In a B2B environment, the sales and credit departments represent two different perspectives on growing the business. Sales wants to sell products or services to any interested customer. The credit department wants to make sure the sale represents revenue rather than uncollected debt. Although both departments are critical to the financial health of the organization, there is often friction between them. But when both entities understand their role and work closely with rather than competitively against the other, they are much more powerful in pursuing the end goal of growing the company.

The problem

It’s natural that a company’s sales department and credit department frequently butt heads. Sales has one main goal: sell — whereas a credit manager’s primary goal is to protect the company’s assets through careful screening processes. No wonder there may be friction at times.

This breakdown summarizes each department’s role:

Sales department:

  • Responsible for growing the company
  • Sell, sell, sell
  • Wages based on commissions or performance
  • Marketing
Credit department:

  • Risk management
  • Credit screening and monitoring
  • Accounts receivable
  • Collections

Working together

Although often seemingly at odds, the two departments should both be working toward the same ultimate goal: increasing their company’s bottom line and growing the company. And when both departments work as a team, they are much more powerful and effective toward achieving that goal.

Neither entity would exist without the other. The salesperson does the legwork, seals the deal, and hands it off to the credit manager. The salesperson may have made the sale, but the sale does nothing for the bottom line (and could even negatively affect it) until the money is in the books. That’s a key concept for the relationship between the two.

When sales and credit work as a team, you get fair and consistent credit extension; sales has access to large amounts of customer data; and the relationship between sales and customer is preserved. By working together, the company as a whole generates more leads, closes more deals, retains more customers, and grows profits faster.

Best practices for maximizing the sales-credit relationship

Cooperation and teamwork between sales and credit aren’t always easy. Often one side believes the other is impeding their success. But with a little work, the benefits can be beneficial to both parties. Here are some ways to foster that relationship:

  • Communicate — Sales can provide background information on a potential account, which is helpful for credit analysis. The credit department can advise sales on the status of an existing customer’s account so that sales can approach the customer for more sales, and credit can pre-determine a new or potential customer’s credit risk and advise sales about whether and how much credit might be extended.
  • Collaborate — Share knowledge about each other’s processes and tasks. Sales should discuss the challenges facing sales personnel, and credit managers can discuss how they evaluate credit risk. Through understanding, neither department will feel like their priorities and goals are being overlooked.
  • Cooperate — Break down barriers between departments. When sales and credit departments are siloed, you lose the sharing of information that is crucial for a good sales-credit relationship. When sales and credit teams work toward a common company goal of growing the business, they are more likely to work together to come up with options when accounts are a little shady (e.g., mechanics lien, credit insurance, additional security deposit).
  • Create incentives — Promote cooperation by providing conditional incentives, such as bonuses, that only apply after the customer pays, or after the sales team meets certain sales goals. This promotes working together between the two departments.
  • Review credit policies often and be willing to listen to concerns from the other team. For example, are your credit policies too strict and limit growth? Are they too loose, leaving the company vulnerable to unacceptable risk?

Although the sales department and credit department have a common goal of increasing revenue, each comes at the problem from a different perspective. Sales wants to sell to whomever wants to buy, and credit wants to ensure that the buyer will complete their financial obligation. This can cause friction between the two entities. However, when each team understands the role of the other and knows that by working together and balancing sales with an acceptable level of credit risk, they are more powerful than either entity by itself.

Need help managing your commercial credit risk? MSCCM financial experts can assist you. Contact us today.