Why you might ask is the Credit Coach writing an article about pricing. Surely pricing is a marketing function that is added to or probably more often reduced by the sales people whose job it is do the deal and close the sale, so in most cases the responsibility for pricing lies somewhere between sales and marketing. The problem is when responsibility for anything lies between two functions it often happens that it falls between the two stools and problems occur.
The simple truth is that if there is a problem in this or any other area of business it will always end up on the Credit Controllers desk in the form of a query or a late or non payment. In all my years as a Credit Manager, pricing errors were always the ones that annoyed me the most because they are simply down to a lack of communication internally. You can make it as complex as you like but the simple fact is through the web of communications the customer received one price and the billing department received another. I consider this to be really serious for a number of reasons:
1. You are tripling your own workload:
a. Send out wrong invoice
b. Send out a credit note
c. Send out correct invoice
2. You are causing extra work for your customer having to pay staff to correct errors in your invoices.
3. You are giving your customer an excuse not to pay
4. You look foolish at best and dishonest at worst – is that the impression you want your customers to have of you?
5. Your sales figures are overstated by the amount of the overcharge
6. In fact your Net Profit is also overstated by the full amount of the overcharge
7. If you pay commission on sales value, the chances are that you have rewarded the sales person for their lack of
communication by overpaying commission
All bad. I would highly recommend you do a detailed Credit Note analysis every week, identify the culprits and fully understand how the overcharge occurred. In most cases a pricing error occurs, not because someone did something wrong but because somebody didn't do anything at all! I would also make a strong case for the administration of the Price files to reside with Credit on the basis they are the ones who feel the pain when things go wrong and also I truly believe that Credit
management is much more that simply collections – a valuable Credit Manager should be the “manager of the margin” who is responsible to ensure that every sale is a profitable one and the required controls are in place at all times.
The simple truth is that if there is a problem in this or any other area of business it will always end up on the Credit Controllers desk in the form of a query or a late or non payment. In all my years as a Credit Manager, pricing errors were always the ones that annoyed me the most because they are simply down to a lack of communication internally. You can make it as complex as you like but the simple fact is through the web of communications the customer received one price and the billing department received another. I consider this to be really serious for a number of reasons:
1. You are tripling your own workload:
a. Send out wrong invoice
b. Send out a credit note
c. Send out correct invoice
2. You are causing extra work for your customer having to pay staff to correct errors in your invoices.
3. You are giving your customer an excuse not to pay
4. You look foolish at best and dishonest at worst – is that the impression you want your customers to have of you?
5. Your sales figures are overstated by the amount of the overcharge
6. In fact your Net Profit is also overstated by the full amount of the overcharge
7. If you pay commission on sales value, the chances are that you have rewarded the sales person for their lack of
communication by overpaying commission
All bad. I would highly recommend you do a detailed Credit Note analysis every week, identify the culprits and fully understand how the overcharge occurred. In most cases a pricing error occurs, not because someone did something wrong but because somebody didn't do anything at all! I would also make a strong case for the administration of the Price files to reside with Credit on the basis they are the ones who feel the pain when things go wrong and also I truly believe that Credit
management is much more that simply collections – a valuable Credit Manager should be the “manager of the margin” who is responsible to ensure that every sale is a profitable one and the required controls are in place at all times.