13 Sep, 2016 | Business, Payment, Productivity

Whenever I come across a finance director or a credit manager, I always ask the same question: Who should take care of those customers that “forgot” to pay? The financial department that is well-versed on the debt, but not on the customer?Or the sales department? Since they have a special relationship with the client, but who are not always aware of the receivables.

The answer is not simple and raises several questions regarding the organization and motivation of the company, not to mention the financial challenges it represents. A good customer is a customer who pays in time. An ideal collection would avoid at all costs litigation processes since they are very expensive and very bad for business. Therefore, it is important to take decisions that allow us to reduce payment risks and optimize collections.

Therefore, among the many departments that can found in a company, is the sales team the one who should be responsible for accounts receivable?

Go for the privileged relationship you have with your custome

The sales department is the one in direct and regular contact with the customers, holding a unique relationship with them. They know about the business, its products, its problems and even about its organization. They also know a lot about the contract that was celebrated between them. Finally, sales are the most direct link between your company and your customers: Take advantage of them!

These skills, which are crucial for negotiating contracts, may also be useful when clients haven’t paid their invoices. Thanks to this regular communication with the client, your business can anticipate potential future defaults and, if necessary, can use this position to remind the customer of his obligation. Learn to take advantage of this opportunity.

And don’t forget that a good customer is a customer who pays in time.

However, we must be careful when playing this role well if we want to avoid damaging the relationship with our customer. For example, your seller can negotiate an extension of payment terms with the customers that have been unable to pay. His relationship with the clients will provide him adequate grounds for negotiating. If necessary, you can combine efforts with other departments in addition to financial to have better results. This kind of maneuver can really simplify the collection. But beware, the sales department should maintain contact in such a way that they are not  to be perceived as collection agents. Remember that despite all, your business is still based on its commercial relationships.

Moreover, whatever their role in the collection process might be, make sure to limit your liabilities when drafting your contract in order to avoid any misunderstanding in the future.

Learn how to educate your company about the risks of a non-payment situation.

Often, financial services tell me that in their companies, employees are not interested enough in the collection subject. However, they all care for it. In fact, if we look at it from a different perspective, customers indirectly pay their salaries. We all have an interest that those debts get paid. Your employees – including your sales department must always be aware of the consequences that result from non-payment situations.

Nevertheless, we should motivate salespeople to create and maintain quality contracts by not only getting new customers, but also by identifying which ones are more likely to their bills in time, but how do we do this?

Here are some alternatives:

  • Collection performance bonuses: this way, the seller will have every interest in avoiding those elusive clients.
  • Performance indicators, such as the DSO (Days Sales Outstanding): from the first point of view, it encourages the sales department to carefully select their prospects.
  • Participation in collection procedures: for a sales department, this mission can be slow and uninspiring; its function may be better accomplished when choosing clients and when negotiating contracts.

With this approach, you can motivate your sellers and create consciousness about the risks of default, increasing their productivity and improving the profitability of your business.

Promote the exchange of information between the company’s departments

It is well-known that promoting teamwork rather than individual efforts will bring great positive results for the overall performance. However, I often encounter with organizations who suffer from a lack of internal coordination. In fact, it is common to find sellers who usually work on their own since the company promotes individual performances by granting with individual performances bonuses. The first symptom is usually a bad communication, which will usually end up affecting the results of the company.

When clients are not paying their bills, the joined efforts of the sales department and the credit managers is essential. If we want the collection process to run smoothly, there must be a good communication between these two subjects. The creditor can do the “good cop, bad cop” game. On one hand, the seller uses the relationship it holds with the customer to convince him to pay, keeping the conversation on good terms. On the other hand, the financial service should be more strict and go with more formal approaches. I have observed that this joint effort is more fruitful than isolated approaches.

You can also apply the “good cop, bad cop” game during contract negotiations. If you are looking to have the most favorable terms when negotiating with a client, you should definitely contact your financial department. When combining the information that has been acquired by the seller with the study of the risks done by credit managers it allows the company to reach a clear agreement, capable of limiting the risk of failure and its consequences.

Involving sellers in collection processes ?: Yes, but you have to do it right.

The relationships that your sellers hold with your customer can play a major role in collection processes, getting them involved is the best thing you can do. However, this role should be complemented with the functions of the other departments of your company. For better results, you should first try to encourage sellers and credit managers to collaborate in contract negotiations. Then, if a collection process becomes necessary, we can take advantage of the privileged position of sellers to convince their customer to pay their debts, before the situation gets worse.

Dunforce, the right tool for team spirit

Dunforce is an innovative solution that can be integrated with your company’s software  (accounting, CRM, ERP …) to retrieve information on accounts receivable from your customers.

They are reflected in a bright dashboard next to the options reminders (emails, SMS, mail) available on our platform, with Dunforce you can know at any time the status of reminders, payments, etc …

This tracking tool can be used by all those involved in these processes, enabling close collaboration between finance, administration and sales departments.

Dunforce can also issue specific reports on certain customers and can send notifications depending on the situation of those who have not yet paid, these alerts can be enabled for specific departments such as sales, depending on the case, it won’t be necessary to involve everyone at all times.

In short, it is a kind of CRM for collections, its innovation, and its potential improves enterprise-wide participation in these processes.

If this type of problem is worrying you, we are currently offering a free audit for your recoveries. You just have to sign up here and talk to one of our experts.

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