"Certainly, we'll rectify that as a gesture of goodwill."
Guideline: Own Policy
Description:
This term refers to those costs that must be borne by the Service Department that cannot be reclaimed or charged on to warranty or any other Department.
Example:
Let's
say that three days ago you fitted a new exhaust system for one of
your customers, and now they are back in front of you with a problem.
They are saying that the exhaust system is rattling and of course they
are not happy.
Naturally,
you cannot expect the customer to pay any more money, as they have only
just paid you to have the exhaust system fitted. Therefore you agree to
rectify the problem for the customer, and the question is who pays the
bill?
Discussion:
Since this job is the direct responsibility of the Service Department, it cannot be charged onto warranty or any other department and therefore the hours spent on the rectification is accounted for within Policy Costs in your management accounts.
Related Terminology:
This term is also known as Policy adjustments, Goodwill Policy Grants or Rectification.