Key negotiation skills and strategies

From negotiating bedtimes with children to negotiating the price of a new car, negotiation—a strategic discussion aimed at reaching a mutually beneficial agreement—plays a key role in many aspects of life.

In B2B credit management, negotiation is key for securing payments, reducing credit risk and nurturing long-term business relationships.

Why it matters: By leveraging effective negotiation strategies, credit professionals can enhance communication, strengthen relationships and create win-win solutions that benefit both their company and their customers. Here are some negotiation strategies you can use on the job:

#1 Know your customer

The more you know about your customer, the easier you can come to an agreement that suits both your needs. For instance, in a collection matter, conduct thorough research on the customer to understand their financial situation. “You may find that you have alternative securities or strategies that could give you leverage, potentially putting the other party in a position where they are more inclined to pay sooner than they would prefer,” said Kevin Stinner, CCE, CCRA, credit manager at J.R. Simplot Company (Loveland, CO).

Don’t be afraid to get personal. Understand their interests and motivations to build trust and persuade effectively. “If I can connect with them on a personal level, such as bonding over a shared sports team, it helps build trust and fosters a relationship,” Stinner said. “When there’s a personal connection, whether real or perceived, it can strengthen your position in the negotiation.”

#2 Practice active listening

Active listening is a communication technique that involves concentrating on, understanding, responding to and remembering what the other person is saying. In negotiation, active listening helps you pay closer attention, further enhancing communication and understanding. “By understanding their needs and constraints, you’ll build trust with your customer and better identify problems and solutions,” said Jill Burns, regional credit analyst at ABC Supply Co., Inc. (Beloit, WI).

If you want to get the upper hand in a negotiation, make a statement and be quiet. “The silence will make them uncomfortable, and they’ll start sharing things that they wouldn’t necessarily share otherwise,” Stinner said. “This way, you’ll gain additional information you may need or can leverage in your negotiation.”

#3 Ask for help

Consulting external sources gives credit professionals a strategic advantage in negotiations. For instance, the sales team may have information about the customer that wasn’t disclosed to you. “It’s important to keep the sales team informed and reach out for additional support as they manage customer-facing relationships, while my role is more focused on the back-end,” said Brittany Yvon, CBA, CICP, credit and risk manager at Seaboard International Forest Products, LLC (Nashua, NH). “At my new company, the President is also heavily involved in negotiations, which is helpful because of his significant visibility in the organization.”

#4 Pushback when necessary

When negotiating, it’s important to be firm. If needed, push for a favorable outcome by resisting or offering alternatives. “Maintain a position of confidence, knowing your limits and understanding the risks your company is willing to take,” said Daniel Wheeler, CCE, ICCE, director, worldwide credit at Adobe, Inc. (Lehi, UT). “Pushback is necessary, but it must be done thoughtfully and strategically. Always do your homework beforehand and look for creative solutions that give the customer a sense of compromise without compromising your position.”

#5 Share the burden

Another strategy is to let the other party feel they’re winning. For example, if you’re negotiating finance charges and they refuse to pay them, you could offer to split the charges—where you pay half, and they pay the other half. “To them, it seems like you’re sharing the burden, but in reality, the cost of capital on those charges is less than half of what they owe,” said Stinner. “In the end, you’ll actually come out ahead on those finance charges.”

Or you can go the opposite way and share the value of the solution. “Most often, if you can find a way to create value in your solution, the customer is going to feel like they’re getting more than just the basic trade, so it’s really a win-win,” Burns said. “Before I go and enter into a negotiation, I do my research, and I have my perfect solution and I just figure out how I can expand on ways that it’s more beneficial for them.”

Key Negotiation Skills

• Self-awareness: Recognize and understand your emotions, thoughts and behaviors and how they influence your actions and interactions with others in a negotiation.
• Interpersonal skills: Being able to relate and communicate well with others can help create a positive environment, facilitate open communication, manage conflicts and foster collaboration.
• Conflict resolution: You must be able to manage conflict and disagree effectively to find a solution.
• Assertiveness: “Credit professionals should confidently advocate for their company’s interests without being too aggressive or alienating the customer,” Yvon said.
• Emotional intelligence: “Being able to read emotions, understand perspectives and respond empathetically to a customer’s concerns can build trust and deescalate tense situations during negotiations,” Yvon said.
• Empathy: Try to understand their negotiating position so that you can cater to their needs as well as your own.
• Patience: Negotiations take time, so you must be patient and think carefully to avoid making a rushed decision.
• Objectivity: Focus on the process and examine what happened before, during and after the negotiation.

“An important step in any negotiating process is to review what happened and to learn from what worked and what could be improved,” said Francis Eberle, Ph. D., instructor of NACM’s Graduate School of Credit and Financial Management (GSCFM) program. Advanced Negotiations, a key discipline in the program, enables credit professionals to explore various negotiation models and apply them through experiential activities and case studies.

The bottom line: Negotiation is a learned skill and can improve a credit professional’s position. “Negotiation skills are fundamental for credit managers because we have to effectively balance competing priorities of risk management, customer satisfaction and the company’s financial goals all at once,” said Yvon.

Go deeper: Sign up for the Graduate School of Credit and Financial Management by March 7th to take advantage of the early-bird rate! Click here for more information.