Credit and Sales

Establishing a viable credit-sales relationship is one of the most important tasks of the credit manager. Any credit policy must be clearly defined to reduce misunderstandings between the sales department and the credit department. Participation in sales meetings is essential to clarifying the role and responsibility of credit, especially in dealings with the customer. The major goal of every credit department is to help move products or sell services-make the sale-with the reasonable assurance of payment. Additionally, there should be a clear delineation of responsibility for resolving customer disputes and unauthorized deductions. 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.

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. Marginal accounts or accounts with poor payment history, inadequate working capital or a deteriorating financial condition are taken on for strategic reasons and should be identified as such when receivables investment is being 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:

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 courtesy in order 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.