Do You Know of a Company On the Verge of Bankruptcy?

Working in conjunction with the business and its creditors, CMA Business Credit Services provides a struggling business with the opportunity to re-establish its financial credibility through time and planning, or to assist in ceasing its existence while minimizing losses to its creditors. As an efficient bankruptcy alternative, CMA provides all of the services necessary to wind down operations of a distressed business while avoiding both the administrative expense and paperwork associated with bankruptcy court. These alternatives are often less cumbersome for all involved and are less expensive, which means more return to creditors and more money left in the business to regain its footing.

If you know of a struggling company looking for bankruptcy alternatives refer them to:

Molly Froschauer, CMA Adjustment Bureau
Expertise in: Bankruptcy, Preferences, Reclamation, Proof of Claims, Creditor Committee, Chapter 7, Chapter  11,  Bankruptcy Alternatives
Phone: 800-541-2622

Senior Accountant Cheryl Lloyd Celebrates 50th Year With CMA

Congratulations to CMA senior accountant Cheryl Lloyd, who on Monday celebrated her 50th anniversary with Credit Management Association.

Lloyd, who began working at the CMA headquarters (then located in the Koreatown area of Los Angeles) on Sept. 8, 1964, started as an Industry Credit Group clerk, moved over to maintaining membership records, then to accounting in 1983, where she has been ever since.

“Throughout my time here, some things have changed and others haven’t. When I started at CMA, the groups were different because we didn’t have computers. We had to do our work on a typewriter. We copied our reports and group information on a Xerox machine and passed them around the office to share data amongst our staff. Computers have made my life (and job) much easier. On the other hand, the Group meetings themselves were about the same. Group members discussed information on their delinquent accounts in meetings and lunches back then, and still continue to do that,” Lloyd said.

Having only worked part-time jobs prior to coming to work at CMA, Lloyd says that some of her most fond memories have come from the family atmosphere that’s been cultivated while working at CMA. “I’ve appreciated the support over the years that I’ve received from my co-workers. We have shared life and work experiences, and many of them have become as close as family,” she said, adding that she met her husband Ed while he was running the mailroom for CMA from 1976-1992.

The CMA staff participated in a surprise celebration of Lloyd’s amazing feat last Friday, and we’re happy to report that Lloyd has shown no signs of slowing down.

cheryl lloyd

Announcing the New anscersX Report that combines key data from D&B, Experian and Equifax into one Business Credit Report

The anscersX multi-bureau trade credit report combines key factors from the three largest trade credit reporting agencies (D&B, Experian and Equifax), giving credit managers the most complete payment story available. “We spent time reviewing all the elements on each provider’s business credit report to determine what would give anscersX clients the best insight into their customers’ credit worthiness,” says Robert Shultz, Managing Partner of Trade Information Exchange. “By using an anscersX Report, you have covered the necessary bases at a much better cost and a tremendous time savings.   The anscersX Report provides a quick review of the information needed for most trade credit decisions.”

Credit Management Association® and Trade Information Exchange are proud to announce that they have produced the anscersX Report, a single report that contains all the key elements about your customers’ paying habits needed to make most credit decisions.
Credit Management Association® and Trade Information Exchange are proud to announce that they have produced the anscersX Report, a single report that contains all the key elements about your customers’ paying habits needed to make most credit decisions.

The report, which is available now at www.anscers.com, ranges in price from $29.95 to $64.95, depending on the number of reporting agencies the user requests. Users control which reporting agencies are accessed for the report.

“The anscersX report offers some real advantages to anyone making a credit evaluation,” said CMA president Mike Mitchell. “Single-source Business Credit Reports are made up of accounts receivable data that has been contributed by companies, public record data and scores generated from the combination of this data. Since most companies that contribute accounts receivable data only send it to one provider (D&B, Experian or Equifax), using one report may only provide a piece of the payment habit story.”

The anscersX Reports are available through CMA’s web-based platform anscers.com. “The anscersX Report is a significant proprietary credit offering to our customers,” says Teresa Campos, CMA’s Credit Information Services Manager. “A key feature is the summary section that displays scores from all three providers, plus other key data. This makes the anscersX Report easy to read and comprehend so users can make faster credit decisions. There are other advantages as well. This is a web-accessed report that can easily be ordered and received at the user’s workstation in seconds, all at a low cost. There are no minimum purchase or contract requirements. The users order what they want, when they need it and only pay for the reported results,” she added.

Several CMA Members have already used the anscersX Report and have had positive experiences with it. “We got an answer in minutes as opposed to calling all the trade references on the credit application,” said Mary Donaldson, Office Manager, Worthen Equipment Inc. Grating Pacific Inc.’s Stacy Henry added: “The enhanced anscersX Report is very intuitive and easy to read. The “Summary” section at the top of the report included all the information I needed to make my decision whether to extend credit. That saved me a lot of time.”

