Magazine article Business Credit

How Much Should Credit and Sales Be Trained in the Other's Craft? Riding the Seesaw

Magazine article Business Credit

How Much Should Credit and Sales Be Trained in the Other's Craft? Riding the Seesaw

Article excerpt

In a perfect world, credit and sales department professionals have an inherent respect for each other and understand the difficulties and importance of their counterpart's job on the other side. Sounds nice, doesn't it? Unfortunately, as so many credit professionals--and, let's be fair, salespeople too--have found out over the years, it's often not the case. There are reasons why many credit professionals characterize sales as pushy people who pout and stomp when they don't get their way, and just as many sales professionals stereotype those in the credit department as sour, perennial "NO" people and "sales killers."

Still, ensuring that the staffs of 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. FCIB European Advisory Council Member Michael Andreasen, ICCE, I2C process manager with TNT Express, Netherlands, noted the relationship between balancing revenue generation and protecting from bad debts serves as a bit of a grown-up metaphor for riding on a seesaw.

"In some companies, the credit manager reports to sales and in others to finance. Now, picture a see-saw: On one end you have the sales department weighed down heavily with their 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 said. "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. Working in silos is typically what tends to happen. But, if you are 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. said he believes in cross-training and cross-reporting between credit and sales as something that "can only help" 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 that training sales and credit people in each other's discipline and empowering them with a feeling of importance can sometimes get out of hand. Norman Taylor, CCE, credit consultant for NIIT Media Technologies LLC, said that in companies he has worked with in the past, a lot more complications result once cross-training and cross-reporting is a reality rather than a theory.

"Salespeople are not properly trained to be credit people the same way you are not trained to be a salesperson;' he asserted. "I'm not belittling credit or sales, but why should you have to spend so much time learning your different 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 informally polled by NACM in April, 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 professions 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. "[And sales should ask] what would happen if the credit department didn't exist? You need to establish a natural flow of communication between sales and credit." He said another step would be to look at the metrics the other side is judged on, and apply some of those performance measurements to yours to illustrate the overall picture. …

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