Article
Written by Nick Brown
Posted on 18/03/2016

How to guard against credit risk – and support sales

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It seems to be an unwritten law of corporate life that the credit and sales departments operate in opposition to one other. The causes are clear enough. The pressure to secure sales grows year on year, so when credit colleagues seem to obstruct a hard-earned conquest the tension rises and conflict seems inevitable. Meanwhile on the other side of the line, the need to protect your organisation from numerous forms of credit risk has become more complex and challenging, so a rampant, apparently indiscriminate sales department can easily look like part of the problem, not part of the team.

But clearly a culture characterised by conflict is unproductive and ultimately unprofitable, so it’s seriously important for credit management and sales to work together. A collaborative relationship built around mutual respect and understanding is the nucleus of good business.

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Minimal credit risk and burgeoning sales as one

It’s definitely time to forge a real partnership between departments, but how do you go about this? There are various ways and some of them are disarmingly simple. For example it makes good sense to organise a social gathering where credit and sales people can really mingle and share their thoughts and issues. Understanding the other side of the ‘argument’ is key to resolving it. Some proper social interaction eases tension every time too.

Once a degree of mutual understanding is established, it’s easier to understand why people are reacting as they do, sympathise with their working challenges and see their motivation. Mistrust is replaced by respect.

Making the connection

At the core of the new, positive relationship is a real understanding of the connection between credit management and sales. You’re not separate entities, you need each other and are part of the same trading mechanism.

For example if the sales department doesn’t sell on credit, then the company has no need for a credit department. But if those credit sales turn out to be shakier than they first appeared, then the bottom line and indeed the organisation’s core solvency are at risk.

Meanwhile in the overworked heart of the credit department, it’s vital to remember that an energetic, opportunistic sales force is also the life force of your enterprise. Everyone relies on a constant stream of new sales conquests – where would the company be without them?

Some tactics for sealing the deal

There are some effective tactics you can employ to strengthen and refine the partnering process with sales colleagues.

  • Aim to get buy-in from sales so that credit applications are right first time. Explain why this is so important in preventing time-wasting returned applications and non-payment of debts.
    Stick to your guns on this and don’t process a sketchy application. Send it back every time. Sales will get the message and understand the importance of accuracy after a while!
  • Decode the art of credit management for your sales team. Give a presentation that focuses on the core issues and steers clear of taking sides.
  • Get sales into pre-vetting. When they pre-vet prospects, it avoids disappointment further down the line by allowing a potential customer to see that a sale can’t be approved - saving everyone time and money. For this to work, you’ll need to provide access to financial data and quality forecasts, and ensure that your sales colleagues know how to make best use of them – it’s all part of the collaboration process.

Be in at the start of the sale

Sales professionals are inevitably in at the start of a potential customer relationship, with credit only being consulted later in the process. A progressive, proactive credit manager can enter the relationship sooner and spot possible problems before they really develop. The bigger the potential client, the better your impact will be, so getting into the sales cycle early makes a lot of sense.

Be a problem solver

A proven method of strengthening your relationship with sales is to offer solutions to the problems that arise between disciplines. You can help sales to go through smoothly and enhance the credit process at the same time.
 
For example if there’s a £20,000 sales opportunity, but the customer has a credit limit of £10,000, don’t simply deny credit. Broker the idea of a 50/50 transaction, with 50% upfront  and 50% on credit. Or use the enticement of a discount for cash. A settlement discount is a powerful persuader for buyers to settle promptly and improves cash flow at the same time – use this approach where you know it will create maximum benefit to the business.

It’s time to grab the initiative and cement the relationship between credit management and sales. Forget the entrenched positions and collaborate. When you understand and share the whole sales cycle and present solutions instead of obstructions, everyone will prosper!

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