Credit vs Sales Departments

8
Feb

Quality vs Quantity:  The Age-Old Struggle Between Credit vs Sales

By Paul Krause, NACM BCS Collections Manager

I recently had a member ask me how to reduce her receivable problems this year. What I found a bit amusing is that when I asked what their bad debt write-off was for last year, she said “Oh around $10,000.”

Now this is a company that sells several million dollars per year. As I reminded her that this ratio is excellent, her response was, “Oh I run a pretty tight ship here, and sometimes my sales people don’t like it too well.”

Ah yes, the decades-old saga of Credit vs. Sales.

The primary difference between sales and credit team members is how they think…about a sale. Salespeople think in terms of quantity of sales. Their goals are often number-based and they are rewarded with commissions, so they are out to get as many transactions as possible.

Credit Managers have a different perspective. The primary goal is the quality of sale. They must decide whether customers are a good risk and whether they will be reliable payers over time. Credit managers have the final say about whether a customer will be allowed to purchase using credit. Their reward is based on managing risk and collecting outstanding debts.

So, how does everyone get along?

The natural conflict arises because of the difference in these goals and a lack of understanding and appreciation for the other team’s role.  After all, the goal of both teams is to increase company revenue overall, right? If credit and sales make a point to work well together, the whole company benefits from their cooperation.

After many years spent collecting bad debt, I’ve gained a few ideas to improve the relationship between Credit and Sales:

  • Communication — Start with shared experiences. If you get to know each other and establish personal connections, you will likely work together better.
  • Education — Show each other how the other half lives — and works. When one has experienced the other’s role, everyone will understand the other’s reasoning and decisions.
  • Focus on a common goal — Don’t limit the focus to department goals. Share overall company goals and successes regularly
  • Compromise if needed — There are option on how to work with customers. For example, if a customer isn’t a good risk for a credit account, have the sales and credit manager create a program that will help bring on the customer at less risk.
  • Make bonuses and incentives interdependent — Have a sales bonus that pays only after the customer pays; provide a bonus for credit managers when sales teams meet production goals.

Fostering an atmosphere of cohesiveness among the sales team and credit managers is possible.  With these ideas in mind, you can create a culture of working toward the overall goal and the whole company will benefit.

Best wishes for success in 2019!

Paul Krause