Credit Matters Blog

Credit and Accounts Receivable - The Guardians of Your Sales Cashflow

Kim Radok 14 February 2012


One of the key roles of credit and accounts receivable employees, is to guard the expected cashflow from credit sales. Unfortunately, this role is often belittled, or ignored, or not appreciated.

Credit and accounts receivable employees fulfil thier guardianship role via the completion of two sets of tasks.

The first task is proactive as they monitor the trading relationship between a business and its customers. In addition, they identify the creditworthiness of new and potential customers.

The second task is reactive and involves monitoring the causes of outstanding invoices.  Part of this task involves  contacting  customers about why the invoice remains outstanding and/or when the payment will be received.

In completing these aforementioned tasks, and acting in their guardian role, credit and accounts receivable people have to sometimes say NO to people. 

Herein lies the problem for credit and accounts receivable employees. When saying NO, they can incur the displeasure of others within their business, and of course, customers.

Nobody likes discipline in normal life. In the business environment, it is no different, even though, discipline is recognised as a good thing. We see problems relating to discipline when conflicts occur between sales and credit departments. The main critics of discipline are managers and salespeople who believe any discipline at all, restricts their own opportunities of success. 

Typical outcomes of poor management and sales discipline are:

1  increased sales and purchase frauds perpetrated against the business;

2 greater numbers of slow paying customers in the Debtors Ledger; and

3 bad debt write offs increase.

Being able to say NO, is part of normal business life. Many business people already say no to consumers customers because their business only deals in B2B trade. In addition, salespeople often say no to customers they deem will not be able to generate a certain dollar of value of sales.

It just seems, credit and accounts receivable employees are not allowed to say NO when the customer has a poor payment record or is always a slow payer.

Recognising when to say No, is also a very powerful growth tactic. After all, selling to ultra slow paying customers  who always find excuses not to pay, or to fraudsters, means you are using valuable business assets and energy. These resources could be better used selling to good paying customers.

Another good reason for saying NO to certain types of customers, is to cause grief to your competitors. This tactic is not always recognised, but is valid nevertheless. The fact is; if you can say NO to the non-payers, you will often see these rejected customers with your competitors.

Whilst your competitor may gloat for a short time, they will soon learn why you rejected the customer. These customers slow pay at best, but sometimes not at all.

Finally, the old adage which advocates "There is no freedom without self discipline" is often forgotten. In the above situations, the freedom of discipline is seen in the nature of the work which occurs within the business. For instance, there are many ways to be busy in business.

One way to be busy is to waste valuable sales time in following up sales mistakes, bad sales and slow paying customers. Alternatively, respecting the value of discipline in business decisions, means you can be busy doing good business with customers who actually pay within your terms.

The credit and accounts receivable employees play a guardianship role in the protection of the cashflow from you expect to receive from sales. Ignore the reason for the disciplinary messages they put forward, and it will affect your cashflow, operational efficiency and profits. 

May you be paid today rather than tomorrow

Kim Radok