NACM Survey: Sales Can’t Override Credit, Both Work Best as a Team

According to NACM’s most recent monthly survey, "In your company,
can a sales team overrule a decision by the credit department?" the
majority of respondents noted that sales cannot overrule their
department’s credit decisions, with 60.7% of participants answering
"No." However, while a still sizeable 39.3% answered "Yes" to the
survey question, many of these respondents noted that the occurrence of
a sales override over credit is exceedingly rare and happens when a
member of a sales team or upper management has a relationship with the
customer in question.
       

The type of account upon
which sales tends to override credit is also similar among
participants, with many of them noting that, in many instances, sales
will override a credit department’s decision regarding marginal
accounts. Many "yes" respondents also noted that sales overrides cannot
be done whenever sales finds it necessary; most of them require the
approval of a vice president or officer of the organization and some
also require that the customer meet certain previously agreed-on
creditworthiness criteria.

       

There were some
participants, however, who noted that, in their opinion, sales can
often function and overrule a credit department decision without any
prior approval whatsoever. "The local sales managers or the general
sales manager can and do override credit decisions with no impunity or
consequences," said one respondent. "Creditworthiness is not a concern,
only the sale." When asked to characterize their credit department’s
relationship with sales, the aforementioned respondent noted that the
relationship is "good, as long as sales gets their way." This sentiment
was echoed by a number of other respondents whose credit decisions can
be overridden by a sales team, with many noting that their relationship
with sales is "combative" and "adversarial." In one instance, a
participant simply responded by asking, "What relationship?" Another
respondent, who answered the question positively, noted that sales’
decisions to override have taken their toll: "After 20 years of dealing
with marginal credit and tons of collection problems, I am rundown and
about ready to give up and retire."

       

A large portion
of respondents noted that, while sales does have the ability to
override a credit decision and make a sale, for the most part, the
sales and credit teams work together to come up with an agreeable
solution to the problem. "The main objective is to find that unique
balance between sales and credit," said one respondent, who also noted
that, at their company, "There is mutual respect between credit and
sales. I am very fortunate to have the support of sales, as well as
upper management, especially in this economic climate we are currently
working in." The economic climate was also cited as a reason for why,
in the last several months, many sales people have stopped overriding
to make sales and taking greater heed of what the credit department has
to say. "It is not happening as much as it used to happen," said one
respondent. "Economic times are curbing their recklessness."

     

Be sure to visit www.nacm.org for this month’s survey question, "Do you
use a proprietary credit scoring system in your day-to-day evaluation
of accounts?"

     

Jacob Barron, NACM staff writer

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