The Credit-Sales Connection

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Is Credit corrupted by too close a connection with Sales? Will the receivables asset go undefended by a credit staff too concerned with sales goals? Not in the experience and opinion of this credit woman. She's an enthusiastic advocate of a close Credit-Sales connection, and here's why.

Credit operations at the many facilities of Quebecor Printing Pendell, Inc. are part of finance departments--with one exception. At the international company's Midland, Michigan plant Credit is part of Sales. And that suits Credit Manager Teri Jarema just fine.

"I'm here to service the salespeople in getting sales," she says. "My goals are not only to keep bad debt below a certain percentage. They're also to hit sales targets. That's why being creative with credit terms is beneficial for the company--for my goals and for the salespeople, it's a win-win situation all around.

"To get a job into the plant, you need paper, schedules, and an estimate. That's why these functions were put into Sales Service. The last thing you need is credit so Credit and Collections were also moved into Sales Service. When I first started working here, I thought it was strange, but now I realize it's a wonderful idea. Everything I need is in Sales Services. It's not in Accounting."

Jarema lists these advantages of being part of Sales:

Easier accesses to valuable information. She contends that in operations where the credit manager reports to the controller or the CFO the credit department has information it doesn't need while information it does need is not easily accessible.

"I don't need to know what the payables are," she says. "And I don't need to know about payroll. That doesn't affect how I collect money or how I give credit. What I need to know is what's happening with customers, what jobs are estimated for, and what jobs will bill out for. Billing also reports to Sales Service.

"The information we share is so much more useful than the information I would get if I were in the accounting department. For example, personnel in charge of paper and scheduling can easily ask me, 'Has credit been cleared?' and I can easily obtain schedules to ensure customers are within their credit terms before jobs are run."

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In addition, Jarema is aware of questions customers ask about invoices because she works close to the billing department. The proximity is also helpful to other personel that need information from Jarema.

"Sometimes estimators recall I had a problem with a particular customer," she says. "Before they quote the job, they talk to me to make sure the customer doesn't still owe us money. If there were too many issues that weren't taken care of, they don't quote the job.

"If I were reporting to the finance department, we would be at different locations so they wouldn't hear me struggling with customers on the phone, and they wouldn't know they should ask me about certain customers. We may put out 20 to 30 estimates in one day. They can't check with me on every one. Just because we estimate a job doesn't mean that we'll accept it or that the customer has credit. The estimate is just the beginning of the whole process."

A close relationship with sales personel. Credit personel work "very closely" with sales personel, according to Jarema. Salespeople talk to her before a job comes in so she is familiar with the job, knows how often the publication will be printed, and gets names of contacts in case there are problems with collecting or the customer has questions about charges.

In addition, salespeople are helpful when there are problems collecting. "They lose their commission after 90 days," she says, "so it's to their benefit if we to get paid. They get copies of their agings every week so they know the status of their accounts.

"If customers are having problems, the salespeople highly encourage them to let us know what's going on. We've worked through a lot of situations that way. If we don't know where we stand, that's when we put our thumb down on customers, and it hurts them more than if they had talked to us when the problem started."

Salespeople also deliver the first invoice to new customers, This is particularly helpful with startups because they may not understand why the final invoice is higher than the pre-bill which they pay upfront. The invoice is often higher, according to Jarema, because after the pre-bill is calculated, customers may ask for pre-press changes, increase the number of copies they want printed, or fail to send in mail disks sorted to uses codes so they can get a price break on postage.

Furthermore, presses cannot be stopped at an exact quantity so there is always 2% either over or under the quantity ordered.

The account manager who follows the job through the plant also keeps the customer informed.

A better understanding of customers' questions regarding invoices. Because Jarema is so close to the billing department, she hears questions customers have about invoices. In addition, if a customer calls her about an invoice, she can pull the invoice up on her computer screen and easily get more detainled information from billing.
"The billing department is only five steps away," she says. "I can go over there, pull the invoice and have the details. Then, I can look at the same thing the customer is looking at while I answer questions."
Participation in sales service meetings. Jarema is routinely in meetings with managers in charge of paper, scheduling and estimating, this is helpful to these departments since they must know whether credit has been cleared before they order materials and schedule the job.

"We share information," she says. "When a new job is coming in, we discuss such questions as, 'Do we have paper?' 'Is credit cleared?' 'Is it in the schedule?' We don't want to count a job as part of what we'll do that month or put it on our schedule if credit hasn't been yet. We also need to order paper 5 weeks in advance and we don't want to do that either until credit is cleared.

"When credit is involved in supporting sales, everyone fits. The company can increase sales because the credit department focuses on creating ways to help customers with credit. The department has fewer problems collecting because jobs are run for customers whose credit has cleared. Salespeople also benefit because, when the company collects, they collect their commissions."

Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by Credit Today in 2006. This article originally appeared prior to 2000.