Consumer Protection 3/4

In this month’s article, as we continue the series on the Consumer Protection Act we take a closer look at the implications on Gift Vouchers and Sales Records.

Vouchers

The main change in the new act with regard to vouchers is that the expiry period has changed. Instead of you placing a three or six month expiry date on your voucher you now have to provide a minimum of three years for your expiry date.

The reason I say minimum is because the act also says that you as the supplier may agree to extend the expiry date at any time. In this case you cannot fall back to the 3 year expiry date if you have agreed a longer period.

Topping up vouchers

In most cases the 3 year period will suffice but the extended period will come into play if clients top up their gift vouchers. This topping up procedure is generally a factor with plastic gift cards where either the client will use part or all of the full value on the voucher and ask you to reload some more money onto the card in which case they extend their voucher expiry by another three years.

In my opinion you should try to honour vouchers for as long as is possible, within reason. Turning a client away because of an expired voucher is generally enough to turn them away for good, which is short sighted as vouchers are way of winning new clients who in many cases are visiting you for the first time because of a voucher they received.

Displaying the voucher value

What does make life a little tricky is when you specify that the voucher is for a particular service or product rather than a value. In this case inflation is not your friend. If you hide the value of the voucher and specify the name of a service or product that they can redeem in future and the client waits three years to redeem the voucher the pricing of the product or service will most likely have gone up two or three times and you will lose the difference.

The main reason for hiding the value of a voucher is when the purchaser does not want the recipient to know exactly how much money they have spent on them and would rather just specify what they have bought them.

Personally I would prefer to receive a voucher to a certain value as it gives me the freedom to choose what I would like. It is also common practice these days, especially with the larger retailers, to work in values rather than specific goods or services.

Vouchers before the CPA

Remember that transactions that took place before the act came into effect are not subject to the same legislation but it may be a wiser option to be lenient to your clients if it is the difference between keeping them and losing them in the long run.

Vouchers are promises

A very important point to note with regard to vouchers is that they remain the property of the purchaser until they are exchanged for goods or services. This means that you owe the purchaser that value and promise to give them something in exchange, i.e. it is a liability. You are really just holding their money for them until they return. Seeing a voucher in this light perhaps changes ones attitude to honouring a voucher when it is presented (apart from the new obligations provided in the CPA).

Honouring someone else’s vouchers

One grey area worth mentioning is if you purchase a salon from someone else and whether you will still need to honour all the vouchers sold by the previous owner. If you take over the business as a going concern and do not establish a new company then you will need to honour those vouchers like you will need to honour debts to any other suppliers.

However,  if you set up a new company but just take over the premises, equipment and client base then the liabilities will not apply as the transaction was not entered into with your company.

However, the goodwill that you are purchasing will be diminished severely if you do fail to honour these vouchers. A good idea would be to notify purchases of vouchers bought from the previous company and give them a window period in which to redeem the vouchers. This way you are extended your goodwill by explaining that although you are not obligated to honour the vouchers you are providing a limited opportunity to do so.

This will balance the goodwill and the loss of cash flow you will experience as you never received money for the vouchers in the first place but may need to pay commissions on these. It may also be worth discussing the matter with stylists and reaching a compromise in this regard to reduce the cost of commission on these vouchers.

Vouchers sold by shopping centres were not transactions conducted directly with your business, however, your obligation will most likely be with the shopping centre to honour the voucher rather than the CPA and besides gift vouchers sold at the larger shopping centres are actually bank accounts with cash available on them and this will be more of a credit/debit card transaction than a gift voucher redemption (although it may be referred to differently).

Sales Records

In order to comply with the new act you must supply your clients with a written record of any goods and services that you have sold them.  This puts a dent into any store policy that says we will provide you with an invoice if you request one.

What must be on a sales record

The information required on the sales record includes your businesses full name or registered business name (*refer to last month’s article in relation to CPA’s naming requirements). It also requires your VAT number if you are VAT registered (*check with your accountant if you need to be VAT registered), the physical address where the goods or services were supplied (i.e. your salon), the date when the transaction took place, the name or description of any goods or services supplied, the unit price and the quantity of each, the total of the sale before tax (if you are VAT registered) and the tax (VAT) applicable and the total including tax (VAT).

It’s for your own good

I have heard many salon owners tell me that clients hardly ever request an invoice/receipt and therefore they don’t have a receipt printer. Those days are over and believe it or not its better for you.

Being specific on your sales record will actually protect you from possible fraud in cases where clients try to return a product that they may have purchased elsewhere or outside of the time period you are required to honour. If your sales record was not specific (i.e. only stated 1 x Retail item or no date) then you cannot refuse their claim very easily if you are a stockist of the item that they are returning or when they purchased it.

Printing a sales record also helps to prevent staff theft as the only way to print a sales record is to enter the sale into the computer system. This reason is usually the main reason why salon owners insist that clients request a sales record.

Saving time producing sales records

Handwriting this sales record for every single transaction will place great strain on the reception area, which in most cases is under strain already. Therefore a computerised system with a printer that can do it instantly with all required information is no longer a luxury but a necessity.

Conclusion

For gift vouchers try and have the attitude that you owe the client something in exchange for the money they have given you and it is not really “fair” to refuse to provide them with something in return. This will make the CPA requirements less of a bitter pill to swallow.

For sales records ensure that you are presenting all clients with a sales record with all required information thereon each time you conclude a sale with them. This will protect you from client fraud and staff theft.