Credit Matters Blog

Credit and Accounts Receivable Departments ARE Part Of The Sales Growth Solution

Kim Radok 23 October 2011


My first introduction to dedicated credit management education and training was over 25 years ago. During the introduction, the first statement was:

"Credit and Accounts Receivable is all about helping the business grow its sales. IT IS NOT ABOUT DEBT COLLECTION!"

However, I see very few business organisations which utilise their Credit and Accounts Receivable Departments with the intention of growing their sales. As a consequence, management fails to appreciate the essential role of these departments in the sales process.

Since the GFC it is even more important that Credit and Accounts Receivable Departments receive due recognition for the work they do to increase sales. Furthermore, personnel from these departments provide impartial information on how your business is perceived by your customers.

But that is a story for another blog.

So how do the Credit and Accounts Receivable Departments assist in sales growth? Here are just a few examples.

1 The large outstanding balance is not always just about past unpaid invoices. It is about knowing whether the outstanding balance is made up of unpaid invoices, invoices with special terms or outstanding credit claims against your business.

2 Good customers stop buying from suppliers that do not address their outstanding credit claims. Bad customers keep buying from a business which does not focus on processing credit claims. Many of these subsequent sales, end up unpaid and as a bad debt.

3 Customers on stop supply lists appear to be bad payers. However, they may not have paid the outstanding invoice(s) because they did not receive the invoice(s)or because of other issues.

4 One of the best ways to lose sales is to act without contacting the customer because a payment authority became out of date.

A true story from the US; a supplier did not contact the customer about a credit card which had expired - as credit cards do occasionally. The customer was put on stop supply without explanation or contact.

The customer subsequently stopped paying. Furthermore they could not be sued because they paid their account off as per their OWN arrangement. This process took over two years.

The loss of sales per annum - in excess of one million dollars - which all went to a competitor.

These few examples illustrate that you can have "sales" but if they remain unpaid, or other issues remain outstanding, the sales become liabilities.

Who manages these situations?

Rarely are salespeople employed to be proactive in dealing with unpaid invoices and outstanding credit claims. Therefore it falls upon the Credit and Accounts Receivable Departments to manage these situations and all the other issues related in having the "sale" paid.

Therefore, post GFC, it is essential, if your business wants more sales, one strategy appears essential. Re-engineer your business so the Credit and Accounts Receivable Department is part of the sales strategy.

Your Credit or Accounts Receivable Department should never be your Debt Collector. Debt Collectors do that job much better.

May you be paid today rather than tomorrow.

Kim Radok