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

“Oh East is East, and West is West, and never the twain shall 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. GAIN TRUST — When trying to improve the credit-to-sales cycle, it is critical to meet with sales personnel and their leadership. Have an open dialogue about the order-to-cash cycle. Find out what is working, what needs to be tweaked and what is unnecessary.

When it’s possible, draw the process out on a whiteboard. Identify each pain point and suggest a solution. Commonly, the credit department is at the end of the cycle; it’s notified only when a given deal is closed and ready to go to order. Propose that credit managers be at the forefront of conversations in the sales process so that all information needed to make a sound decision is obtained from the beginning. This paradigm shift helps lead to the second step. EXPLAIN THE “WHY” — Oftentimes, the credit department is seen as the “no” 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 contacts for billing and payment requests. It also allows us to check credit and create a customer record showing that the customer agrees with our terms of business.

In the review process, keep the sales team engaged with what you see or don’t see as you are checking credit, references and the like. When gaps in information emerge, ask salespeople to fill them in immediately; do not wait until the end to provide a laundry list. Once a decision is reached, let the sales team know promptly.

Explain that credit is denied when a company’s financials don’t support the amount of business requested. There may be too much legal activity or an onerous company history.

“Yes” decisions relate to strong financials. Or the company may be publicly traded or

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. Look for ways to say “Yes.” When needed, Sales and credit departments are two sides of the same coin. Both do not be afraid to ask salespeople for balance each other out; both will more information or a direct contact. have shortcomings. Salespeople will bring some bad deals to the table. The credit department will make some bad decisions. Both are indicators of healthy risk to fuel growth of an organization. The common denominator is that both departments are selling. Sales is selling the reason why a customer should pick their product. Credit is selling the customer on why they should pay on time, as “it’s not about collecting money, it’s about eliminating objections to payment.” Nat McCall is the senior manager, U.S. credit and collections, at Discovery Communications. He can be reached at (865) 985-7787 or nat_mccall@discovery.com.