Credit and Sales; Using Salespeople as Collectors; Team Based Account Management

Establishing and maintaining a viable working relationship with sales is one of the most important tasks for any credit department. A credit policy must be clearly defined to reduce misunderstandings and improve communications between the sales department and the credit department. Participation in sales meetings is helpful in clarifying for both the sales department and the credit department the role and responsibility of the credit and collection function, especially as it relates to:

• Managing risk,
• Resolving disputes,
• Collecting past due balances, and
• Dealing with customers

One of the goals of every credit department is to help their company make the sale safely, meaning making the sale with a reasonable assurance of payment. One of the major contributions of the credit department to the sales function is to work with customers and sales representatives and to find ways to approve orders. For example, a credit manager may be able to suggest a financing method not previously considered by the customer or may be helpful in locating sources of capital for a customer.

Additionally, there should be a clear delineation of responsibility for resolving customer disputes and unauthorized deductions. Finally, what may be called a marketing risk should be distinguished from a credit risk. For example, to achieve adequate geographic distribution in marketing a name-brand product, it may be necessary to sell to a company that may not be creditworthy based on the creditor company's normal credit granting standards.

Marginal accounts or accounts with poor payment history, inadequate working capital or a deteriorating financial condition may be granted credit for strategic reasons, and should be identified as such when receivables investment and collection performance is analyzed. The credit department must communicate the risks to sales and management while guarding the confidentiality of the customer. This aspect of confidentiality extends to credit information that may be obtained in connection with industry credit group meetings.

The Three "Cs" of the Credit-Sales Partnership are Cooperation, Communication and Courtesy:

Cooperation: Credit and sales are interdependent. Without sales, there is no need for a credit department. Without a credit making it possible for customers to buy, there is no need for salespeople.

Communication: Credit and sales each has account information the other needs. Communication works only if it goes both ways.

Courtesy: Cross-functional cooperation requires nothing more or less than common business courtesy at a minimum to succeed.

There are times when the sales staff knows that obtaining the business of a particular customer is important to a company's distribution plans, to developing a new market, or for maximizing shipping efficiency, for example. If the sales staff can explain this importance to the credit staff, a more informed credit decision will result that combines both credit information and sales strategy. The three "Cs" help the two staffs to reconcile their differing missions for the good of the company. By cooperating, they work together to make the prospect a customer. By communicating, they discuss the reasons why the prospect is worth the credit risk. Courtesy enables them to fulfill their own functional responsibilities and continue to work on a creative solution to finding a way to grant credit.

Remember that salespeople normally have a vested interest in keeping their customers off credit hold.  They may be willing to participate actively in helping the credit department to collect the delinquent balance.  Often they do so not by contacting the customer's A/P department but by working with and through the buyer or purchasing department.  You can encourage their voluntary involvement by:

• Providing advanced notice of potential credit holds,
• Encouraging but not requiring their involvement,
• Seeking out their expertise particularly in dispute reconciliation rather than in collections of undisputed invoices,
• Reminding them gently that they have a vested interest in getting involved and staying involved in problem resolution and debt collection.

Edited by Michael C. Dennis.  Michael Dennis is a business credit consultant and can be reached by email at  mcdennis13@yahoo.com with questions or consulting inquiries.