In most organisations Finance is important so they have a Finance Director. Sales are important so they have a Sales Director – if Credit was that important should there be a Credit Director? While some companies have such a person, most sadly do not.
In most organisations the Credit Function is set a the lowest level within the organisation and in some cases the person or the people are working in isolation, buried in a back office somewhere far away from customers and sales people, often reporting to Finance who only have a partial understanding of what is required to deliver excellence at every stage in the process.
The really sad thing is that the Accountants the Credit Controllers and Credit Managers are reporting to have not spent one hour studying credit from risk assessment to knowing the very best way to collect what is owed. Worse still if they are paying Sales people commission every time they bring an order into the business, they are rewarding them for emptying the warehouse and scattering your stock all over the country and beyond.
If the management were serious about cash collections, sales people would only be rewarded on the basis of sales that have been turned into cash – this simple change in business practice would change the way business is done, the attitude to credit and the profitability of the business.
You cannot have your Credit Team working in isolation; they have to become an integral part of the commercial side of your business. Where sales people go out looking for sales, your Credit team ensure those sales become profitable sales and this only happens when the money is collected.
In this article I am proposing a one-team approach to doing business, you are all working for the same company; you should all have the same objectives and that involves selling more and getting paid, in full within terms. For this to work everybody has to be bought in. The serviceman filling out a docket must be aware of the implications of their actions on the whole cycle through to payment, the order picker must be aware that their actions have a major effect on your customers perception of your company and how happy they are with the service you are providing to them, the sales person should learn to ask the question “How would you like to pay?” and Credit People must become more aware that money is only received from orders that are sent out correctly, on time and in full to the right place with the correct documentation.
Show your Senior Managers this article if you think the picture I am painting here is better that the reality you currently enjoy. From today Credit must become everyone’s problem and everyone has to work together as a single unit to achieve it. You cannot rely on banks and external finance to fund your cash flow so why not go for the simple option and collect what you are owed?
This year, why not offer all your staff a bonus on the amount of cash collected between now and the end of the year and watch them work together to achieve results you never thought possible. The great thing about this is that you will have your money in before you have to pay out a portion of it.