Meaning of Goodwill 2

What are the advantages and disadvantages of goodwill?

Goodwill should never only benefit your customer. There are, however, certain cases in which the granting of the grant results in advantages and disadvantages.

advantages disadvantage
With goodwill you can bind customers to your company and thus do additional advertising. Many customers see goodwill as a matter of course (for example when they want to exchange a product because they don’t like it).
You may incur additional costs through goodwill, but future orders that you can get by granting goodwill compensate for these additional costs. If you give too much goodwill, this can endanger the solvency of your company. Therefore, you have to carry out a clean controlling and inform your employees exactly when goodwill is granted and when not.
In this way you get valuable information about the quality of your work and the quality of your products.
You can set up goodwill management in your company, create guidelines and adjust your prices correctly.

How does goodwill affect CRM?

Sensible goodwill management can be an important instrument for you to retain customers and also to acquire customers . It brings you long-term advantages, especially for the loyalty of your customers to your company. Remember that a customer will be happy and satisfied if you behave accommodatingly towards them. He will recommend you to others and buy from you again and again. You can therefore see goodwill as the foundation for further income. Existing customers are often neglected in many companies. In order to acquire new customers, entrepreneurs like you come up with many ways to acquire them as customers.

But what do you do with your regular customers? What kind of reward do they get for their loyalty? Goodwill can be exactly the right means to strengthen their loyalty to your company. Above all, make yourself aware of the power and reach of the Internet. Customer experiences on the Internet are becoming more and more important and word of positive, accommodating behavior quickly gets around. Through the Internet. If you get bad reviews because of refused goodwill, your image can be very damaging for you. With goodwill you can turn customers into voluntary ambassadors for your company.

  • Goodwill is an important instrument for customer loyalty.
  • You increase customer satisfaction through goodwill.
  • Satisfied customers pass on their positive experiences and contribute to the acquisition of new customers.
  • With good ratings on the internet you strengthen your image.
  • With goodwill you can turn your customers into voluntary ambassadors for your company.

Worth knowing!

There is a rule of thumb that says, “One happy customer brings you X new customers. On the other hand, a dissatisfied customer ensures that around 10 customers no longer come or do not become customers of you. ”

What must be considered when granting goodwill?

Especially as a small business, you have to develop a feeling for goodwill. By doing business with your regular customers, new orders are constantly coming in and thus ensure a certain financial security. If you annoy a regular customer, in most cases you will not only lose him, but a few more. Acquiring new customers will also be much more difficult. The margins are often not very high, especially for small companies and also in the skilled trades. If you give goodwill every time, it will quickly put you in financial difficulties. Therefore, you should pay attention to a few points.

Subdivision of goodwill into two areas

Basically, you have to differentiate goodwill into two areas: Justified and unjustified goodwill.

So for you there is no more maybe, sometimes to think about or for once. There are only those cases where you give it or you don’t give it anymore.

You refuse goodwill in the following cases
Your liquidity is endangered by a goodwill gesture. You can no longer meet current payment obligations and it would lead you to bankruptcy .
You do not grant any goodwill if the costs outweigh the benefits. If a business relationship is designed in such a way that no follow-up orders are expected or no long-term partnership is in prospect, you waive the grant of goodwill.
You grant goodwill in the following cases
Several follow-up orders are to be expected from the customer, which will lead to high income in the future and significantly exceed the additional costs due to the granting of goodwill.
You grant a customer goodwill if you cannot do without him. If you lose this customer, you would no longer have a chance due to a certain monopoly of demand in the market.
The customer’s order is of strategic importance to you. Additional costs for goodwill and expected income are in the same amount, but the customer gives you an advertising advantage.
You should also give goodwill if refusal threatens a legal continuation. The costs for this are usually higher and with the granting of goodwill you can limit the damage.

How do you have to look at goodwill from the accounting perspective?

Every single goodwill grant must of course also be taken into account as a business transaction in accounting. In order to keep an overview here, you have to conduct a sensible controlling . In practice, the write-off of the value and the new posting with a reduced value are usually used.

Which steps are necessary for goodwill controlling?

To consider goodwill only with one business transaction in accounting would not be enough. Several steps are necessary to set up a sensible controlling system.

  1. Step: In the first step, you have to collect data on why there were goodwill cases.
  2. Step: Collect key figures as a goodwill gesture. First of all, you need to collect metrics. The three most important ones are a comparison between the costs of goodwill on your sales. The next key figure is the recording of goodwill cases for all sales and the recording of goodwill cases per seller as a control figure.
  3. Step: You now need to derive appropriate measures from all the data and key figures collected. Does it only apply to certain products? Do the cases of goodwill only occur with a specific employee? As this you need to clarify and then act accordingly.

Goodwill 2