How often do credit professionals have to deliver bad news and what is the bad news that credit professionals have to deliver? From my experience, good credit managers have a lot of bad news to deliver. This is because credit manager is the gate-keeper of the company's cash flow and he is the controller of the company's asset. In his effort to carry out this function, he has to make lot of decision that may not be favorable to the other party. Once a decision has been made, the credit manager needs to deliver the bad news, and he has to deliver it in a good manner so that there is no bad implication to the company.
Rejecting request to open an account terms
The are many reasons as to why an application for opening of accounts could be rejected. Although most of the time we can explain why the application is rejected, there are cases where we could not reveal the reasons. Allowing the Sales Department to inform this news may not be a good idea, ensure that the news is from the credit department themselves. Inform the customer verbally and follow up with a letter.
Placing orders on hold due to past due status of account
When customers account is past due, credit manager have to put the account on hold. We have to be very careful when we want to inform the customers that their order is being put on hold. Customers will surely get angry when their order is place on hold and the news may have a very bad implication. The customer may just continue not to pay, and they stop purchasing from us, we might still want to deal with this customer. For this situation, inform verbally and follow up with a letter. Get the sales department to be involved as well.
Reducing credit limit or shortening terms because of bad payment history
When an account is past due, and the payment trend is not very favorable, credit managers need to review the account. Usually the credit limit has to be reduced and the terms have to be shortened. Even though the company would like to continue doing business with the customer, Credit Manager still needs to convey this information to the customer. The response from the customer upon receiving this decision is usually not very positive.
Repossession of items sold on credit
sometimes when goods are sold on credit, and the customer are not able to pay, there is a need to repossess the goods.Request additional security or collateral for the account Sometimes, due to changes in management policy, new development in economic situation requires
How do you deliver this bad news in the best possible manner? Consider the following tips that I use, although this may not be the best.
- Customer would prefer to get the news sooner than later. Ensure that the news does not get into the hands of third party first.
- Explain in detail why about the bad news; do not rush through the explanation. Take your time; listen to the customer's complaints and concerns. Remain calm. Listen attentively and explain, do not debate it.
- Do not use the scapegoat tactics such as blaming the senior management, shareholders and CEO for making the bad decision. Tell them that it was based on consensus and you are also part of the decision maker.
- Demonstrate empathy as the decision will surely hurt some feelings of the customer.
- When delivering a bad news, end in a positive note.
These are some of the tips that used in delivering bad news to customers and these news need to be informed to your subordinates and peers, that is from the Sale Department. Get the Sale Department to be involved in delivering the bad news. Do not let your Sales Department to use the scapegoat tactics on you. Tell your customers that you are always looking for the good reasons to go back to business with them as usual.
