Implementing a consistent scrap metal handling protocol is extremely important in order to promote transparency and accountability in the asset liquidation process. It also serves as assurance that you are getting the highest return from the sale of your material.Scrap metal liquidation, if done properly, can be a very lucrative business. However, it is also one of the most attractive nuisances in the investment recovery industry. An investment recovery professional must be trustworthy in addition to knowledgeable. The mere perception of impropriety can ruin a career and tarnish a business’s reputation. Whether shortages happen by mistake or intentionally, the result remains the same–a significant loss in revenues and credibility. The implementation of best practices, such as those listed below, promotes understanding, maintains credibility, reduces errors and increases profitability. So, what are some of the best practices and considerations that need to be taken into account while developing the proper protocol for scrap metal liquidation? A few are as follows: Develop and implement a scrap purchase agreement that is both reasonable and effective. Be sure to include an anti-kickback clause. Establish third-party waste stewardship standards to ensure the buyers commitment to safety, quality, and environmental compliance meets or exceed that of the seller. Have a committee review program components that will allow for accurate evaluation of scrap metal bids and maximize the potential for implementation of a successful scrap management program. The committee should also review the different grades and types of scrap metal commonly generated at a particular facility and how the material is valued. Educate the various facility groups that generate the scrap about the benefits of a successful scrap management program. Develop incentives for the facility groups generating the scrap to secure their willing participation and commitment to ensuring a successful program. Establish weights as well as classifications of material before it leaves the site, and get copies of the buyer’s weight tickets. This will help minimize losses due to unjust downgrades, reclassifications, and variations between seller’s and buyer’s scales. Be clear that agreement downgrades will not be accepted unless you have had a chance to inspect the materials. Do not go on pictures alone! Make your scrap more valuable. Have mutual communications between buyer and seller. Put dispute resolution measures in place to solve most problems before they happen. (i.e., segregation of materials in the shipping process; maximizing the weights and quality of loads to reduce freight cost; be able to prove through best practices that you are not a potential responsible party for cleanup in the event an environmental problem surfaces at a scrap yard 10 years down the road, etc.) Review common loopholes in scrap sales agreements and programs: Use published market assessments that provide you with the information you need to have confidence that you are receiving the highest return from the sale of your scrap. Are you spending a dollar to recover twenty cents when you could be spending a dime to recover fifty cents of the same material? How do you know? Work smart! In conclusion, the success of your scrap management program is directly proportional to the buy-in from upper management as well as the groups that generate the scrap at the various facilities. The best way to do that is through a robust communication program between everyone in the liquidation chain. Use that information to develop or revise written best practices that can be applied openly, willingly and systematically. Even a small amount of metal being scrapped can have surprisingly high value. Reduce the opportunities for theft and ad hoc liquidation practices that are both illegal and dangerous. Most people remain honest even in the presence of extraordinary temptation, yet a few individuals cannot resist the temptation of a handful of $100 bills. And many troubled sellers are not caught until the illicit buyer goes through an IRS audit to explain where all of the cash went. Accountability always comes back around regardless of your practices. The Investment Recovery Handbook is full of excellent procedures and agreements to get you started on the road to a successful scrap metal management program (Chapter 14: Scrap Recycling and Environmental and an exhibit of a Sample Scrap Sales Agreement). Lastly, remember that once the scrap is gone from the site and mixed with acres of similar materials, it is almost impossible to find out what happened to it. Stay focused on transparency, communication, value–and most of all–keep a clear conscience. If you’re transparent in all that you do, you won’t worry if a question is asked [or a finger is pointed]. Sale of scrap metal is paramount to the success of your program. Set a high standard. And no one will debate profits if you have done your homework!