The battle continues: salesmen vs. credit managers

By Peter J. Bower Mariner's Forest Products. Inc.

ONEY is tight. Now there is an understatement! But when money is tight, credit is tight. You can verify this by asking your salesman, "When was the last time the credit manager turned down one of your 'golden' accounts?"

So what can you as a manager do when you cannot afford to extend credit to marginal accounts; yet, with business down, you cannot afford to lose sales?

Unfortunately, there is no simple answer. Still, the problem requires a decision by you as management. The normal response is to look to the past, to try to manage as if these were the good-old-days.

Right away you have two problems:

(1) It is almost impossible to apply yesterday's decisions to today's problems.

(2) Often management has no idea of what was done in the past.

But, eyes are found on the front of your head so you can see forward, not backward. The best way to solve the problem that you are dealing with is to look forward.

The eternal conflict between the sales department and the credit department is an important one. The two will never see eye to eye 10090 of thetime. Yet, it is also importantthat each receive its fair share of the victories.

An overly powerful credit department will make an aging of accounts look as beautiful as a piece of fiddleback hardwood; however, a look at the sales report may not be as beautiful. An overly powerful sales department will bring in more business than your facility can handle; however, a look at your aging in 30-60 days may be hazardous to your health.

There are ways to keep both departments happy. One way is to increase profits. If enough profit is plugged into an order, even a normally slow paying customer can still be a profitable account.

Beware, though, of laws concerning pricing. Changing the price to one particular customer for any reason may cause you legal problems further down the road. Be sure you have yourself covered before you start changing your pricing structure.

Another way is to use the finance charges which are becoming quite popular. If you as management do not want to increase prices, but still would like to help cover the cost of money, the good points are:

(1) Prices remain normal.

(2) Salesman will not have to deal with a general price increase.

(3) You can choose the time you wish to charge: after 30 days, 60 days, or on the first day past due. Again, be consistent with all your customers.

(4) The finance charge will help you pay the finance charges that you have been receiving! The drawbacks are:

(1) If your accounting department is already at wit's end, the extra burden may not be feasible with the existing set-up.

(2) You may alienate customers, but consider that you are alienating slow paying customers.

(3) You cannot expect to collect 10090 of your finance charges. The people who will not pay finance charges are usually the same ones who take unearned discounts.

Story at a Glance

Tight money means tightcredit with sales/credit conflict ways to create balanced team effort . . improve cash flow, business effectiveness.

There is still another way of going about this sales/credit conflict: cooperation. Let's face it! When you look at the whole picture, you cannot run a business without a sales dept. Likewise, you cannot run a business without a credit dept., even if it is nothing more than your bookkeeper, making phone calls ten days before the end of the month.

A balanced, effective team effort by both credit and sales can be one of the best things to ever happen to your company. Here is a list of what each department can do to help.

Credit

(1) If you do not have a written credit policy now, write one. Hand it out to the salesmen. Let them know what you expect from customers.

(2) Explain to the sales department how you evaluate a new customer.

(3) Inform salesmen how you gather information. They may even have a suggestion!

(4) Let the salesmen know what you are doing. It is embarrassing for them to go to a customer's shop, give a sales pitch and then have the customer tell him that your credit manager has filed a suit against him.

(5) Remember, the more help you can give salesmen now, the easier it will be on you later.

Listen to your credit department.

(3)

If you are going to make a planned cold call, check with the credit department first. It may prove to be a time saver. Do not try to push through an order or a credit application if you know the customer has a bad credit history. If management finds out after the fact, say 60 days past due, one of (Please

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