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I recently wrote an article about the friction between sales and credit departments: Credit Departments v. Sales Departments: How Everyone Can Get Along. While the two departments are naturally at odds with its department specific goals and incentives, they are the yin and the yang for any organization as they look to a greater vision: more cash.
This article discusses whether credit management practices can possibly drive more revenue to the business, and if so, what type of practices will do the trick?
Can Credit Managers Drive More Revenue?
So how does a credit manager drive more cash? It seems opposite to their job’s core function to drive additional revenue, but as we’ve explored in the previously published article 3 Characteristics of Great Credit Managers, great credit managers are interested in taking and making more business. Here is how we explained it in the previous post:
Great credit managers, on the other hand, consider it their job to create a credit program that allows the company to do take more business. Instead of focusing on the small picture (not getting stiffed), the great credit managers focus on the actual purpose of their job (to allow the company to get more business).
It’s something we reiterated in the recent Credit Management v. Sales Departments post, discussing specifically what a credit manager can do to help their company pull in more customer and drive more revenue: create different credit options.
If the credit department can create more options to extend credit, this enables the sales folks to close more accounts. Credit managers want to balance this desire with the risk mitigation demands of their job. So yes, the credit manager can enable the company to drive more revenue, but how to do this responsibly?
Possible To Reduce Credit Risk With Better Credit Data And Monitoring?
This topic recently came up on the Cortera Core Insights Blog: 3 Ways Credit Pros Can Become Sales Heros. I love this Core Insights blog and highly recommend it to B2B credit mangers or credit directors, and really anyone in B2B industries. This particular blog post caught my attention as it hit right on the same topic as my recent Credit v. Sales post and the general notion that credit people can be enablers of sales people.
The Core Insights article argues that “armed with right data, credit and risk professionals can change the game by not only reducing risk, but also contributing to the sales effort.” Cortera, of course, is in the business of selling business behavior data. This allows companies to track the health of their customer base and take action if there are any red flags. Cortera has mounds of data on private and public companies.
If the data feed to a credit department has enough quality, it can go a long way to mitigate the company’s financial risk.There is a lot of truth to this data argument.
If the data feed to a credit department has enough quality, it can go a long way to mitigate the company’s financial risk. The more you can mitigate your company’s financial risk and predict your customer’s payment behavior the more you’ll be able to make better decisions about who to sell to. Usually, this enables companies to sell to more parties.
Nevertheless, data is not bullet proof.
Similar to the challenges with products like credit insurance, good data still restricts your company to selling to companies who have enough positive indicators to be pretty insulated from risk. While data is always helpful, your company still might be scared to do business on terms with those fringe companies, and as anyone in the construction industry knows, there are a lot of fringe trade contractors.
Further, using credit monitoring or business behavior data to mitigate credit risk doesn’t help you much if the account goes unpaid (you still have to meddle with clunky and expensive litigation), and it carries some overhead in that you’ll need to monitor your customers and make quick decisions when the data points indicate a change or increased risk.
All in all, I have to say that Cortera’s points are very good in this article and on their Core Insights blog in general. I’m a fan of their product and philosophy. More protection, data and options are always a positive, and Cortera provides companies with additional intelligence about their customers and potential customers.
Construction Industry Is Blessed With Mechanics Lien And Bond Claim Rights – Use It!
If you’re in the construction or building supply industry the conversation about business behavior data is very interesting, and definitely worth exploring. However, it’s the mechanics lien and bond claim rights that can make the biggest impact to your organization.
As the above subtitle suggests, the construction industry is blessed with mechanics lien and bond claim rights. Companies all over the globe furnish services or product on terms and go to great pains to verify that their customers are a low credit risk. Those in the construction and building supply industries, however, can almost skip this. If they protect their lien and bond claim rights they will have security on every account, and this security – when used properly – can virtually guarantee payment.
We’re huge advocates of lien rights (obviously), but just like we mention in the recently published Credit v. Sales post, it’s just another option that your credit department can give to its sales people to enable them to drive more revenue.
Cortera is right. Credit pros can become sales heros. They do this through empowering their sales people to sell more by giving the sales team more options to mitigate the risk of default. That may be better data (better data, like Cortera, is pretty good). It may be mechanics lien or bond claim rights (a virtual guarantee for payment). A good credit policy is the foundation for this, and creating a credit scheme that has predictable and profitable results.