In credit as in any business activity, there are certain common points from one to another company, one of them if not the most recurring is that of the eternal credit conflict with the sales area.
Let's try to approach this problem from an open perspective, let's start by looking at the differences.
Sales is considered in the company as the area of value generation par excellence, the main reason and source of subsistence for the organization.
On the contrary, credit from the traditional approach to business is identified as something negative “a cost center, which is in charge of the negative part of the relationship with customers that is the collection”.
Sales is viewed from the perspective of increased billing and credit from the perspective of increased cost.
Sales is considered an area of business development and customer service, credit as an area of risk management
Sales believes that the limited vision of the credit area prevents him from doing his job and generating more sales.
Crédito thinks that the sales area ignores the concept that a sale is not a sale until it is paid and that they only think about their commission and not the benefit of the company.
And last but not least, Sales is evaluated by the number of new businesses it can bring, while credit for the money it can recover.
Anyway, the list is very long and surely when you are reading you can think of many other elements to add to this list.
The central point beyond these considerations is to find out what is the factor that gives rise to this eternal confrontation between both areas and this goes through a redefinition of the concept that we have about credit.
When an order is placed with a customer who has credit with the company, an account is immediately created in the balance, that is, an asset is created for the company through an account receivable, at the time of its origin this value of course includes the corresponding percentage of contribution to the profit of the company so a value is undoubtedly created.
Whether this value is maintained depends on various factors (purchase and sale prices, supply and demand, economic variables, risk, etc.), but the commitment with a client is not only for a sale but for the development of joint businesses in the medium and long term and for this it is necessary to manage a line of credit.
According to this, we can then understand credit as a fundamental tool to sell more and more because if the business is to develop long-term clients, then what we are looking for are repetitive sales, that is, that the client makes new orders and therefore that have enough space on your credit to do it
Understanding credit in principle as a sales function, we take the first step in order to guide its development towards the generation of value.
Traditionally, the credit function, being associated only with the risk environment, has developed very specific measurement and monitoring schemes for this purpose, for example, the DSO (Portfolio Days Indicator),% of Past Due Loans, etc. These indicators are not bad, but they are incomplete since they are limited to measuring only the return time of the portfolio and how much has not been charged for what is related to the generation of flow, which is only one of the functions that the credit and accounts receivable area of a company manages.
On the other hand, in the evaluation of new clients following this approach, the research and analysis process is done under the premise of containing the risk and not from the perspective of guaranteeing more and better sales, the latter implies knowing the client, his way of doing business, your internal processes to process payments, your billing requirements, your delivery requirements, your payment habits, your financial situation, but above all and fundamentally, the value of the business at the time of sale Regardless of the risk, this value is obtained by considering the profit margin of the product line, idle or active production capacity and the demand for the product or service at the moment it is required, eventually other factors intervene such as costs of storage, transportation, waste, etc.
If we do not consider this factor, it is easy to make wrong decisions based solely on the risk assessment, since sometimes not placing a certain merchandise or service has a higher cost than doing it with a client who will eventually have a delay in payment.
On the other hand, to guarantee payment there are tools such as factoring, credit insurance, check protection, put options, etc. In addition to the possibility of handling real or documentary guarantees that may facilitate recovery in an extreme case.
We consider that in practice the delay in payments is not always a consequence of fraudsters, but rather problems related to errors made by us or the client, repetitive procedures, lack of compliance with requirements, billing problems, quality problems, or even simply for attitude reasons, so it is better to prepare to tackle these causes than to assume that all payment delays are due to fraud.
Although it is true that financial problems also arise frequently, for this it is necessary to be prepared and respond promptly when they arise, identifying if they are temporary or serious.
In short, the proposal itself is to transform the vision of credit and accounts receivable in the company since they are a direct channel of communication with the client and have a fundamental impact on the generation of more and better sales.
If we transform the operation of this area from risk control to sales and customer service without neglecting the procurement of cash flow but not making this its sole purpose, if for this we establish new rules that encourage new indicators generation of more sales, the timely response to customer requirements, the solution of internal problems and in general the generation of value, we will begin to see great results not only in the relationship with our customers but also in the work relationship in the areas of sales and credit.
Finally, the commercial area is made up of sales and on average 80% of these are made through credit, so the sales-credit binomial should be understood as a synonym associated with the profitability of the company.
Selling on Credit is Selling More.
The business environment has changed, you can take advantage of the change and be part of it or you can see how the changes continue to occur.
