Best practices for dropping a monitoring customer

Industry experts discuss the financial, legal implications of disconnecting accounts

Cohen said there are important financial implications for dealers when an account becomes more than 90 days past due.

"From an economic standpoint, when a customer’s monitoring bill becomes 90 days or more past due, it is considered to be a non-performing account. A non-performing account has specific implications in our industry," he said. "A non-performing account means that lenders aren’t going to advance monies on that account, so it is no longer of value to a lender and it is also no longer of value to a prospective purchaser if they were ever in the business of wanting to sell it. We also understand what the economic value of a customer is as well and for our purposes, based upon what lenders are willing to lend money with as well as what the valuation of the customer is in the industry of buying and selling, we know that a customer is generally worth between $500 and $800. So, if the amount of monies that is under dispute is greater than that threshold, we’re now going beyond the value of the customer."

One way Ackerman has been successful in keeping many of its’ customers current on their bills, according to Cohen, is through the implementation of an auto-pay policy, which gives the company authorization to automatically debit their bank account each month. Ackerman also has 24/7 customer support, which gives clients the opportunity to call and talk about their bill whenever they need to. In addition, Cohen suggests that dealers do a follow up call after an installation to ensure that everything is working properly and that they’re satisfied with the system.

"Our folks understand that our goal is to do anything and everything we can to retain that client. By the same token if unemployment or underemployment is the cause (of the non-payment)… we don’t burn the bridge, we empathize, sympathize and let them know that we would like for them to consider calling us back when that circumstance changes," said Ackerman President Jim Callahan. "We understand why they’re having to do what they’re doing. We have to cut them off, but we do it in a very amicable way so that it does leave the door open when those circumstances that they may find themselves under change back in a positive manner."          

For those dealers thinking about selling their businesses, having too many no-pay and slow pay customers can significantly impact the amount someone is willing to shell out for their accounts, according to Ron Davis, president of Davis Mergers and Acquisitions Group.

"If there are a significant number of slow pay accounts, let’s say 10 percent of the total, that poses a problem in getting the best purchase price for a company. To the extent that a dealer can ease that stress of having a slow pay, it can be advantageous when it comes time to sell the company," Davis explained. "One of the things a dealer can do is exercise the opportunity to give a hardship case a period of time where they’re not being billed. But rather than have a slow pay customer, it sometimes is better to have a current customer that you’ve given a few months of monitoring to."

Aside from the potential impact poor performing accounts can have on selling an alarm dealership, Davis said that dealers must also take other economic factors into consideration prior to disconnecting a customer.

"From a business perspective, the first thing (dealers) have to think about is the loss of revenue. The second thing they should think about is the negative ramifications of dropping a customer and the third thing they should think about is the overall value of the RMR that accrues to the dealer from both the client that they’re dropping as well as other referrals that could be made," he said. "In my opinion, there are very few things that can’t be rectified through conversation and trying to get a reasonable solution to a problem."

Dealers also need to think about the potential legal implications of disconnecting a customer and making sure they’ve done all that is required of them from a court’s perspective before they cancel service.