Three Real-World Strategies to Strengthen Credit’s Relationship With Sales

icon Blog on Credit  •  posted 09/14/11

Credit professionals who find ways to work productively and creatively with sales not only add to the company’s bottom line but also contribute to higher morale and efficiency in two key departments of any company.

Obviously, given the seemingly inevitable potential for tension between credit and sales, this is easier said than done. However, responses on this subject by several innovative credit executives to an MCRC survey reveal three successful strategies for improving credit’s relationship with sales—and getting the sales force to be more credit-oriented in the bargain.

Do Some Research

“We formulate ways to sell or grow a new business by mutual agreement with sales,” says a credit manager from a consumer goods manufacturer. This manager also plans joint trips with the sales department, especially to visit new or startup customers. By helping the sales department find leads, the credit department helps counter a perception of being the “sales prevention” department and becomes an ally of sales.

Given Internet access, the ability to help sales with new customers is easier than ever today. By offering to do this research up-front, you may find yourself working on the same page as sales more often.

This manager’s approach takes the prequalification of potential new customers one step further. Let sales know that you are willing to do some preliminary research before it invests its time in trying to lure a new customer. And if you have to say no, give sales some potential new leads that can be approved.

 Share Information

For sales to become more credit-oriented, salespeople need to be armed with appropriate data. Technology makes it easier than ever to develop a mutual exchange of information with sales. “The sales staff has access to all the credit screens in our new system,” says another credit manager, “and credit can review pending quotes and orders.”

This ongoing exchange ensures that there will be no big surprises for either department.

“We e-mail information on customer trends and credit and collection issues,” says a director of credit for a large consumer goods manufacturing company. The salesperson who understands the credit and collection issues—and has the current customer information—is in the best position to help with the collection.

Pocketbook Incentives

“We transferred terms (more than 90 days) to our finance company and charged sales for the net effect of the interest expense or the value of money,” explains the credit manager at an industrial goods manufacturer. She says that the salesmen now think twice about giving away time extensions to pay something. The interest expense is treated as if it were a discount—directly affecting the commission or bonus of the salesperson.

This approach has the same effect as not paying commissions until the receivable is cleared—or not paying any commission if the goods are not paid for within, say, 60 days. Naturally, the sales department isn’t crazy about such approaches, but if management backs credit on the issue, there’s usually an improvement.

Another approach is no commission, bonus, or merit increase for salespeople whose clients pay late or never, coupled with an incentive fund (a percentage of the current cost of late receivables) for rapid and prompt collections.