FACT: relationships are all about close connection, close association and close feelings and will not blossom without these fundamental components existing between those involved.
FACT: Businesses will not survive without sales, managed by the sales team, and without cash flow, managed by credit control. Therefore, it is vital that a strong, healthy relationship is built and maintained between these two key departments within a company.
Yes, I know it sounds obvious but, even in the 21st century I still see many instances where this is not the case. This topic was covered in depth in a very recent training/tuition course I was running, where one of the delegates said they had witnessed a 'stand up row' in the corridor between the sales director and the credit manager over a credit decision. Astonishing! Or is it?
Key areas for potential conflict
Before we look at ways to build the relationship let us examine three key reasons for the problems arising in the first place. Perhaps the most common misconception is that the Credit Department is "Sales Prevention Department" and will put up barriers to the efforts of Sales. As a result, the salespeople feel their job is being interfered with and nobody likes that. This often occurs because there is seemingly no alignment between the sales strategy and the credit control objectives.
Sales see Credit as being desperate to increase collection rates and reduce DSO figures and view credit controllers as being over cautious and even inflexible. On the other hand, Credit often look at Sales as being hell-bent on securing more orders (and more commission!) and behaving over zealously meaning they are constantly trying to cut corners in areas such as risk assessment and extended payment terms.
Then there is the potential rivalry between Sales and Credit as to which is the most important for an organisation. As stated at the beginning, one cannot survive without the other, but this does not stop the relationship problems. In-house fighting and unhealthy competition will have a negative effect on performance, sales, profits and reputation so we must address this situation.
The third area is one where I have recently started to see improvements. It actually involves looking at how both of these departments actually view themselves rather than just each other. When asked what they see the main functions of their department as being, credit controllers often state things which actually sound negative ("chasing overdue debt", "hitting cash targets", "resolving queries", "sorting out misallocated and unallocated cash" etc.)
Whereas the mantra on the Sales function sounds much more positive i.e. "generate more sales", "increase revenue for the business", "sign up new customers". As a result it is imperative that we all strive to feel positive and motivated in what we do and to recognise that maximising sales and minimising losses is best achieved through a team effort between Sales and Credit.
Improving relationships Cultivating the relationship between Sales and Credit can start at the earliest possible stage. For all new recruits to either department, part of their induction should involve spending at least half a day meeting with their colleagues from Sales and Credit to find out what goes on, what the constraints may be and gain a clear insight into ways the sales team can help the credit controller and vice versa.
Thereafter, regular formal meetings of not more than an hour every four to six weeks should be arranged and given the credence they deserve. This should involve sharing positive as well as negative information on customers, sales drives and target markets as well as information on late and non-paying customers, accounts nearing their credit limit and, of course, disputes. At this point, it should be stressed that issues of a serious nature should not be saved up for these meetings but that a system for disseminating the information as quickly as possible should be devised.
In a previous company where I was a Credit Manager we even produced Aged Debt analyses for each sales person together with their own DSO figures, which provided some good banter and healthy competition amongst Sales as well as helping Credit Control in its cash collections. Joint visits between the sales person and Credit Control to potential, new and existing customers should also be encouraged, where possible, especially for key accounts.
This not only enables the credit control representative to meet their counterpart in the customer's Accounts Payable team but demonstrates professionalism on the part of your company. It will also serve as a very useful insight for Credit Control in to the daily challenges of Sales and help cement the relationship between the two. Credit Control could demonstrate flexibility in its approach of assessing the creditworthiness of customers by classifying the current portfolio of accounts by risks and opportunities in order to give Sales more guidance.
Also, rather than making a prompt decision not to sell to a customer because they are not deemed creditworthy enough, the Credit Manager should look to accept business on a different basis. For example, it might be possible to obtain guarantees, trade on a cash basis or even offer credit terms shorter than the standard terms. For Sales, when they are visiting potential customers they could spend some time talking about the standard payment terms and the importance of the customer adhering to them. They could also obtain documents for Credit Control such as a company letterhead or business card so that the process of credit checking can start straight away.
Communication channels should be kept open between Credit Control and Sales and each should know who is the assigned salesperson and credit controller for each customer. From experience, it would be very helpful if Sales could provide a list of their planned movements or locations in advance each week to Credit Control to see if there is a customer in the area who is in arrears that a sales person could call on to collect payment or to ascertain the situation at short notice.
These suggestions for improving, building and maintaining a good relationship between Sales and Credit are by no means exhaustive. However, we should accept that we cannot do without each other and we should respect and understand the vital role each department plays and why it is essential that we work together.
*By Kevin Artlett FCICM ACII Credit Control Consultant and Trainer Pecunia (2016) Limited
email: firstname.lastname@example.org website: www.pecunia2016.co.uk