7

Watch Out!

Years ago, my manager and I attended the national sales meeting. On the second day, the VP of Sales made a surprise announcement. “All of you know that our Credit Manager is here. I am going invite him up to explain why our credit policies are so restrictive that we lost business last year to our competitors. As you know, some of you did not reach your sales targets, and I am sure you have lots of questions for him”

The next 45 minutes were stressful, but this experience taught me a great deal about how to interact with the sales group. I learned in 45 minutes the importance of taking time to explain the rationale behind negative credit decisions. I learned that it was best to give advanced notice about possible negative decisions. I learned to encourage salespeople as well as sales management to challenge any credit decision they consider incorrect.

My advice is to think carefully about your present relationship with the sales department and to remember that there is room for improvement in any relationship. I found that more open and more detailed discussions helped change the perception of the credit risk management function for most sales personnel. My challenge to you today is to look for ways to build bridges and mend fences between sales and your department. If not, one day you may be invited to a sales meeting just like me.

Tips on building bridges include:

  • 1. Return calls the same day. Chances are good that sales is calling you because the customer is calling them.
  • 2. Whenever possible, give advanced notice of credit holds. Rather than announcing an account is past due and on hold, try this instead: Let the customer and the sales department know that if payment is not received by a specific date that you will have no choice but to consider a credit hold.
  • 3. Always be open to new information or suggestions made by the sales department. Valuable information and valid options can come from anywhere including sales.
  • 4. Take as much time as necessary to explain your decisions to the salesperson, but remember that this is not a debate or a negotiation. It is an opportunity to share information.

Michael Dennis, CBF

What are your thoughts on this subject? All comments and constructive criticism are welcomed.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

7 Responses to “Thrown Under a Bus — and Learned from the Experience – Michael Dennis, CBF”

  1. ANNE MATTSON says:

    Wow! that was a BIG bus! but the experience you obtained impromptu was invaluable. I agree, in regards to letting your sales team know before there is a problem or as soon as their is a “potential” problem. I don’t believe in sales being involved with credit on a daily basis, they should be allowed to do their job which is selling, not chasing short pays or disputes. The credit professional needs to do their job and let the sales person know the status of an account whether good or bad, review credit lines bi-annually, keep on their good side! without sales there is no business. You can discuss a credit decision but don’t ever let sales make the credit decision:)

  2. Larry Convoy says:

    Michael,
    Always enjoy your articles. While I agree that communicating with the sales department as to why a particular decision was made is beneficial, I think you must also educate them as to the “code of ethics” that you as a credit manager follow.
    They must be aware that you cannot identify some of your sources or reveal information from an industry group member or report. We have seen over aggressive sales people destroy relationships that a credit manager has developed over the years within his industry with one slip of the tongue.
    Setting the ground rules early as to what you will tell them and what they are permitted to tell the customer can resolve situations like you were in.

  3. F. Scott Wilson says:

    At one of my first positions as credit manager, over fifteen years ago, about six months in the VP’s of Finance and Sales decided to move my desk…into the Sales Department. This was to give them easy access to me, and it was very stressful, and quite instructive. This was done, BTW, without talking to me at all, or with any advance notice. Very, very rough when Sales had started with the idea that the company didn’t need anyone in credit, because we had “only” $250M in annual sales!

    Since then, the first thing I do when taking a new credit management slot is to meet with Sales, let them know what I do and that my aim is to collect the money so that the customer can continue purchasing, and that I will keep Sales in the loop on any potential issues.

    Also, we have recently implemented a procedure that mandates e-mails to Sales on a daily basis, advising them who is on Potential Hold or Potential COD, with a window of at least five business days before the account is placed on COD/Hold, *and* a requirement that the customer in question be contacted by telephone, preferably speaking to a live person, so no-one is surprised by the account going on hold.

    This keeps Sales in the loop, and often gets us another contact at that company for better follow-up. It also makes Sales very happy with the Credit Department, because they have the option to weigh in on the issue, before any action is taken. Nowadays, Sales sometimes comes to me first, and gives me information about an account that I didn’t have, and suggests to me that they be put on hold or otherwise pursued.

  4. Laura says:

    Wow, I still have the tire tracks. My company sends out, twice a week, notification of potential past due accounts that may go on hold. They get notified and spoken with about the hold when the event occurs. The problem is that many hope it will clear up on it’s own. Unfortunatly they call in the 11th hour begging for help.”just one more order”. I was in sales before credit management in my company and I always managed my aging. In fact talking to my customers about their aging was an added value and I could ask for payment and the next order on the same visit. A sale isn’t a sale until payment has been received. We used to call it closing the deal. Sales people in my company are somewhat conditioned to sell ( or send orders) until someone says no more. They have been plenty educated on what criteria we need to make good decisions but still…..

  5. Dawn says:

    A recent acquisition has required that we move locations. As the only credit analyst in the region, I found myself in a sales office, sitting smack in the middle of my sales team. We had all known each other for years, but we always had the safety of separate buildings. I was not at all sure how this was going to work out. But we were all motivated by the fact that we were still employed. And while the transition to a new company was “very difficult” for all of us, we made it work. In fact, by seeing & hearing what they go through on a daily basis, I have gained a unique understanding of their situation. I have always treated them fairly and professionally, but I never really understood the REAL pressure that they deal with. It has not changed the way I make my credit decisions, but it has put a little “sugar” in the way I relate to them. And of course, they now have a better understanding of my situation as well.
    After a year, I was finally relocated to a separate facility with other “corporate” employees. This is necessary because we all know that there are many sensitive credit matters that require a more private environment. But the lesson that I learned was invaluable. While they can still be aggressive, impatient, irritating, manipulative and, sometimes, downright maddening…………..it’s not about me. The pressure on them to get the job done and seal the deal is huge. Their customers and managers are relentless.
    This might sound crazy, but I think all credit professionals should spend serious time in the sales department. Knowledge is power………Insight is invaluable. I didn’t learn anything that I did not already know, but my approach has shifted. And we are all the better for it!

  6. Denis M. Golden says:

    Michael,

    This “ambush” from your peers you deftly handled reminds me of a comment made by one of our esteemed credit colleagues – that a Credit Manager can never gain the respect of a Sales force until they see you do a presentation in front of the group.

    In front of customers 24/7, the Sales team gets punished in negotiations with unyielding Purchasing types, demanding managers who don’t “get it’ , and so on. They want to see you do it too.

    As the only Customer facing financial process, Credit is unique, and I for one always was proud of the fact my paycheck stub always listed “Sales”, as that is exactly what I am part of.

    There’s this idea I’ve often heard, in every company I’ve ever worked, that the relationship with Customers belongs to Sales, and Credit can only disrupt things. I doubt this sentiment will ever disappear, but it is truly off the mark, as experienced Credit pros take the time to develop a deep understanding of their Customers, unrelated to getting the next order.

    As it should be..

  7. Michael Dennis says:

    Thank you for your comments thus far. All of them are well written and instructive.

    Michael Dennis

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