By Patrick Hogan, Handle.com
It’s not unusual for friction to arise in the relationship between sales and credit departments. Salespeople are keen on closing as many deals as possible. At the same time, credit departments want to ensure that all customers are thoroughly vetted for their creditworthiness before purchase on credit is made. These two functions serve crucial roles in the success of any construction business–and while friction may not be entirely unavoidable, working in harmony toward improving cash flow and meeting customer needs is possible.
The symbiotic relationship between credit and sales
Sales and credit are not at odds. On the contrary, with increased collaboration, those who work in sales and credit can unlock many opportunities for the business, help each other avoid wasted time, and make work easier for both sides. It begins with recognizing their benefit to each other.
How credit departments help sales teams
Credit departments are most concerned about cash flow–they welcome new sales that ultimately lead to actual revenue and profits for the company. It is in credit’s best interest to help salespeople land high-value deals that work well with the company’s credit policy. In an industry heavily reliant on credit, such as construction, managing credit and the terms extended to customers is crucial. Being over-conservative will end in lost deals–and credit departments know this. They play a vital role in developing tailor-fit credit terms that work with customers that benefit all parties.
Through prospecting, salespeople have vetted potential customers. However, to complete the picture, those working in credit need to clarify the risk entailed in extending credit to a customer. A solid credit policy serves as the playbook for credit departments in evaluating creditworthiness, and sharing the credit policy with sales helps them prioritize prospects and refine dealmaking.
Credit teams can assist sales teams in reaching their sales goals by providing them with data from credit investigations and financial reports. The credit team holds information that sales can use to optimize their processes. Credit has information on slow-paying and high-risk accounts, customers who can handle more credit where deals can be increased, impending credit policy changes that need to be considered for new accounts, and other updates that can help sales teams fine-tune their sales process.
How sales departments can help credit teams
Credit departments are often buried in collections work, so there is a good reason why they want sales to screen deals to avoid those that end up in delinquency.
The initial information they have gathered from the customer is valuable in helping credit departments thoroughly evaluate a prospect’s creditworthiness. Sharing basic information with the credit department, such as business names and DBAs, addresses, and names of reputed agents and decision-makers, goes a long way in making credit evaluation more straightforward and faster for credit departments.
The level of communication between sales and prospects or customers is also indispensable when needing more information for credit evaluation. Some businesses are understandably wary of sharing financial information. Still, sales teams can communicate in detail that you will handle their data carefully with the utmost confidentiality and that credit evaluation is part of standard industry practice.
Since salespeople spend a lot of time communicating directly with prospects and customers, they are instrumental in educating customers. Explaining the terms offered by a business, the different credit options available to them, how important prompt payment is, and the reasoning behind credit terms extended to them can be done by the sales team. Ensuring that customers understand credit terms is crucial in optimizing their experience, promoting prompt payments, and avoiding payment delays. For example, clients who are not familiar with lien laws might take preliminary notices in a negative light. Sales teams can include the conversation about mechanics liens and payment protection earlier in the negotiation to educate the customer about the standard practice and not cause any undue tension.
Sales teams that communicate credit considerations early in the negotiation help credit teams tremendously. Their role is critical in setting up a lasting relationship with a customer. Ensuring that the sales team’s conversations with customers are consistent with the company’s credit policy is key to maintaining an excellent customer experience.
Forging a better bond between credit and sales
A good relationship between credit and sales results in better cash flow for any business. There’s no getting around the fact that sales might feel that certain credit decisions like not allowing open billing or limiting trade credit extended to a customer impedes their sales.
When payments from specific customers get delayed, sales teams, which account managers are usually part of, can give greater insight as the first line of communication with a customer. There might be delivery issues or other disputes causing payment delays. Solid communication between the two departments is essential in resolving payment issues earlier on.
Ultimately, sales and credit are a team. Both departments want as many deals as possible with customers who can pay, and they both benefit from cultivating relationships with good-paying customers.
About the Author:
Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors and material suppliers with lien management and payment compliance. The biggest names in construction use Handle on a daily basis to save time and money while improving efficiency.
