Negotiation skills for credit managers—What’s your BATNA?

From day one, credit professionals learn that negotiation isn’t a one-time task—it’s a daily occurrence. Whether it’s a sales deal or a customer dispute, credit practitioners are always negotiating. 

Why it matters: Effective negotiation goes beyond “winning” an argument; it’s about reaching a mutually beneficial agreement. No matter how conflicting each party’s interests may seem, the right negotiation tactics help credit professionals increase the likelihood of finding a resolution while also mitigating risk and preserving the relationship. 

Do Your Homework: Know Your Customer 

Negotiation is nothing without preparation. Before entering negotiations, research your customer and engage with them. The more you know, the easier it is to reach an agreement that suits all parties. For instance, in a collection matter, conduct thorough research on the customer to understand their financial situation. “For example, I retrieved financial documents from a struggling customer, which allowed me to ship them products so they can make ends meet in terms of generating costs,” said Natalie Pearson, CBA, CCRA, credit analyst (Fort Worth, TX). 

Separate Position from Interests 

In negotiation, there’s an important distinction between a position (a specific demand or solution) and interests (the underlying needs, desires and concerns that motivate those positions). Focusing on interests rather than positions allows negotiators to move beyond stated demands to find creative, mutually beneficial solutions that address the “why” behind each party’s stance.  

“Ask them about what they’re looking for or what’s going on at their company,” said Francis Eberle, Ph.D., instructor of the Advanced Negotiations course at NACM’s Graduate School of Credit and Financial Management (GSCFM) program. “Find out what’s truly influencing their decisions and how much is at stake. Perhaps the company is at risk of going under, or the person may be worried about losing their job. Knowing this type of information will help you better approach the situation and determine the course of action.” 

Know Your Alternatives: BATNA 

Even the most skilled credit managers don’t always get their way. When interests conflict and more people become involved, the chances of winning a negotiation can decrease. If a negotiation does fail, a credit professional can identify a BATNA, or Best Alternative to a Negotiated Agreement, to enhance their position in negotiations. 

BATNA was popularized by the book, Getting to Yes: Negotiating Agreement Without Giving In, by Roger Fisher and William Ury. It involves listing alternatives and assessing their pros and cons before selecting the best option. “When a customer missed a milestone payment, my BATNA was pausing fabrication and protecting lien rights,” said David Escobar, credit and collections manager at Evapco, Inc. (Taneytown, MD). “Once they understood the next step, the payment came through.” 

Maintain Control 

When negotiating, it’s important to remain firm on your company’s interests as some customers may persist until they get their way. “Many customers will threaten to take business elsewhere if they don’t get what they’re asking for, whether that’s extended terms or the actual product release, regardless of the past-due balance,” said Pearson. “Long-standing customers often feel they have some level of leverage over the company.” 

Being clear about expectations and maintaining your composure, even when the customer is confrontational, will help you reach a consensus. “Maintain a position of confidence, know your limits and understand the risks your company is willing to take,” said Danny Wheeler, CCE, ICCE, director, worldwide credit at Adobe, Inc. (Lehi, UT). “Pushback is necessary, but it must be done thoughtfully and strategically. Don’t be afraid to develop creative strategies that give the customer a sense of compromise without compromising your position.” 

Build Trust Through Empathy 

Ultimately, negotiations are built on relationships and trust. When a customer feels supported and understood by their lender, they are more likely to communicate openly and make timely payments. These connections can be forged through strong interpersonal skills from how you interact with the person to how you resolve conflict. “Getting their perspective on the problem will help you find a quicker outcome,” said Eberle. “If you can find a way to connect with them, you can build trust.” 

Leading with empathy will help you understand their position so that you can address their needs as well as your own. “Being able to read emotions, understand perspectives and respond empathetically to a customer’s concerns can build trust and deescalate tense situations during negotiations,” said Brittany Acone, CBA, CICP, credit manager at Seaboard International Forest Products, LLC (Nashua, NH). 

The bottom line: Negotiations require preparation, curiosity and flexibility. With that, credit managers can turn even the most challenging situations into mutually beneficial agreements. 

Whether you’re sharpening your negotiation skills, enhancing your financial statement analysis, deepening your understanding of business credit law or aiming to become a stronger leader, the GSCFM is an invaluable resource. The registration deadline is May 29. Register by March 6 to secure the early-bird rate.