The Tension Between Sales and Credit

Sales sees revenue opportunity; credit sees working capital exposure. Both are right — and this session starts by naming that tension honestly. Every time you extend credit, you are effectively financing your customer's business with your own cash. The CFO's job is to hold both sides at the same time: say yes to growth where it makes financial sense, and hold firm when it does not.

Gross Margin: Your Write-Off Multiplier

Gross margin is the most underused factor in credit decisions. If your gross margin is 10% and you write off R100 000, you need R1 million in new sales just to recover that loss. At a 15% margin, a R500 000 credit limit means a write-off would cost you R3.3 million in revenue to recover. Before every approval, ask: what is our gross margin on this product line, and what does a full write-off at this limit actually cost us?

Cash Position and Payment Terms

60-day terms on a R500 000 account means R500 000 of your working capital sits with your customer for two months. At a 10% cost of capital, that is over R8 000 in financing cost before any risk of non-payment. The session covers how to think about the gap between your supplier terms and your debtor terms — and the rule of thumb that your business should be able to absorb your three largest debtors going slow simultaneously, without a cash crisis.

Defining Your Credit Appetite

Credit appetite is not a feeling — it is a position, and it belongs with the CFO and board. The session introduces the Growth Mode vs Preservation Mode dial: growth mode means higher risk tolerance, longer terms, and more flexibility; preservation mode means tighter criteria, shorter terms, and security requirements above defined thresholds. Critically, both modes can coexist — one for new accounts and another for existing customers — and the position should be reviewed at least quarterly.

The Risk-Adjusted Credit Decision Framework

The level of conditions you require should always match the level of risk you are taking on. Low risk customers with strong payment history get standard terms. Medium risk customers — newer, limited history, or high concentration — get shorter terms and personal surety. High risk customers require a security instrument or deposit. And some accounts should simply be declined, freeing your capacity to say yes to the ones that genuinely work. This framework removes subjectivity and gives both credit and sales a clear, consistent basis for every decision.

Having the Right Conversations with Sales

The conversation between credit and sales is one of the most important — and most frequently broken — relationships in a business. The session contrasts two responses: "We cannot approve this account — they do not meet our criteria" versus "This deal puts R500k at risk on a 10% margin. Here is what we need to make it work." The second frames the risk in language sales can use and gives them something to take back to the customer. Your job is not just to approve or decline — it is to define the conditions under which your business can safely take on the risk.

When to Hold the Line — Five Firm Situations

Knowing when to say no is as important as knowing when to say yes. Holding the line is not obstruction — it is financial stewardship. The session identifies five situations where firmness is non-negotiable:

• You cannot verify the business exists, is solvent, or has identifiable directors — COD only, no exceptions.
• There is adverse credit bureau information: judgements, defaults, or patterns of slow payment.
• The account would represent 15–20% or more of your debtor book, creating dangerous concentration risk.
• The margin does not support the risk — a write-off on this account eliminates months of margin from the product line.
• Commercial pressure is the only argument — "we will lose the deal" is not a credit argument.