Commercial Collections: The Relationship Between Credit/Collections and Sales

"How would you describe the relationship between credit/collections and sales?" I recently asked the question on LinkedIn. I want to thank all those that participated in this conversation, we had over twenty plus comments and I wish I could have included everyone's responses.

Charley Dehoney, CEO of Manning's Truck Brokerage said "Intertwined. Sales aren't sales if you don't collect the money. Collection is the conclusion of a sale, without collecting money, you're just practicing or donating."

Jay Bernard Halprin, Senior Vice President - Portfolio Management with Rauch-Milliken International said, "A love/hate marriage for the ages!"

Frank Sebastian, Director of Credit and A/R with Adidas said, "The credit department head should have an ongoing relationship with the head of sales, sales managers and major reps, as well as be training their credit team to have the same relationships."

Michael Neme, Director of Enterprise Sales with Trinity/Burris Logistics said "I'll stick with my industry (Supply Chain) because that's what I know. I see great salespeople who spend tons of energy & time to land an account only to lose it shortly after because of the lack of relationship/transparency within: Accounts Payable, Accounts Receivable, Collections, Operations and Customer Service."

Clint Richards, Regional Vice President State National Companies said, "It certainly helps to have a clean book of business, but having payment and credit conversations early in the process will be well worth your time."

Jim Becker, Founder and CEO Becker Logistics said, "The relationship is STOP gaps. Sales should ask for Credit; it's approved or denied, Collections collects (quickly or slowly) or doesn't collect and Sales has to honor what Credit and Collections says."

There is this stigma out there that it's "us versus them". When that shouldn't and can't be farther from the truth. All successful organizations know you have to have a healthy balance of "push versus pull". The best do. The top sales producers throughout my career have been my biggest supporters and champions! I've been told that's very unique and tell me more. This is such a vitally important relationship to the health of your organization!

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Step One: Educate

Take the approach that the sales person doesn't know because they truly don't. What do I mean by that? Credit/Collections leaders should not just call/email and say no! It should be an opportunity for them to build credibility with sales and educate them on what they are seeing. Early in my career, I made it a point to build relationships and gain trust with the sales operators and leaders of the business. We needed to have a mutual understanding that I was their biggest cheerleader. I would say things like "I want to see you on a golf course on a Friday" or "I want to see you on stage at the awards dinner". I truly meant that and I knew if I could educate them, and build trust that we as an organization could scale! Credit/Collections leaders should never dictate a decision but supply as much of the story that paints the picture for why the recommendation is not to go forward. Or maybe it's to go forward with a personal guarantee, security deposit, prepayment, or require automatic.

Fun fact: Most of your sales people aren't trying to make Credit/Collections leaders job more difficult. They actually are interested in understanding why and mutually coming to the same conclusion. After I made this investment of time into our sales, they would tell me forget it, I don't want to waste my time.

Step Two: Don't waste time, it's valuable!

The age old idiom, time is money. Guess what? It really is and your sales department should value their time. As I would expect the credit and collections departments to do the same. What do I mean? When you can get a sales person to understand that compounding revenue actually is a thing, something very special happens. I know, I know, you want me to spill but keep reading. The above mentioned "education" helps sales to determine what potential customers are worth the time investment. Sales (rightfully so) will always have high revenue goals and high activity/growth expectations and that's important. But if they are wasting any time on a customer that is going out of business, filing bankruptcy, etc. That wasted time could have been spent on the right customer. A customer that's increasing their spending volume, easy to work with and pays on time.

Step Three: The Compound Effect

If your salesforce is now educated, values their time, this step can be truly magical. I like to give the analogy of a hamster wheel. A sales person brings on a new customer, adds their revenue and suddenly they don't pay their bills. Their account gets suspended, what happens to that new added revenue? Poof, it's gone. The sales person goes back to the "pavement" and eventually replaces that lost revenue. They find that new customer, feel like they are getting momentum with the large uptick in revenue they added, when BAM! You receive a bankruptcy notification, once again "poof" goes that revenue. The revenue that they undoubtedly worked hard to bring on. What eventually will happen is while this salesperson can sell revenue, they are just running on a hamster wheel. If this is a good salesperson, you are risking them burning out or just getting frustrated so they quit. Losing a sales person that only needed some good advice.

Now let's take that same sales person and educate them. They are learning what are the warning signs credit/collections are seeing. They are proactively going to their credit department before any time or money is wasted. Is this a customer I should keep pursuing or onto the next one? They work cohesively together and on board a new customer, one that's not in severe financial distress. This customer comes on board and out of the gates, they are spending more revenue than anticipated. We aren't panicking though, we are comfortable with this customer, everyone is excited. Sales person is pumped and onto the next deal. That customers revenue really starts ramping and we have another new customer. That originally revenue has really started taking off and now adding another new customer. Don't look now but the original new customer and revenue is taking off and adding this revenue starts the compound effect. I'd be willing to put this test up against anything out there. The best sales people aren't worried about bringing any revenue on, they are focused on making sure it's the compounding type of customers.

In closing, if you have sales people that are extremely active but are losing business due to bad debt, forward them this article. Once they realized that it wasn't credit/collections is there to be a valuable tool in their arsenal to help them achieve their professional goals, the "stickier" and healthier their book of business will be.

I hope you see purposeful decision-making throughout the steps mentioned above. If not, feel free to reach out to me via email at keich@theiainstitute.com. I would love to hear your thoughts. Even better, #chimein on my personal LinkedIn page where this article will be shared and published for open comments.