A customer had organised a payment plan that would see the debt paid over several months at the rate of a couple of grand a week. At the point of negotiation, the debt was already 120 days old and a formal letter of demand had been sent. The account manager/sales rep responsible for this account was querying why we had stopped supply. After a detailed explanation, the account manager said he understood but wondered why we had stopped supply. He did concede that it would be reasonable to suppose a customer would pay for goods they had bought on credit.
In discussion with the Steelforce Australia Pty Ltd credit team, we delved into the void of understanding between supply and payment. Particularly, why supply didn't incorporate payment in its universal meaning. Between us we came up with the term 'Expectation Vacuum'. This is the difference, the expanse, between the meaning of a sale from a sales perspective and a sale from a credit perspective. In our credit policy I have included the philosophy 'A good sale is sale paid for in full and on time'. It supports the ethos of 'a sale is not a sale until it has been paid'. I have just taken the ambiguity out of the 'when' for payment.
But why is this a uniquely credit perspective? It would appear to be the centre of all cash sale events. I couldn't imagine going to my local supermarket, doing my shopping, and then telling them I would pay them later, possibly look to make a payment arrangement at some given time in the future. Even to the most hardened sales professional, this would seem a tad unrealistic (and I have been told something that would not attempt to do). So why is a credit sale event looked at with different eyes? Why is it so unrealistic for a credit professional to hold new orders for a customer who is late paying for the previous order?
In all fairness to the sales person, they only see a part of the process. In a cash sale event, the sales person sells the goods and walks the customer through the paying process. It is intrinsically the one and same process. Just separated by a step or two. Of interest, in this process if there is no payment, there is no sale. No goods released.
In the credit sales event, the sales person is generally only involved in the first part of the process. I would be surprised if many of these same people are involved in the payments part of the process ever, and if they are, it is probably only with picking up cheques from the customer or the like. It certainly is not in negotiating payment plans, following up on missed payments, working through the myriad of legal issues, and let's not get started with liquidation and PPSR returns.
In many organisations there is a real separation between the activities of the sales staff and that of the credit team. Through a series of baby steps, starting with getting involved in the national sales meeting held once a week, I have been getting more involved with the sales team. I now run Q&A sessions with branches on my regular visits. This is with the view of providing an understanding of the second half of the sales event to those who have never been exposed to it.
This is an ongoing process, and as you can see from the opening paragraph, still some work to do. The success lies in consistency of message and tenacity of the deliverer. It is as important for the sales team to understand what the credit team do as it is the credit team understand what the sales team do. After all, we are all rowing the same boat. I regularly go with the account managers/sales reps to meet with customers face-to-face. This builds a relationship with the sales people, with the customer, and lets me see first-hand the quality and space of the customer's business. Let's me see with a sales persons eyes and helps me to show the sales person how the physical links to the thought process.
The credit function is unique in the commercial world, in that it touches all aspects of the business simultaneously. There is no better helmsmen than a credit manager, but only if there is a holistic understanding of the vessel and the waters she rides in. Without this view, a credit manager can be trying to steer in the dark, or worse, against the wind.
The first step in this filling of the 'expectation vacuum' is to break down the walls between these two areas and retrain our thinking to incorporate the philosophy that sales and credit are two halves of the same side of the coin. Without each other, there is no victory, no prize.
For years we have belted sales team with trying to get them to understand credit, when what we needed to do was partner with them and have them 'see' what we do. In a culture that supports this interaction, there will be high success. Where there is no support for this interaction, the path is that much harder.
What a day it will be when credit teams realise they are also an after sales service and sales recognise that they can support their customers buying more by working with them to make payment. We then close the gap between cash sale event and credit sale event.
The uncharted territory of having the benefits of filling the 'expectation vacuum' flow into the market may well see a positive impact on insolvency for customers, reduction of tension on price-wars with competitors, and the softening of downward pressure on internal margins. Maybe even an increase in the value realised by credit departments around the world, and positive view by potential new entrants to the credit profession.
In the coming week/s what will you do to fill the 'expectation vacuum'?
National Credit Manager
Steelforce Australia Pty Limited
Telephone: 07 3900 6919
December 2017 - FNSMCA301 - Collect Debts - FNS30415 Certificate III in Mercantile Agents and FNSCRD504 - Manage the credit relationship - FNS51520 Diploma of credit management