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Passing The Five "C's" Of Credit
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By Benjamin Johnson

A successful chief executive bridges the gap between sales and credit. The sales staff focuses on product specification, quality, size, price, packaging and competitor's price. Sales people, whose
income generally depends upon a sale, fear rejection and resist discussing credit terms.

However, a sale without collecting the money is really not a sale and worse, it is a loss because of the time spent in the collection process, the cost of money, and the cost of production.

Credit terms should be a part of the sales package. The terms should be prominent in the sales presentation and be part of the proposal/specification. The easiest and often most practical way of achieving this is to state credit "specifications" right along with product detail.

Train the sales staff in the importance of cash flow. Continuously remind the sales staff that the conversion of a sale to cash is a necessity and attempt to overcome the fear of rejection and no sale.

The sales person should ask the prospect if the credit terms are agreeable. If not, reach a mutually acceptable compromise with the prospect. Once the prospect has done that and agreed to the terms they are in effect and in reality his terms and ultimately become the basis for the sales contract. Then the collection department can proceed and at that point, the customer no longer has a defense that the terms were not acceptable or not as anticipated.

Down the road when the payment terms have not been met, the sales department often requests the collection department or credit department to back off because of a big order expected to be submitted within a short time. This provides a free loan for the customer and unfortunately
invites abuse.

Terms of 30 days then become terms for a longer period and the buyer may defer payments on the new order. This erodes your bottom line because of the cost of money and the need to monitor the account to reduce any losses.

Educate the sales force to be aware of the importance of cash flow and the advantage of discussing credit terms. Emphasize that credit terms are not merely an afterthought in the sales process but a significant part of the transaction.


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