The coal face in business today is where the sales team carves out deals with customers and the finance department shovels up the money afterwards.
But when payment doesn’t swiftly follow the sale, a company can be starved of the vital oxygen of commerce – cash.
Credit managers are sometimes called the ‘sales avoidance department’. But productivity improves when sales people and accountants work together, say the Cranfield University School of Management academics
‘Sales is shifting from a 20th century “selling products and services” model to a 21st century model in which salespeople focus on increasing customer productivity,’ said Professor Lynette Ryals and colleagues in a 2009 paper, ‘The changing role of sales: viewing sales as a strategic, cross-functional process’ (pdf).
According to Harvard Business Review, they said, sales were becoming a strategic activity in which a sale is made with the intention of building and maintaining a long-term relationship. The salesperson ‘is increasingly acting as a relationship manager rather than as the traditional order-taker’.
Nathan Coates, writing for the Register, the IT business news website, said sales and finance were both ‘occupied directly with customers: who they are, what they need, what they have bought, whether they have paid’.
The customer’s experience, he argued, depended on how information was captured, updated and passed between the two departments. Better information meant you had more informed conversations with customers.
Sales staff focused on deals, that’s how they earned bonuses, Coates said. But was the customer a poor payer? A little information would help and some organisations were putting sales and finance into one team.
But he said: ‘There is more to it than throwing gung-ho sales types in a room with stuffy accountants and expecting them to get on with it.’
Eric Shepherd of Irish distribution company Johnson Brothers, writing last summer in CCR Magazine, the UK credit industry magazine, reminded sales managers that ‘their sales are potential bad debts until the customers pay for the goods’.
In the recession Ireland had been suffering, he said, pressure to sell more could lead to riskier sales, perhaps exceeding a customer’s credit limits.
‘Credit management is about risk management, not risk avoidance, but this can only be achieved with the sales teams working in partnership with credit.’
He suggested three ways to minimise exposure: ask the customer to agree to part payment for good before delivery; seek personal or bank guarantees, with a time limit to help persuade customers to agree; and increase bad debt provision to cover increased risks.
Some businesses might not be worth the risk, he said, but in the end the goal for both credit and sales in business to business dealings was to record profitable sales.
At SJ Collections, we can advise on best practice in credit management, how to proceed when a customer fails to pay their bills, and ways to build long term B2B relationships. How knowing your customer better and choosing the right way to make an approach can help will be the subject of my next blog.