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The Relationship Between Sales and Credit
Michael C. Dennis, MBA, CBF

Business Credit Concepts
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There is an old adage: "A sale is not a sale until the cash is in the till." I think this statement is inaccurate, and probably insulting to the sales department that works long and hard to establish business relationships and to secure orders from customers. In point of fact, a "sale" is made as soon as title passes from the seller to the buyer. A more accurate statement might be:

"The sales department makes the sale, but the credit department completes the process by extracting payment and profits from the sales department's efforts."

Close ties between the sales and the credit departments are essential because it is only through cooperation between sales and credit that a company can maximize [or more precisely to optimize] both sales and profits. Credit and sales often disagree about credit decisions but these disagreements are healthy. Why? Because challenging the credit department to explain the decision making process helps to ensure that the policies in effect in the credit department are consistent with the goals and objectives of the company as a whole.

Often, the decision about which supplier is awarded a purchase order is as much about the relationship between the buyer and the salesperson as it is about the price, the terms, and the quality of the supplier's products. For this reason, many salespeople are concerned about the impact that the credit department could have on their relationship with a customer - particularly if the credit department acts in way which is seen by the customer as:

  • Arbitrarily

  • Antagonistic

  • Belligerent

  • Condescending or

  • Confrontational

The credit manager recognizes that the goals of the sales department and the credit department are not identical. Here is a simple example:

  • The credit department wants past due balances to be paid as soon as possible.

  • The salesperson wants to get paid as soon as possible consistent with:

    • maximizing future sales,

    • maintaining a positive working relationship,

    • not holding orders because the account is past due and

    • not damaging the goodwill established between the buyer and the salesperson.

The salesperson cannot become the focal point of the creditor's collection process. Instead, the salesperson should encourage the customer to contact the credit department to discuss payment. Salespeople often act successfully as intermediaries, but must be actively discouraged from crossing the line from intermediary to mediator or arbitrator.

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