Why is a Credit Limit Good?

I am a salesman. I want to sell. The credit department is a tool and a necessary asset to the company. If it was up to me, I probably wouldn't have customers fill out that fancy paperwork naming their liabilities or have some lawyer review it to make sure it is legally binding. There would be very few I would not set up because I want the sale. I would do this until I got burned one time and then I would change my philosophy. I would have people I don't know very well fill out the fancy paperwork and also have a lawyer review it to ensure it is legally binding. Then once I was burned by a good "friend" I would have everyone fill it out because you can never tell.

So, this brings us to credit limits. Many customers don't like to have a limited amount they can spend with you until they send some money to bring the balance down. They want unlimited spending potential. As a salesman you want unlimited selling power. The more you sell the more you make. The credit department is designed to help the salesman. I know most salesmen see it as a liability, not an asset. To be a successful salesman you must understand credit. No, you probably will not be making collection calls all day or reviewing credit applications, but you do need to know the credit worthiness of the customers you wish to sell. You are the first line of defense in protecting the companies assets to unscrupulous people. Why would you want to sell to someone that will potentially burn you if that is their history? Most people will pay their bills. Some early. Some on time. Some late. Very few never pay. If a greater percentage never paid as opposed to the ones that did pay there would never be credit extended to anyone. You need to know the market and the customers so you can sell good customers. The credit limit is there as a guideline. Some credit managers use it to make sure that not too much money is at risk at anytime but to allow exceptions when deemed appropriate for that particular customer. If you, as the salesman, have a good working relationship and a proven track record to help the credit department, they will most often work with you. You must build that trust though and understand their job is to protect the company. When you go on a sales call and get the order, the customers are not usually mad at you for coming by. When the credit department calls they are not usually treated as friendly and have to listen to excuses or sob stories of why the money has not been sent in.

I have had customers call and ask for the credit limit to be raised. Sometimes I ask for it to be raised because of a large order. I may notice a volume of sales increase and see that it is appropriate to ask preemptively. When a customer calls me and asks for a credit limit increase, I try to go to bat for them. Before I do, I look at the aging report and how much they have spent. If someone has invoices over 90 days, I have to tell them why I can't do it right then. Usually they understand. I don't close the door on them, I just let them know that I need a little of their help, which is getting the invoices paid on time, so I can do my job of getting their limit raised.

A credit limit is good because it keeps salesmen mindful that part of their job is credit management.