This topic is a highly controversial subject, and not an easy one to discuss. However, I do believe that both sales and credit personnel are teammates and cannot afford to operate independently. The ability of a company to collect its outstanding credit balances determines the long-term viability of the business.
I am a member of a group who has spent their entire careers in the building supply industry. I have also been an overseer of both sales and credit, so I believe I am in a position to see this controversial issue from both points of view.
It’s almost asking too much for a company to require its salespeople to build a sufficiently strong relationship with a customer so that one day they will trust them with their business and then have the salesperson turn around the next day and become a collection agent.
Scrutinizing a customer’s credit history, approving credit, and establishing credit limits is the “accountability” of the credit manager. Achieving sales goals is the “accountability” of the sales force. But this doesn’t mean the two should be on different teams.
I believe credit managers are wise to seek the advice of salespeople. Salespeople can be a credit managers’ eyes and ears. Salespeople are in a position go see how builders run their jobs, have conversations with subs on a routine basis, and get a gut feeling as to a builder’s level of profitability. And when the credit manager has exhausted all efforts to collect from a past due account, I believe it is wise to ask for the salespeople’s help and advice, even to the point of getting them personally involved.
As a salesperson, I remember not wanting any part of collecting; my job was to sell. But when the credit manager suspended the credit privileges of one of my customers, I was in essence out of business with that customer. So unless I was prepared to lose the income I was earning on that account, I knew I had to get involved.
Over the years, I realized that in many respects a salesperson was actually in a better position to collect than the credit manager was. Salespeople can see the job in progress and can talk with the subs. If material is flowing onto a job and the subs are continuing to work, salespeople know that the builder is paying someone. The salesperson is highly motivated to persuade the builder to get their account current.
Should salespeople lose commissions on uncollected accounts? One of the reasons this issue is so controversial is because most companies would never even think of docking the pay of a salaried salesperson because a customer didn’t pay their bill.
I’m guilty of feeling strongly both ways on this issue, but I do lean in the direction of asking salespeople to repay out of future commissions the money they earned as a direct result of selling a customer who can’t or won’t pay the company the money they owe.
My logic is that a manager who is paid a bonus tied to the bottom line will certainly suffer if a customer either can’t or won’t pay their bill. I don’t believe salespeople should be any different; that is, if the salespeople are commissioned. It sends a clear message that salespeople—as members of the business team—must participate in credit losses.
For the same reason, I encourage our clients to tie a portion of the credit manager’s bonus to the company’s sales goal; again, to send a clear message that sales are critical to the company’s success; that is, that the company must have a top line in order to have a bottom line.
Credit and sales personnel are interdependent. Both professionals are necessary to the effectiveness of any building supply organization.
