Sales sees a customer ready to place another order. Finance sees unpaid invoices and an account approaching its credit limit. The discussion quickly becomes an argument about who is helping the business grow and who is standing in the way.
Both departments have legitimate concerns. Sales needs to maintain relationships and convert demand into business. Finance needs to protect cash and manage the risk of non-payment.
The conflict often begins when the business gives these teams different targets without a shared process for deciding which customer commitments it can safely accept.
Different incentives create different decisions
When sales performance is judged mainly on orders or invoiced revenue, extending more credit can appear to be a successful outcome. The cash consequences may only become visible later.
Finance experiences those consequences through overdue accounts, supplier commitments and pressure on working capital. Its response may be to restrict further deliveries.
Without agreed rules, sales can interpret a credit hold as an obstacle to growth, while finance interprets a request for more credit as disregard for risk.
The business needs a shared definition of a good sale. That definition should consider commercial value, payment terms, delivery obligations and the likelihood of collection.
A credit limit is a controlled exposure decision
A credit limit establishes the level of customer exposure the business is prepared to accept under its policy. It should be supported by evidence and reviewed when circumstances change.
Relevant information can include payment history, outstanding balances, financial information where available, references, disputes and the customer’s dependence on a particular project or income source.
The policy should state what counts towards exposure. Depending on the business, this may include unpaid invoices, delivered but unbilled goods and committed orders that will consume available credit. Avoid counting the same obligation twice.
A limit is useful only when both departments can see the information behind it. Sales should understand why available credit has reduced, and finance should understand the commercial commitments already made to the customer.
Separate credit risk from an invoice dispute
An unpaid invoice does not always indicate the same problem.
A customer may be unable to pay. Alternatively, payment may be delayed because the invoice is incorrect, a delivery note is missing or the goods do not meet the agreed specification.
These situations require different responses. A collection call cannot resolve an internal billing error, and a corrected invoice cannot solve a customer’s lack of funds.
Record the reason for each overdue balance and assign responsibility for resolving it. Distinguish confirmed disputes from unsupported explanations, and track any undisputed balance separately.
This helps sales and finance work on the actual cause of delayed payment.
Set approval rules before the urgent order arrives
Credit decisions become harder when a truck is waiting, a customer is demanding delivery and a salesperson has already promised a release.
Define the approval process in advance. Specify who may approve a limit, change payment terms, place an account on hold or authorise an exception.
An exception request should explain the current exposure, payment history, reason for the request and proposed protection. Possible arrangements include a deposit, partial settlement, a smaller release or payment before delivery, subject to the circumstances and agreed policy.
Record the approver, conditions and review point. A temporary exception should not silently become a permanent increase in credit.
Clear authority makes decisions faster and gives the customer a more consistent answer.
Build a shared view of the customer account
Sales and finance need access to the same dependable account information.
The shared view should show agreed terms, current exposure, available credit, overdue invoices, unresolved disputes and recorded payment commitments. Account notes should identify the next action and the person responsible.
Customer promises should be recorded with the expected payment date and relevant invoice details. When the commitment is missed, the record should trigger a review rather than disappear into a private conversation.
A CRM or accounting system can support this visibility, but the underlying responsibilities and approval rules must be clear first.
Reward sales quality as well as volume
Incentives shape behaviour. A scheme that rewards invoicing while ignoring cancellations, avoidable discounts and collection problems can encourage business that looks attractive at the point of sale but creates difficulties later.
Review whether the sales scorecard recognises margin quality, compliance with approved terms and the collectability of the business written.
Any collection-linked incentive should be designed carefully. Sales staff should not be penalised for billing errors or service failures outside their control, and finance should not be rewarded simply for blocking commercially sound orders.
The aim is to encourage responsible growth with clear accountability for the actions each team controls.
A practical case illustration
Consider a hypothetical distributor supplying a long-standing retail customer.
The customer requests another delivery while earlier invoices remain unpaid. Sales argues that refusing the order could damage the relationship. Finance places the account on hold because the proposed delivery would exceed approved exposure.
A joint review finds that part of the overdue balance relates to a delivery discrepancy. Another part is undisputed, but a payment commitment has been missed.
The teams assign the delivery issue to the operations manager and ask the customer to confirm how the undisputed balance will be settled. Sales requests a limited release against a confirmed payment, with the remaining order held pending review.
The authorised manager assesses the request under the credit policy. The decision, conditions and next review point are recorded and communicated to the customer.
The outcome is a documented commercial decision. The business can protect the relationship while addressing the unresolved exposure, and neither department has to rely on an informal promise.
Measure the process with operational indicators
Use indicators that connect sales activity to collection and decision quality. Establish a baseline before setting targets, and compare results over consistent periods.
Days sales outstanding measures how long credit sales take to turn into collections at an aggregate level. It is commonly calculated by dividing average trade receivables by net credit sales and multiplying by the days in the period. Use a consistent treatment of tax and balances, and consider seasonality and customer mix when interpreting changes.
Overdue receivables share measures overdue customer balances as a proportion of total trade receivables. Review ageing categories and major customer concentrations alongside the overall result.
Credit limit breaches track accounts operating above their approved exposure. Separate authorised exceptions from unauthorised breaches, while reviewing both for recurring problems.
Payment commitment performance measures the share of customer payment promises fulfilled by the agreed date. Define how partial payments and revised promises are treated so that performance cannot be improved simply by repeatedly moving the date.
Dispute resolution time measures the elapsed time from recording a dispute to its resolution. Separate internal errors from customer disagreements and assign an owner to each case.
Credit approval turnaround measures the time between a complete request and a recorded decision. Track incomplete requests separately so delays can be attributed to the correct stage.
Collection-adjusted sales performance follows the conversion of a defined group of credit sales into cash. Match collections to the relevant sales cohort so that receipts for old invoices do not make new sales appear better collected than they are.
Credit losses and write-offs show the value of customer balances assessed as impaired or written off under the applicable accounting policy. Review these alongside sales growth and customer concentration rather than treating strong revenue as sufficient evidence of success.
These indicators should prompt investigation and action. A dashboard has little value if no one owns the exceptions it reveals.
Make customer account reviews action focused
A regular joint review should address overdue accounts, material disputes, upcoming orders and credit exceptions.
For each account, agree the next action, responsible person and review date. Keep discussion grounded in account records and customer commitments.
Sales can contribute insight into the customer’s trading activity and relationship. Finance can contribute payment patterns and exposure analysis. Operations should participate where delivery or service problems are delaying collection.
This turns the meeting into a place where decisions are made and followed through.
Create a consistent customer experience
Customers should receive one clear message about payment terms, available credit and the conditions for further supply.
When sales promises a release that finance cannot approve, the customer experiences uncertainty. When finance changes terms without informing the account owner, the relationship can suffer.
Agreed communication responsibilities help prevent contradictory messages. They also make it easier to discuss a difficult account firmly and professionally.
Align growth with cash collection
Sales and finance can work effectively together when they share account information, decision rules and responsibility for resolving problems.
A clear credit policy protects the business’s ability to keep serving customers. A balanced performance system supports growth that can be delivered, collected and sustained.
Contact M&J Consultants for support with credit-control procedures, sales performance frameworks, debtor reporting and cash-flow planning. Enquire for a tailored quote based on your business needs.
Case and measurement note
The case illustration is hypothetical. The indicators are proposed management measures, not reported client results or guaranteed outcomes. Definitions and targets should be adapted to the business’s trading cycle and accounting policies.
