In my over 18 years as an Executive of CIBI Information, Inc (CIBI), the leading credit information and receivables management company in the Philippines, I always believe that Credit and Collection, as a profession is one of the most underrated of all the professions in the industry. At times, I am getting to the point of being frustrated as I have been witness to a lot of companies who gave or still giving very minimal resources to their Credit and Collection Department.
A lot of times especially during my talks, I always ended up acting like a mediator (more of a referee) between the sales/marketing group and credit & collection/ finance department. At the end of all the discussions, I would always tell them that no matter what is the merit of the case, whatever is the situation and points being raised, they have to agree on this simple and most important principle: A SALE is NEVER A SALE until THE MONEY HAS BEEN COLLECTED.
Most companies especially those with big marketing or sales group, have a lot of incentives being given for hitting respective targets or quota. I always advise them that if ever there are incentives being given for a particular sale, it must be only released or given if that particular “sale” is already collected in full or if only half is collected, it follows that half of the incentive is also released. In this case the salesperson will have a mindset that anything that is still NOT PAID is not considered a SALE. Now, in this set-up, especially if there is a separate collection group that is tasked to collect, the salesperson will sometimes (if not always) put the blame of non-collecting to the credit and collection group. The sales group will raise a lot of issues such as “incompetence”, not enough effort, or the much classic line of “is it our fault if the credit and collection group cannot collect a legitimate contract/ transaction?” or to that effect.
This is the reason, why in all of my talks, I always push companies to have a simpler, clearer and well-discussed credit granting and collection policy coupled by escalation procedure. In drafting your Credit & Collection Policy, it is very important to start with the objective. For example, you could state as your objective: TO MAXIMIZE SALES, MINIMIZE COST AND LOSSES.
Of course, one must have in mind that there are a lot of factors to consider in drafting and designing credit and collection policies such as available resources, capital, competitors, product or services, target market or kind of customers, territory among others. Credit and Collection Policy acts like a map or a direction especially if you are already experiencing delinquencies in receivables or worse, you are already having an infighting between your sales/ marketing group and credit and collection department. As you know, delinquencies in receivables needs to be monitored because of the following reasons: delinquencies makes: (1) working capital tied up; (2) business operation disrupted and complicated; (3) company growth slowed down; (4) causes business failure; (5) the creditor financier for free; (6) the company requires to borrow more than necessary to finance receivable; (7) profits to be drained and/or reduced; and (8) lastly delinquency prevents build up of reserve for seasonal or long-term demands.
Bottom line, a sale is not considered a sale unless it is fully collected.
For credit & collection questions and inquiries, please call or text 0917-7220521 or email at elimtingco@cibi.net.ph
A lot of times, I am witness to a lot of delinquency meetings wherein I always ended up acting like a mediator (more of a referee) between the sales/marketing group and credit & collection dept. I would always tell them that no matter what is the merit of the case, whatever is the situation and points being raised, they have to agree on this simple and most important principle: “A Sale Is Not A Sale, Unless Collected!
Most companies, especially those with big marketing or sales group, have a lot of incentives being given to the Sales/ marketing department for hitting their respective targets/ quota. I always advise these companies that if ever there are incentives being given for a particular sale, it must be only released or given if that particular “sale” is already collected in full or if only half is collected, it only follows that half of the incentive is also released. With this policy or in this case, the salesperson will have a mindset that anything that is still NOT PAID is not considered a SALE. Now, in this set-up, especially if there is a separate collection group that is tasked to collect, the salesperson will sometimes (if not always) put the blame of non-collecting to the credit and collection group. The sales group will raise a lot of issues such as “incompetence”, not enough effort, or the much classic line: “is it our fault if the credit and collection group cannot collect a legitimate contract/ transaction?” or this is the reason, why in all of my talks, I always push companies to have a simpler, clearer and well-discussed credit granting and collection policy coupled by escalation matrix. In drafting your Credit and Collection Policy, it is very important to start with the objective. For example, you could state as your objective: “To maximize sales, minimize cost and avoid losses”.
Of course, one must have in mind that there are a lot of factors to consider in drafting and designing credit and collection policies such as available resources, capital, competitors, product or services, target market or kind of customers, territory among others. Credit and Collection Policy acts like a map or a direction especially if you are already experiencing delinquencies in receivables or worse, you are already having an infighting between your sales/ marketing group and credit and collection department. As you know, delinquencies in receivables needs to be monitored because of the following reasons: delinquencies makes: (1) working capital tied up; (2) business operation disrupted and complicated; (3) company growth slowed down; (4) causes business failure; (5) the creditor financier for free; (6) the company requires to borrow more than necessary to finance receivable; (7) profits to be drained and/or reduced; and (8) lastly delinquency prevents build up of reserve for seasonal or long-term demands.
