Fear of "The Money Talk"

Companies are grappling with a challenging cash flow environment. They're concerned about their customers defaulting on payments or just slowing down payments to preserve their own cash. When finding solutions for clients to improve cash flow, we find a common theme in most organizations: the crazy fear of talking to their customers about money.

Sales trainers will say that the fear of "The Money Talk" causes many sales people to fail. If the customer doesn't have a budget, can't afford what you're selling, or doesn't have the authority to buy anything, why are you wasting so much time trying to get them to purchase? The same could be said for managing the receivable after the sale.

This current economic climate is forcing many suppliers to become their customers' financiers. When the banks won't renew credit lines and the customers aren't generating profits or positive cash flow, vendors become the main financing choice. Actually, we're usually the financing choice because we unsecured creditors consistently provide free credit without the benefit of thoroughly understanding the risk. We fall in love with increasing sales and doing the deal while too often ignoring the risks of financing our customers' businesses. Too many suppliers are eager for business and afraid to Talk Money with the customer.

It's time for creditors to talk money. If customers are requesting extended terms or want increases in credit lines, find out if they qualify. Ask them to sign applications so you can check bank and trade information as well as public records. If the amount is substantial (we use $250k as our cut-off), tell them you need financials to verify the risk. This "don't ask" policy for fear of "insulting" customers needs to end. No one should be granting credit, let alone extending ridiculously long terms (beyond 30 days) without financial justification. If customers balk that you want to know how they're doing, it's a sign--a very bad sign. Well-run businesses, big and small, understand you need information to grant credit. Gone are the days of granting terms based on the old "we know these people, and they're good for it".

We need to turn the "Fear of Money" discussions into a free-flow discussion about what we creditors need to make a sound decision. Customers shouldn't be bullying you into making a bad decision. Let the poorly run customers go to your competitors and not pay them. Studies show nearly one-third of customers, on average, aren't profitable to the vendor. I would guess most of these are of poor credit quality.

There's no time like the present to explain to the customer what you need to get the money discussions going. Just say that your bank and vendors are doing the same to you, so you need to have standards in place. Without these frank talking points with your customer, the Fear of The Money Talk will drive you out of business.