all callback expenses to it so as to determine what they spend in this area. Others just charge the callback to the original job code while still others—who use flat-rate pricing for their technicians—incur no dollar cost because they force technicians to fix problems at their own expense.
I recommend building in a percentage for callbacks on each service call—say two per cent of the direct cost of the job—and mark it up for overhead and profit. Include it as you would any other cost.
Upon job completion, record a debit to the job cost with the two per cent and credit your balance sheet’s Callback Provision Account. (The balance on this account will be added to taxable income at year-end. Your accountant can explain this in greater detail). Every time you get a callback, debit the Callback Provision Account with the cost.
At the end of the year, you can see the account’s balance. When it is negative, your callbacks are costing you more than two per cent of the cost of sales. When the amount is positive, you know callbacks are costing you less.
This information empowers you to make decisions, such as:
There are several elements to the cost of the callback:
The cost that we should never forget, however, is ‘perceived indifference’. In fact, people change providers 68 per cent of the time because of it. Callbacks often make customers feel you are indifferent to their needs. So take responsibility and make sure the customer is satisfied and compensated for the inconvenience you have caused by not doing the job properly the first time.
Your action plan is as follows: