Should deal makers be debt chasers? Should salespeople do debt collection? At first blush the response, would be, “Duh! Yah. It’s their job. Further, it makes financial (cost) sense as opposed to having others do it and in any case isn’t a sale closed, when payment is received? Why should someone else do it and they are the ones that brought and know the client?” If only it were that simple. As you will see, debt collection is not a Sales, but a business, problem. But before proceeding, debt here refers to overdue debt (receivables to use accounting language). Now, walk with me.
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Balancing act: The business owner dilemma
For business owners, the decision to integrate sales and collections responsibilities requires a delicate balance. On one hand, sales teams are the face of the company, forging connections and driving revenue. On the other hand, collections demand a firm hand, persistence, and often a different set of skills. Striking the right equilibrium is crucial to maintaining a healthy cash flow without jeopardizing client relationships.
The importance of collections in Sales
Now then. Outstanding debt is a pervasive issue in the world of sales, affecting businesses of all sizes across various industries. According to data from one research, late payments are a significant concern for 47% of small and medium-sized enterprises (SMEs) globally, impacting cash flow and hindering growth opportunities. And why? Simple. Cash is King. It’s cash that makes payments (including salaries and commissions). Not LPOs, cheques or invoices. Cash. No cash means the business struggles to pay its own debts and depending on its size may founder. Yes, borrowing is an option for big business but borrowing costs (interest), and needs cash to pay it too. Mr. Salesman, you get the picture? It’s a vicious cycle over-due debt creates and is why Mr. Business Owner pushes you to collect.
Read: Debt collection is in itself a formidable salesman
Should salespeople do debt collection? The case for sales-driven collections
For most sales people (63% by some studies) debt collection is a terrain they would rather avoid. It causes friction which goes against their nature, is seen as inhibiting future sales from same customer, and time wasted which could be used selling to other customers. “Selling is about building relationships, closing deals, and driving revenue, not chasing outstanding payments. That is for Finance to do,” they argue. But. “But Finance don’t know how to talk to customers and they’ll mess up the relationship.” When it comes to debt collection, salespeople want to have their cake and eat it too.
Read: Get your salespeople off the path of least resistance
Is there merit in combining the roles of the dealmaker and the debt collector? Should Salespeople do debt collection? A report from The Harvard Business Review suggests that sales-driven collections can have its merits. Customers often appreciate dealing with a familiar face, and a salesperson who understands the nuances of the deal might be more effective in resolving payment issues. This approach emphasizes relationship building beyond the sale, fostering trust and goodwill.
Illustration of sales vs collection
For instance, personal loans to employees by banks, come with this caveat: “Final dues to be channelled through the account.” Knowing his impending change of employer to a foreign country, a customer approached the salesperson with this proposal. “I have gotten a job in Qatar. My final dues will be coming in next month but I need the funds. I know I will continue paying the loan from Qatar just as I have been but so ask your advice how to proceed.” Knowing the bank would not compromise on this, the salesperson advised thus: “Congratulations on the job. You’ve been a loyal customer and I trust you will continue as is. Let’s just keep this between ourselves.” And that is what happened until the loan was cleared three years later.
Read: Invest more in sales relationships than processes
Practical considerations: Balancing sales success with debt management
Salesforce, a global leader in CRM, has implemented a hybrid model where sales teams play a role in collections. Their data indicates that this approach not only enhances cash flow but also contributes to stronger client relationships. However, caution is advised, as blurring these lines can potentially strain the delicate balance between sales and financial responsibilities.
In the dynamic world of sales, striking a balance between closing deals and managing outstanding debt is crucial. While chasing payments may seem like a distraction from the core sales objectives, ignoring overdue invoices can have detrimental effects on cash flow and profitability. Implementing effective debt collection strategies, such as setting clear payment terms, following up promptly on overdue invoices (especially for small businesses), and leveraging technology for automated reminders (mobile loans lenders excel in this), can help mitigate the risks associated with unpaid debt.
Should salespeople do debt collection? That is the question
In conclusion, the dilemma of debt collection in sales is a multifaceted issue that requires careful consideration and strategic planning. The key lies in understanding the unique dynamics of your business, the expectations of your clients, and the delicate dance between revenue generation and financial stewardship. While salespeople and business owners must prioritize revenue generation and customer experience, they cannot afford to overlook the importance of managing outstanding debt effectively. So, as you navigate the complexities of the sales process, as business owner ask yourself: Should sales people take charge of debt collection, should Finance do it or is it time to enlist the expertise of dedicated professionals?
What do you think?
You may also like to read: 4 practical ways to resolve Sales vs Operations fight
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