Treating your Credit Department as a Selling Function
As personal and business budgets shrink and fears of a recession rise along with inflation and gas prices, it is not uncommon for today’s sales professionals to ask: How will I be able to keep pace with my company’s sales targets?
The answer could come from an unlikely source: the credit department.
The Power of Credit in Sales
While one might assume that credit would tighten in economic distress, commercial credit remains less expensive than historical averages, and business lending conditions are favorable. The same holds for consumer credit, despite rising rates and market volatility.
Credit remains a tool in the arsenal of businesses and consumers alike — for any business to succeed, the credit management team must work in conjunction with the sales department, ensuring that the company collects on its sales. The credit department plays a significant role in maintaining and expanding the customer pipeline. Companies must treat their credit department as a selling function.
A line of credit gives the customer time to complete the payment following the actual sale of goods or services. The incentive of a flexible timetable for payment helps small and large businesses alike attract new customers and retain existing ones. Customers appreciate the breathing room when credit is extended during financial stress. Assisting a customer during tough economic conditions builds customer loyalty.
In addition to credit, the business can offer a discount for upfront purchases in full,; directly and immediately enhancing cash flow. In these ways, the credit department is a selling function in and of itself, both by bringing in customers who may not have otherwise made the purchase without a credit offer and by accelerating cash flow for purchases completed at the time of sale.
Naturally, credit sales do carry risks. Suppose a customer who made a credit-based purchase does not pay according to the agreed-upon timeline. In that case, cash flow would be halted. Although a sale was made, it is never complete until payment is collected. Businesses can protect themselves against this pitfall by requiring a credit check for any customer making a credit-based purchase.
Then, in situations where delinquent payment persists, companies can work with a debt collection agency to pursue the funds. There will always be “bad apples” when collecting payment from customers — a business, especially a growing company with rising sales targets, cannot expect a perfect history. Accordingly, rather than running away from the risk of offering credit, businesses need to manage the risk.
The bottom line is that despite the inherent risks associated with extending credit during turbulent economic times — and even in regular economic times — it is incumbent upon businesses to use every tool at their disposal to stimulate sales. While credit sales constitute a calculated risk, today, that calculation favors moving ahead. With, of course, appropriate safeguards such as credit checks and backup plans such as debt collection in place. For the most part, the business can rest assured that they will be paid in good faith for repeat customers. And for new customers, the company must ask: What is the cost of not even trying to make a credit sale? Ultimately, treating the credit department as a selling function has proven to be an indispensable tool, and the upside outweighs the risk.
