SALES V CREDIT

Part 1: Myths, Misconceptions and Missed Opportunities

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?

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.

In Part 2, I will suggest ways in which the Credit and Sales relationship can be built, improved and maintained.

Kevin Artlett

Pecunia2016 Ltd

Sales V Credit Part 2