It’s a question that bothers many organizations. Who should be responsible for collecting debts from customers?
Some people say it should be Sales, because a sale to a customer ends not with an order that is delivered but with an order that is collected.
Others say it should be the Supply Chain, particularly Logistics, or the people who deliver to the customers. The one who delivers the goods should be the one who collects.
Other people say it should be the Finance department, specifically those in Treasury or the ones who manage the organization’s cash resources. Finance managers track unpaid collectibles from customers and Treasury accounts for the cash. They’re the ones who should collect.
Sales executives would say their job is to develop and increase business. Collecting from customers distracts them from this focus so collecting from customers should belong to another department.
Supply chain managers would say their job is to make available products, deliver the goods, and satisfy after-sales requests such as warranty fixes—activities that meet customer needs. Collecting doesn’t fall under this scope.
Finance executives would say their job is to record transactions and manage financial assets. As much as they report how much debt there is to collect, that doesn’t mean they’re supposed to do the collecting.
Some chief executives tend to try to answer the question of collection as quickly as possible, thinking it’s just a matter of finding out who’s accountable. Other executives would simply pass it on to a third-party like a debt collector or via creating a stand-alone department devoted to debt collections.
Debt collection efficiency doesn’t necessarily get better even when there’s a third-party or even if the enterprise has assigned the accountability to either Sales, Supply Chain, or Finance. In several corporations I’ve observed, it sometimes gets worse, with debts not only soaring but also with conflicts becoming more frequent between departments.
This is because when whoever starts to collect more intensely, issues start to arise between enterprise and customer. For example, in one manufacturing corporation, customers refused to pay debts because their orders weren’t delivered complete. Another customer protested that they weren’t credited for a return of rejected products to the corporation. While another customer said she shouldn’t be paying because she had a pre-arranged agreement with her sales representative.
In other words, the problem of collection accountability is in many cases not the real problem. The real problem is the policy of collection and how it is being implemented.
Many corporations do have collection policies, which are usually built into their billing policies. The policies dictate allowable terms of payments and qualifications for credit for customers. It is the topmost echelon of an enterprise’s management who formulates the collection policy and oversees its enforcement.
Collecting from customers is therefore a process founded on policy. It starts with the terms of payment agreed with the customer upon sale. It continues with the enterprise checking the status of customer debt before delivery, then with the customer receiving and confirming the delivery, and it ends with the customer making the payment in conformance with the terms.
Sales, Supply Chain, and Finance have their roles to play in the collection process. The policy guides the conduct of the process and each function’s role.
To answer who should collect would be to ask who is the one who would pick up the customer’s payment. But as one can see from the bigger picture, that’s the one final step that depends on how well the other ones did before it.
This post originally published on August 2019
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