When you do it right, landing a sales deal can feel like hitting a home run. You practice endlessly, do your hardest on game day, line everything up and finally set everything in motion.
But when the deal gets killed or rejected, it’s more like a game being rained out at the last minute. You’ve still put in all the work, but now you have nothing to show for it. And the more it happens, the more frustrating it gets.
Those deal killers can happen for many different reasons, but it all boils down to one thing: you’re missing business risks and red flags somewhere along the line. Let’s take a look at some of the risks you can’t afford to ignore when it comes to new deals.
1. Not looking deeper than a credit score
When you pull a business credit report on a potential customer, the first thing you’ll probably look at is the credit score. It makes sense: it’s an easy way to get a general overview of a business and its financial health. But what’s important to remember is that’s all it is – a general overview.
A good business credit report goes much deeper than a credit score or limit. When you dig deeper, you should be able to see things like historical payment data, corporate linkage structures, legal filings, compliance violations, sanctions and other key information. From there, you’re more able to make informed decisions about which companies to pursue – and which ones aren’t a good fit for your business’ credit policy.
Look at metrics like Days Beyond Terms (DBT), which tells you how many days, on average, a company pays its bills past due. Looking deeper into a company’s DBT can give you serious insights into a potential customer’s overall financial health. If you notice a fluctuating or inconsistent DBT, for example, it could point to cash flow issues. They may be experiencing liquidity problems – easily paying their bills on time some months, but struggling in others – or dealing with too much debt. A good finance team would be right to deny a deal with a company likely to default on their invoices, so sales teams should always look below the surface when it comes to a business credit report.
2. Missing key due diligence investigations
What’s your idea of a perfect deal? A customer who pays on time, has great financial standing, communicates well and orders consistently sounds pretty good, right? What possible reason could the finance team have to kill a deal like that?
Sometimes, it’s about much more than a potential customer’s financials. Some companies are a no-go because of their business practices, ownership structures or supply chain – and it’s your company’s job to identify them before you sign a contract. Working with a business that’s been sanctioned, uses forced or child labor in their supply chain or otherwise violates compliance laws is a serious problem. If you’re found to work with a company that uses forced labor or sources from a sanctioned entity, it’s your company that will take the fall. For example, Elf Beauty was fined nearly $1 million for importing false eyelash kits from Chinese suppliers. So, what was the problem? Those Chinese suppliers sourced materials from North Korea. Even though Elf didn’t know, they were still fined for not vetting suppliers closely enough.
Not only will your business be subject to fines and legal fees, there’s also the reputational damage to consider. Allowing one deal to go through without thoroughly checking for compliance investigations won’t just impact that deal itself – it could have a knock-on effect that hurts your business for a long time.
3. Using outdated or inconsistent data
You’ve no doubt heard that a team is only as strong as its weakest link, but we have another saying we like to use. Your team is only as strong as the decisions you make – and those decisions are only as strong as your data.
Things can change quickly: you need to make sure that your data is always up to date and accurate. And when teams are using different data sources to make their decisions, it’s easy to fall out of step with each other.
Using good data to make business decisions sounds like a no-brainer, but it’s not always that black and white. Often, teams are sure that their data is the best of the best – until they realize other teams are using different data that tells a different story. From there, it’s a question of whose data is better and what the right decision is. It’s confusing, stressful and ultimately wastes time and brings down the morale of everyone involved.
There are two ways to avoid data disputes: first, make sure that the data you use across teams is unified, reliable and up-to-date. Second, make sure everyone can easily access the same data. Using an API to integrate data directly into your existing sales systems and CRM means everyone can access the data they need to make smart business decisions.
4. Not monitoring for changes
It’s like we just said: things can change quickly. And if you aren’t able to stay on top of those changes, you could be in for a nasty surprise. Even the most positive, outwardly-healthy company can be struggling behind the scenes. Going forward with a deal can be an excellent idea one day and a big mistake the next. If a bankruptcy takes you by surprise, you could be sitting with a lot of bad debt.
Even after a deal’s gone through, the working relationship between your business and your customers should be monitored. It’s easy for things to fall by the wayside when you have a million other things to worry about, but that doesn’t mean you should just leave your company to be surprised by a sudden change.
Your credit data provider should offer continuous monitoring of key companies on a 24/7 basis. A deal can fall through, or an existing relationship can become a liability to the company, if teams are operating under the assumption that everything is business-as-usual when it’s not.
5. A mismatch between sales and finance teams
There are some problems that can be easily fixed – technology issues, minor miscommunications and bumps in the road are all part of doing business. But there are other problems that can snowball so easily that you might not even realize how much of an issue they are until it’s causing some real damage to your company.
Sales and finance teams have historically been at odds with each other. When sales teams rely on hitting set targets to earn commission and grow their careers, it can feel personal when finance teams reject deals. And, on the other hand, when finance teams are presented with deal after deal that don’t align with the company’s credit policy – the thing protecting the company from bad debt and late payers – they can start to feel unheard and underappreciated.
A lot of the risks we’ve talked about today can come back to this point: when sales and finance teams aren’t working well together, more deals will fall through. Both teams should understand and recognize the role the other plays in the process. Finance teams are there to protect the business and help with overall growth. Sales teams are on the front lines to make sure that business goals are achieved. Both are equally as important, but their roles can butt heads when they aren’t working effectively together.
Using tools like automated decisioning software and APIs to integrate data directly into your sales database will go a long way to unifying sales and finance teams. That way, sales teams will have access to the in-depth data they need to decide which leads are worth chasing. Plus, the finance team will have an easier time approving new deals when they know the potential customers have already been vetted using data they trust.
No more surprises when it comes to customer creditworthiness.
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About the Author
Bill James, Director, Enterprise Sales, Creditsafe
With over 15 years of experience in finance, risk management and data analytics, Bill James brings a high level of expertise and industry trust to his role. Before joining Creditsafe in 2021, he served as Area Vice President at Dun & Bradstreet. Bill is widely recognized for his authoritative insights into enterprise risk strategies and is a frequent, trusted speaker at major industry events. His development of tools like the DSO calculator further demonstrates his applied experience and leadership in driving financial performance improvements.
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