As credit professionals, we may sometimes find ourselves at odds with the sales department and the executive management. The main reason is that while the sales team is trying to push the credit envelope to reach their sales goals, we’re pushing back trying to protect the company’s assets, which primarily focuses on Inventory, accounts receivables, and cash. It seems that it’s part of our DNA to pull the alarms and to stop the clocks when we see current or potential customers heading down the road to a non-payment situation.
In our quest to be the company’s credit watchdog, our zealousness may at times not support the company’s sales goals to the extent possible. In other words, being too cautious or overly protective can stifle the company’s ability to grow sales, expand market share, and increase profits. And since the last thing we want to do is to let our competition take sales opportunities away from us, here are my thoughts on how credit managers can be a part of the sales generating process.
Learn all you can about your company’s products and services – This sounds very straightforward but many times we professionals in finance and related fields may tend to only see the products and services from documents created, read, and analyzed. However, when you understand the process from the point of inquiry, to how your products are manufactured, to how they are shipped out and billed, this will give you unprecedented insights that will go into your credit risk management goals and strategy.
Participate in sales department meetings – Sales meetings usually start with a review of monthly, quarterly and annual goals that reaffirm ongoing strategies and action plans. Without question, your credit risk management insights are an invaluable part of every level of the sales planning process. For example, if your company would like to expand into the Brazilian market, your research and analysis of how to make sales on credit in that part of the world as safely as possible will be imperative.
Go along on sales and customer visits – Just how difficult is it to make a sale? The complexity of effectively communicating your products and services, listening to the negotiating approaches, and observing the human relation dynamics can’t be understated. When credit professionals watch and study the challenges that their sales counterparts are grappling with, they will have a better appreciation for what’s involved in “sealing the deal.” But more importantly, by being part of the actual sales process, your thoughts and input from a credit perspective will not only have much more practical value, but will also ultimately strengthen the sales transaction.
Prepare your credit risk management tool box – It’s easy to look at a credit report on a potential company with a marginal Paydex score and say, “no” to the idea of selling to them at the credit limit requested, or even at all. However, as one of our credit risk management goals is to expand sales safely, we have to prepare a credit tool box with as many kinds of credit products, services, and systems that will increase the possibility of approving a new or existing customer’s credit needs. These can include incorporating:
- Credit insurance on domestic and/or international buyers and using more than one credit insurance carrier to cover different customers that require different coverage needs
- Non-recourse domestic or international factoring that will accelerate cash flow and at the same time insure your accounts receivable portfolio
- Credit reports via industry credit groups and other information resources that can provide “comprehensive and verifiable” customer financial and trade data
- Third party credit & collection partners who can be a resource to resolving unforeseen credit risk management issues and challenges
Encourage an increase of sales activity towards selected customers – Every company has its share of customers who occupy a significant percentage of its sales and that always pay on time. Are sales to these customers being restricted due to credit policy terms? By incorporating appropriate credit tools and controls that allow you to increase credit limits safely, you’re directly supporting your sales team’s efforts to sell more to those customers. In other words, rather than waiting for your sales team to ask you to approve more credit, by informing them in advance that they can sell more to particular customers, you are turning the credit department into a proactive vehicle of sales facilitation and expansion.
Help to bring past customers back to life – As part of bringing credit files up to date, credit managers will often come across customers that haven’t purchased products in a year or more. Although there’s a tendency to put these accounts in a closed file drawer, sending a list of the accounts over to the sales department may trigger a renewed interest in approaching those customers. Some customers that started out buying regularly but then slowed or stopped may need to be contacted by the sales department in order to find out what happened. Sometimes there’s a problem that went unattended or a competitor that filled in a gap. Whatever the reason, when the credit department, through its work, can bring certain stagnant accounts to the attention of the sales department, this may help to bring a few of them back to life.
The ideas above are not all inclusive and generally represent my perspective on how the credit department can greatly integrate its support with the sales department so that ultimately the company will continue on a trajectory of unity, growth and profitability.
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This article was edited by Steven Gan.