When sales understand the ‘why’ behind credit fundamentals

Sales and credit are two sides of the same coin, both aiming to grow the business, but from different perspectives. While sales focuses on closing deals, the credit team works to manage risk, ensuring customers are financially reliable and contract terms are sound. These different priorities can often lead to tension. 

Why it matters: When the sales team understands the “why” behind the fundamentals of credit, they can structure deals that not only close faster but also protect the company’s cash flow. Bridging this knowledge gap encourages collaboration, reduces internal conflict and builds long-term, profitable customer relationships. 

Know your customer (KYC) 

Knowing your customer is the foundation of effective risk management. KYC helps protect legal rights, ensure contracts are enforceable and confirm that credit is extended to the correct legal entity. Sales teams, often the first point of contact, are in a strong position to gather this critical information early on. 

“If we don’t have the necessary information, it can disrupt everything, especially when it comes to preliminary notices and job details,” said Ai Watanabe, CBA, credit manager at Unitis, Inc. (San Diego, CA). “If we miss the deadline or lack key job details, we could lose lien rights, regardless of how well we performed. When sales provides us with the correct company name, contact information and other key details upfront, we can better protect lien rights and improve collections.” 

Having the most accurate, up-to-date information on a customer will increase your chances of getting paid on time. “We recently transitioned to DocuSign from paper applications,” said Lisa Santiago, credit manager at Cole Wholesale Flooring (Fargo, ND). “Now, if a vital piece of information is missing for either the customer or the ship-to location, the invoices aren’t sent, which means we don’t get our payment. To prevent this from happening, I take the time to explain to sales what we need from a customer.”  

Assessing credit risk 

The primary goal of the sales department is to generate revenue by making sales. However, the pressure to seal the deal can sometimes lead to extending credit to customers who cannot or will not pay, ultimately putting the company’s financial stability at risk. A proper credit risk assessment ensures that the company does business with customers who can fulfill their payment obligations.  

When sales understand credit risk, they can make more informed decisions that support long-term profitability rather than just short-term wins. “Helping salespeople understand how they can help protect the company from bad debt is key,” said Juan Gondo, CPA, CFE, manager at Americas and EMEA credit at Eastman (Kingsport, TN).  

That understanding also improves customer communication. “It’s important that we clearly explain why a potential customer may be considered high-risk,” said Kara McKellar, director of sales accounting at Zodiac Pool Systems, Inc. (Carlsbad, CA). “When sales understands the reasoning behind credit decisions, they’re better equipped to communicate this to the customer. It helps them make informed choices that align with the company’s risk tolerance.”

McKellar added that credit decisions should never be overridden by sales. “These decisions are based on a customer’s credit history. By respecting that process, we’re protecting the business while still working toward shared goals.” When sales teams can confidently explain credit decisions, it creates transparency and trust — strengthening customer satisfaction and loyalty.

Sales plays a pivotal role in the credit risk assessment process because they are often the first contact person for the customer. “Salespeople can often be the first to detect early signs of financial trouble, especially with privately held companies, just by visiting the customer and observing their operations,” Gondo added. By collecting and communicating this information to the credit team, sales helps to build a more accurate picture of the customer’s financial health. This collaboration in the credit risk assessment process helps minimize both short-term and long-term risks of non-payment. 

Payment terms and credit policies 

Payment terms and credit policies determine when and how much cash a company receives. When sales teams know the terms under which customers are expected to pay, they can help set realistic expectations during negotiations, reduce the likelihood of delayed payments and align with credit in managing risk. “Making sales aware of these concepts ensures that revenue growth does not come at the expense of cash flow stability, thereby supporting the company’s overall financial health,” Gondo said. 

This awareness becomes especially important when sales is negotiating deal terms with customers. For example, a sales rep may be trying to close a deal, but the only way to do so is by offering longer payment terms. However, this option can delay incoming cash and strain working capital. By offering shorter payment terms the customer pays sooner, sales can help further to improve the company’s cash flow. 

Credit policies set the guidelines for extending credit and managing payment risk, so it is important for sales to understand them to align their customer negotiations with the company’s financial safeguards. For instance, stricter credit policies reduce the risk of bad debt but may slow sales growth. Lenient credit policies may boost short-term sales but increase the risk of delayed payments or defaults, which negatively impact cash flow. 

Account setup and order processing 

Knowing the “why” behind operational requirements for order processing and account setup can help the sales team communicate more clearly with customers, reduce fulfillment delays and close deals more smoothly. “Sales should be familiar with requirements like purchase orders (POs), credit applications and any size thresholds for accounts,” said Brian Rindels, financial services manager at Wagner Equipment Co. (Aurora, CO). “Knowing how to get an order through the system can make a big difference in how soon you receive payment.” 

Sales also plays a critical role in spotting red flags in customers and updating that information in the account. “If sales hears about changes in ownership, financial difficulties or operational issues, they need to share that with credit so the account can be updated,” said Denise Boock, CBA, ICCE, director of credit and customer service at J&B Group (Saint Michael, MN). “Sharing this information will also allow the credit team to keep an eye on the customer’s ordering and payment trends, which helps minimize the risk of non-payment.” 

Confidentiality and business credit law 

Confidentiality is essential in credit operations. Sharing sensitive customer information, even unintentionally, can expose the company to fraud, legal action or reputational damage. A solid understanding of business credit law helps prevent these types of violations. “Even if a salesperson has a close relationship with a customer, they can’t share details about one customer with another,” said Jennifer Dochnahl, CBA, credit manager at Seattle-Tacoma Box Company (Kent, WA). “We had a case where a company declared bankruptcy, and a salesperson tried to collect payment directly, not realizing they were crossing legal boundaries. It’s essential for the sales team to understand what can, and cannot, be disclosed to avoid legal repercussions.” 

The bottom line: Sales and credit are on the same team, even if they play different positions. When the sales team knows the ‘why’ behind these credit fundamentals, they’re better equipped to close deals that are fast, sound and sustainable, benefiting both customer relationships and the company’s bottom line. “The credit team will always try to find a way to get to ‘yes,’ because we want the sales team to succeed too,” Boock said. “But risk management and the company’s overall health are top of mind at the end of the day.”