The phrase “glow-up” isn’t just for makeover montages: it applies to your business, too. But as you continue to check goals off your list, you’ll find that they don’t just disappear. Instead, they’re replaced with new ones. And one of the main ways businesses are able to continue growing and achieving those new goals is by setting sales targets.
“No company is in business to not grow,” says Bill James, Director, Enterprise Sales for Creditsafe. “They all want to grow. A lot of times, that means changing their growth objectives and sales targets. Sometimes they’ll be more aggressive, looking to hit high numbers through lots more new deals. Other times, they’ll scale back based on factors like economic conditions and global geopolitical risk.”
But it’s about more than making more deals versus scaling back. When sales goals change, so will your company’s risk tolerance – how much you’re willing to bet that a company will pay you back in good time and not drag down your company’s reputation. And to understand the impact sales goals have on your company’s risk tolerance, you need to look at the relationship between sales and finance teams.
Why might sales targets increase risk tolerance?
When companies chase big growth, sales targets can push risk tolerance way higher than usual. It makes sense: to grow, you need more revenue. To get more revenue, you need more sales deals. And if you’ve exhausted every opportunity at your current risk tolerance level, it might make sense to adjust that tolerance to allow more through. Deals that would have raised eyebrows before could get the green light. That can be a good thing for the company, but it’s important to remember that revenue isn’t always more exciting than risk.
When risk tolerance increases, it’s far from a free-for-all. Sure, the business is looking for big numbers at the end of the month, but those big numbers only count for something when they actually come to fruition. It’s not about accepting every deal that comes through: it’s about carefully weighing up which risks your company is willing to take on for potential growth.
Let’s say, for example, the sales team has a potential deal that would bring the business much closer to those lofty sales goals. The company’s credit seems to check out, but they have a high Days Beyond Terms (DBT) – much higher than industry standards. Under previous credit policies, it’s likely that finance would have denied this potential deal. But if you’re looking for new revenue, it could be worth digging deeper. Maybe the business does have a high DBT, but it’s consistent month-to-month. Shouldering that risk might seem more reasonable if you’re more confident that the payment will come, albeit later than contracted. On the other hand, if you notice that the company’s DBT is fluctuating sharply month-to-month, it could be more of a red flag. Those fluctuations are often a sign of a company struggling with cash flow issues – a contract with that company could be more likely to become bad debt for your business.
Integrating credit data into your CRM or sales pipeline tracking system is an excellent way to make sure decisions are being made as carefully as they need to be. Look for a credit risk API (a tool that connects data into your existing systems) that’s easy to install and use across teams – that way, everyone is on the same page.
Why might sales targets decrease risk tolerance?
Sometimes, it’s not about trying to grow faster than anybody else: it’s about weathering the storm. When external factors like a volatile economy, global tensions, or even things like changing public opinions put your company at risk, the goal might just be to survive the next year unscathed.
Of course, that doesn’t mean everything shuts down – it just means that the business needs to only work with customers who’ll deliver steady, reliable cash flow. And for that to happen, risk tolerance needs to decrease. There’s a time and place for taking bigger swings when it comes to the types of customers you work with (like we just talked about), but it’s probably not when you’re trying to keep things smooth.
When your risk tolerance has decreased, you need to be absolutely sure about the decisions you make. That means knowing your data is accurate and up to date. Most importantly, that data needs to be available to everyone across your business. If the sales team, for example, doesn’t know that the company’s credit policy has changed, they’ll continue business as usual – but, suddenly, they’re getting more deals rejected. Without that clear communication and access to enriched data, they’ll quickly become frustrated.
Automated credit decisioning can be an extremely helpful tool when risk tolerance decreases. When teams need to be extra careful when seeking out, approving and finalizing deals, wires can get crossed easily. Plus, working on deals that won’t be approved takes resources away during a period when no one can afford to waste time. With automated credit decisioning tools, teams can quickly determine whether a contact is worth pursuing. Look for a tool that allows easy modifications to your decision tree or credit scoring model. When risk tolerance decreases, you can start to make decisions in line with that new tolerance right away.
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Tips to unify teams when risk tolerance changes
In times of change, it's easy for teams and work structures to become disorganized. Here are a few of our top tips to make sure that, no matter what direction your risk tolerance is heading, your business can roll with the punches.
- Work from a single source of data: During periods of change, it’s easy for wires to get crossed. When teams are using different data sources, they aren’t able to make the same decisions. Let’s say the sales team is viewing data that shows a company to have a relatively low risk score: they would feel confident to pursue them as a customer. But if the finance team has access to deeper, more enriched data, they could see potential red flags that lurk beneath the surface. They’d reject the deal and the cycle of friction between sales and finance would continue. If everyone has access to the same accurate, up-to-date data, changes can be more easily implemented.
- Unified tech, unified team: Technology can be your best friend when sales targets – and risk tolerance – change. We know that strong teams are the ones that can work together effectively; technology lets you do just that. Look into tools like automated credit decisioning, which can help sales teams vet leads before they put in the hard work and allow them to close deals faster. APIs and other ways to integrate data directly into your CRM also goes a long way. Imagine your sales team being able to immediately verify a contact and access rich data about their business and payment habits directly in their Salesforce platform, for example. Easy, streamlined processes means teams can work better together as goals shift.
- Communication is key: The most important part of any change or transition when it comes to your business is communicating those changes well in advance. If people feel caught off guard, it won’t just be an implementation issue. People won’t feel like valued partners in the business – they'll wonder why they weren’t important enough to be part of the conversations. From there, it’s easy for the company culture to become less focused on work and more focused on personal issues. When sales targets move, communicating the thought processes and strategies behind the change keeps everyone on the same page.
- Know your coworkers: There are many reasons why a company might change sales targets – and why risk tolerance could change at the same time. When those changes mean that risk tolerance has decreased, for example, it would stand to reason that the finance team would reject more deals. And yes, of course that could be a pain for members of the sales team: they’re relying on those deals to pay their commission, after all. But when teams understand each other and know what role they each play in the business, it’s much easier to navigate those periods of change.
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About the Author
Yesinne Alvarez, Manager of Partnerships and Alliances, Creditsafe
Yesinne Alvarez is Manager of Partnerships and Alliances at Creditsafe and supports the Trade Data Team with deep cross-functional expertise. With extensive experience in Relationship Management, Project Management, and Business Development, Yesinne brings both authority and trust to her role. Her background includes senior roles in recruiting and strategic development for Fortune 100 companies.
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