The Essential Role of Sales in Debt Collection

The sales team, traditionally seen as the main revenue generators, relationship builders, and market expansion specialists in typical business operations, also plays a crucial role in debt collection. While their primary focus is on revenue generation, sales professionals offer value that goes beyond recognition in debt collection processes, although they often do not receive sufficient acknowledgment. Their participation in debt recovery operations helps both sustain good customer relations and achieve long-term financial stability while credit and collections departments manage receivables.

Why Sales Should Be Involved in Debt Collection

Salespeople have a unique connection with their business clients. Through their advisory role, they establish bonds as they complete transactions, subsequently developing a high level of trust over the years. This established connection with customers grants them an advantage in collecting outstanding debts, thus protecting current and future business opportunities.

The following factors demonstrate their essential role in this process:

1. Better debt recovery rates result from maintaining good customer relationships. When the person who initiates communication about outstanding invoices shares a familiar connection with the customer, that person becomes more receptive to the discussion. Salespeople maintain a personal connection with their clients because they understand both their needs and their business patterns. Salespeople can achieve more straightforward cordial debt settlements through their established customer relationships.
2. Sales Teams possess intimate knowledge of both client businesses and operating Limitations. Business customers may not always delay payments due to a lack of funds; instead, they might be facing other financial challenges. Sales teams often learn about these issues through informal conversations and their extensive business knowledge, which they have developed over time. Sales professionals support their clients by creating mutually beneficial solutions, which may include options for payment arrangements.
3. A non-paying customer should never be classified as a regular customer. The fundamental principle is that allowing customers to have outstanding debts is equivalent to offering free products and services. While the primary objective of sales teams is to increase revenue, they cannot generate sales without receiving payments from customers. Additionally, sales representatives who engage in collection activities gain a deeper understanding of the financial risks involved in selling to customers who do not pay.
4. Sales Teams are able to proactively manage future Credit Risks. The process of proactive debt collection enables sales professionals to identify warning signs in their customer accounts. Sales personnel collaborate with credit staff to assess payment conditions when dealing with clients who exhibit payment delays or are involved in ongoing billing disputes. Sales efforts become more effecfive when directed at customers with solid financial stability through this type of involvement.
5. Maintaining future sales opportunities is a Sales Team objective. The way companies handle debt collection affects their ability to do future business with their clients. The collections team should avoid aggressive methods that harm relationships, but sales professionals who understand customer needs can use their consultative approach to preserve goodwill. Sales teams should approach debt resolution from a collaborative perspective, ensuring that financial problems are resolved without jeopardizing upcoming sales opportunities.

How Sales Can Effecfively Participate in Debt Collection

Sales teams should operate as complementary partners to the collections department rather than attempting to replace them. Here’s how:

• Early Intervention: Sales professionals should become involved when accounts begin to exhibit payment issues. Their prompt intervention stops accounts from moving into a final collections stage, providing the sales team with a sense of control and proactivity in the process.
• Educating Customers: The sales team should explain payment terms and conditions, emphasizing the importance of prompt payments when working with clients to ensure accurate payment expectations from the outset.
• Working with Credit Teams: Sales personnel, in collaboration with credit and collections staff, should work together to develop a unified approach for handling late payments from customers.
• Offering Solutions: Sales teams can present flexible payment solutions to customers by leveraging their understanding of customer situations, including adjustments to payment terms, modifications to credit limits, and partial payment options.
• Accountability (early and often): Sales personnel must establish financial responsibility for their accounts, as this supports their revenue targets and ensures timely payment of commissions. The ‘early and often’ principle emphasizes a proactive approach to continuous monitoring and intervention, not just when issues arise, to maintain active involvement in accounts and prevent potential debt collection problems.
• Scalability is a key consideration: For a busy salesperson, knowing when to step back from the collection process is crucial for driving revenue and hitting sales goals. Just as important as it is to be proactive in credit management is knowing when and how to hand over the reins to your internal credit team. As salespeople bring on more customers, they require more extensive collection activities, which can impact time management. To handle this effectively, it is essential to establish connections between your company’s finance team and that of your clients. Like the Sales Team, your Credit and Collections team needs to be in a first-name relationship with your client’s finance staff. This structured approach will streamline the collection process, freeing up the salesperson’s schedule so they can focus on increased revenue streams from both current and future clients.

A Win-Win Approach for Businesses

Debt collection becomes beneficial for all parties when sales teams participate in the process. Companies achieve better cash flow through individualized approaches while their sales teams secure future sales relationships with customers. Companies achieve balanced customer relationships and timely payments by breaking down traditional barriers and encouraging cooperation between sales and collections.

Businesses face a simple fact: customers must settle their debts before new sales can occur. Sales professionals who actively work in debt collection protect their revenue streams and build stronger client relationships, which results in sustainable business expansion.

Additional Thoughts from the Publishers . . .

Many good points were raised in this article. One of the most relevant is the relationship credit professionals should strive for with their sales staff: to be seen as a business partner and advisor, not an adversary. After all, the sale isn’t complete until the bill has been paid. The point is that credit and sales need to be fully aligned.

Leverage what you know

Credit and collections teams have unique and valuable insights regarding both their company’s and their customers’ business. They have visibility into processes that work well and those that do not.

Build trust

It is essential that the credit team build the trust of sales representatives and management. You can do this by showing a genuine desire to facilitate revenue opportunities that meet your company’s marketing, sales, and financial objectives. Don’t hesitate to interact with sales. If there is pushback on your decisions, ask why. You may learn something that helps you find a solution.

By building trust and open communications with the sales team, credit can leverage sales’ customer relationships for early warnings, whether a customer is having cash flow problems or will need a spike in their credit line because a large opportunity is forthcoming. You will also be able to be proactive when there are slow payment issues and unwarranted or unresolved disputes.

Have ready solutions

Use your unique visibility and domain expertise to develop off-the-shelf alternatives to mitigate risks and approve credit where profitable sales are possible. Be prepared with alternatives if an increase in a credit line will require some form of security or guarantee. There’s an old saying: “Never say no. Say yes, but how?” Even better: “Never say no. Say yes, I know how.”

Provide excellent customer service

As a customer-facing function, credit and collections has a direct impact on customer service. Showing sales and customers excellent service is a competitive advantage and builds customer loyalty. Do this by being professional in all your interactions, promptly responding to inquiries, and always following up as promised.

Know your customers and develop valuable relationships

We all know that travel budgets are limited. Whenever possible, visit customers. Ride along with sales representatives. See things through their eyes. Discuss your objectives and decision process.

Be there from the beginning

Involve credit as quotations are being developed with pre-sale credit checks. No one in the sales team wants to waste time on companies that can not meet credit risk standards or have to go back after the sale to explain there will be special requirements by the Credit Department before an order is approved.