Sales Department Overrides of Standard Credit Terms

Even if you have stellar software that keeps track of everything, a disorganized accounts receivable department indicates immediate or impending cash flow problems.

creExceptions are a normal part of business. Making exceptions to your credit terms is another hurdle for your accounts receivable staff and your invoice software needs to be able to handle it. When companies offer a good deal, special terms can greatly benefit both you and your customer.

The tricky part is when exceptions become the norm. Of course, you put pressure on your sales department to perform. Most people are pretty good about following the rules and understanding that overriding the standard credit terms is a special case and should be handled as such.

Every year, if not quarterly, reviewing the credit approval process of your accounts receivable is vital to keeping up with shifting industry trends. You can’t do business if you don’t stay competitive. One of those parts should be checking the frequency with which your sales department overrides the standard credit terms. If it’s happening too frequently, you may have an issue with your terms needing to be adjusted. Or you may start hearing “But we need this to make sales!”

The latter is an enormous red flag. Why do your salespeople need to change the credit terms? Are you doing something drastically different than the rest of your industry? Does your sales team need additional sales training? Are they simply so used to doing whatever they want that they’ll continue to do it to make sure they meet their quotas? I’ve seen companies that employ salespeople who will work the system to make sure they make money, regardless of whether it’s profitable for the company. Such habits are dangerous in the long run.

If you have a problem with your sales department overriding your standard credit terms, it causes havoc for your accounts receivable staff. Even if you have stellar invoice software that keeps track of everything, a disorganized accounts receivable department indicates immediate or impending cash flow problems. Consider implementing a Quote-to-Cash solution like Armatic to create permissions and workflows for your team with better visibility throughout the entire revenue lifecycle.