In a perfect world, credit and sales department professionals have an inherent respect for each other and understand the difficulties and importance of their counterparts’ jobs on the other side. Unfortunately, as so many credit professionals—and, let’s be fair, salespeople too—have found over the years, this is often not the case.
Ensuring that both sides are well informed about the goings on of the company and its customers can often lead to a drastic reduction in risk. One side needs the other, especially when looking specifically at risk. Michael Andreasen, process manager with TNT Express in the Netherlands, notes the relationship between balancing revenue generation and protecting from bad debts is like a grownup metaphor for riding on a seesaw.
“In some companies, the credit manager reports to sales and in others to finance. Now picture a seesaw: on one end you have the sales department weighed down heavily with demands for more revenue, more profit, more customers, and more volume; and on the other end is the credit manager trying to manage the risk of poor-paying customers and having to try and strike a balance,” Andreasen says.
“This is not an easy task, especially in companies where the credit department is measured on the level of bad debts, and the sales department is measured on revenue and profit,” Andreasen continues. “Working in silos is typically what tends to happen. But, if you’re able to break down the barriers between credit and sales, you can start evening out the seesaw effect.”
Dennis Karpinski, CPA, controller at Eastern Industrial Supplies, Inc., believes in cross-training and cross-reporting between credit and sales. Since the two really can’t exist and function well without the other, Karpinski argues that if, ultimately, the goals for the company are the same on both sides, “when they work together, they are far more successful.”
However, some fear training sales and credit people in each other’s disciplines not only takes valuable time, but may empower certain individuals with a feeling of importance, which can get out of hand. Norman Taylor, CCE, credit consultant for NIIT Media Technologies LLC, says salespeople are not properly trained to be credit people, just as credit personnel are not trained to be in sales. “Why should you have to spend so much time learning your own disciplines and have them cross-trained to that magnitude? This is too big and too important.”
The Case for Cross-Training and Cross-Reporting
For the majority of credit professionals and other experts, there’s a strong case to be made for improving relations between credit and sales from a risk perspective. Says Andreasen, it sounds “dead simple,” but many professionals and managers in both disciplines simply don’t take the time and the effort to communicate.
“What we, in credit, need to do is to take a leaf of the salesman’s book and be better at ‘selling’ what we do. It’s not just about communicating what we do, but how we do it, and why we do it,” he explained. “You need to establish a natural flow of communication between sales and credit.” Another step would be to look at the metrics the other side is judged on, and apply some of those performance measurements to your own department to illustrate the overall picture.