CREDIT WHERE DUE
Building Team Spirit
An adversarial relationship between credit and sales departments can be transformed by taking three simple steps. BY NAT McCALL
“O
h East is East, and West is West, and never the twain sha ll meet.” So said the great Rudyard Kipling in “The Ballad of East and West,” written in 1892. The modern version of that in today’s corporate world may well be: “Sales is sales, and credit is credit – never shall the two meet.” It’s a classic paradigm within most organizations, but really shouldn’t be. Rather than thinking of the relationship between the two departments as a necessary evil, one should look at it as symbiotic. Each team works for the benefit of the other. Simply stated: “No sales equals no credit, and no credit equals no sales.” The modern credit department should partner with sales departments and view them as equals. Sales teams usually have quicker customer insight and better contacts when the need arises. Three simple steps are key to optimizing the relationship: gain trust, explain the “why” and partnering.
department. This false moniker can be easily avoided when time is taken to walk salespeople through the credit process and help them understand the “why” at each step of the way. Explain that the credit application is needed to obtain the proper legal name of the company we’re doing business with and
well established in the industry. “Yes, but” decisions are likely to result in a low credit limit, strict terms and suspended delivery if terms are not met. Look for ways to say “Yes.” When needed, do not be afraid to ask salespeople for more information or a direct contact. A letter of guarantee, personal guarantee or cross corporate guarantee could mean the difference between yes and no. PARTNERING — Once the credit
department has gained trust and explained the rationale of credit decisions, the two departments can actually work together. Credit managers can let salespeople know when companies make moves that might allow for more spending. By helping at the front end of the “hunt,” credit teams can steer sales teams away from deals that might not pan out or provide too much risk. This allows salespeople to focus on the most beneficial deals for the company. Sales and credit departments are Look for ways to say “Yes.” When needed, two sides of the same coin. Both GAIN TRUST — When trying to do not be afraid to ask salespeople for balance each other out; both will improve the credit-to-sales cycle, it is more information or a direct contact. have shortcomings. Salespeople will critical to meet with sales personnel bring some bad deals to the table. and their leadership. Have an open dialogue contacts for billing and payment requests. The credit department will make some bad about the order-to-cash cycle. Find out what It also allows us to check credit and create a decisions. Both are indicators of healthy is working, what needs to be tweaked and customer record showing that the customer risk to fuel growth of an organization. The what is unnecessary. agrees with our terms of business. common denominator is that both departWhen it’s possible, draw the process out In the review process, keep the sales team ments are selling. Sales is selling the reason on a whiteboard. Identify each pain point engaged with what you see or don’t see as why a customer should pick their product. and suggest a solution. Commonly, the you are checking credit, references and the Credit is selling the credit department is at the end of the cycle; like. When gaps in information emerge, ask customer on why they it’s notified only when a given deal is closed salespeople to fill them in immediately; do should pay on time, as and ready to go to order. Propose that credit not wait until the end to provide a laundry “it’s not about collectmanagers be at the forefront of conversations list. Once a decision is reached, let the sales ing money, it’s about in the sales process so that all information team know promptly. eliminating objections needed to make a sound decision is obtained Explain that credit is denied when a com- to payment.” from the beginning. This paradigm shift pany’s financials don’t support the amount of helps lead to the second step. business requested. There may be too much Nat McCall is the senior manager, U.S. credit legal activity or an onerous company history. and collections, at Discovery Communications. EXPLAIN THE “WHY” — Oftentimes, “Yes” decisions relate to strong financials. He can be reached at (865) 985-7787 or nat_mccall@discovery.com. the credit department is seen as the “no” Or the company may be publicly traded or
8 The Financial Manager • May/June 2021