To learn more about the program, visit www.anscers.com or call 800-541-2622.

Western Region Credit Conference Early Bird Registration Ends Friday, Aug. 15

I wanted to remind our readers to make plans to attend the NACM Western Region Credit Conference: CreditScape by this Friday, August 15, as NACM members will save $100 on conference registration by that date.

This three-day conference, October 15-17, 2014 at The Palms, Las Vegas, Nevada, offers in-depth education sessions, top-notch keynote presentations by industry experts and networking opportunities with the best and brightest minds in credit and collections.

Changing laws, technologies, and markets continuously alter the credit landscape and make this a must-attend event.

Register now.

Here are FIVE CAN’T-MISS SESSIONS at this year’s event:
• How to Analyze Customer Liquidity
• How to Secure Transactions in Mexico and Latin America
• New Rules, Developments and Trends in Credit Laws
• What the Recent Data Security Breaches of Major Retailers Means to Vendors
• How Exporting Can Increase Your Sales

With 18 breakout sessions geared towards every level of credit professional and risk manager, the CreditScape Conference focuses on the credit horizon and shows you how to navigate the shifting credit landscape.

There’s no other program that offers this level of credit education at this price.

Need to convince your boss about the conference benefits?

We realize that every penny counts and sometimes it’s difficult to convince upper management to invest in your future. That’s why we’ve created a letter for you to download and use to explain to your boss why you must attend this conference.

Download the letter here.

At CMA, we believe that the content of this conference cannot be missed in order to keep up with the changing credit landscape. The question isn’t will you attend, but how can you afford not to attend?

Keeping Up With the Information Age, by Larry Convoy

Take a look around your office at all the new gadgets you have to assist you in your job that were not available 5, 10, 20 or 30 years ago.  Five years ago, there were no tablet PCs portable enough to carry in your pocket capable of holding the contents of your entire desktop computer. Ten years ago, your mobile phone’s purpose was to dial out and receive incoming phone calls (not to mention they were a lot heavier), now it is a mini computer allowing you to run your business and play Candy Crush while posting status updates on Facebook. Twenty years ago, email began replacing faxes and 30 years ago faxes replaced waiting for snail mail to arrive. You had to go to the library to look up information, and you could afford to wait days to get it. Today, no so much.

Within this timeframe, industry credit groups have changed as well. Thirty + years ago, these groups were 95% male and the liquor bill was double the food tab. Now they are predominately female and iced tea is the drink of preference. All of these changes have provided today’s credit manager with better tools to make decisions, monitor those decisions and react immediately and appropriately.

Why then, has the credit group meeting gone virtually unchanged for the 3 decades I have been attending? My theory is that the system of exchanging up-to-the-minute credit experiences within your industry, sharing Best Practices and networking with your peers provides more valuable data than any technological advances that have been developed to date.

At a June meeting, a member’s inquiry about a new credit application resulted in two responses of pending litigation. In  30 seconds, her work on this file was done, NO credit report ordered, NO references sent, No phone calls made. Clear half a dozen accounts and the hour-long meeting has saved you 8 hours of investigating and updating.

So the next time you scan a file from your IPAD, download it to your IPHONE and email it to your attorney for suit, consider whether this all could have been avoided had you attended your industry group meeting?

Some things just cannot be improved on.

Have a great August
Sincerely,

Larry Convoy
Supervisor-Industry Credit Groups
lconvoy@emailcma.org
818-972-5323

What Motivates The Credit Professional?, by Melissa Kobus, CCE

Melissa Kobus, CCE, is the Credit Management Association Chair and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com
Melissa Kobus, CCE, is the Credit Management Association Chair and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com

Credit professionals are a great group of people. They are hard workers. They are multi-taskers. They are consensus builders. They are goal focused. They are risk managers. But, what keeps them engaged and involved?

Motivation is defined as the reason one has for acting or behaving in a particular way.  So what motivates the credit professional to continue to perform and strive to be successful? This is a question I think about often. I manage a team of 10 credit professionals and each one is motivated differently. We have department goals and objectives and that influences their actions however it is more than that. Some are motivated by the bonus plan we provide. Some are motivated by the opportunity to learn more about our customers and our business process.   Some simply enjoy the challenge of getting the task completed, the account approved, the cash in the door, etc.

Will a challenging bonus program motivate you to be more successful? Our bonus plan is specific to cash results, past due balances and timely accounts reviews. In the past, it has also included turn-around time on applications, order releases and customer visits. A friend of mine once said, what gets measured gets done and that is what stays with me when I create a bonus plan.

Will the opportunity to learn more motivate you? Mastering a new task will keep you engaged. You should challenge yourself by learning a new “thing” every month. There are a lot of ways to find that new “thing”, webinars or classes, cross-training within and outside the credit dept, what about volunteering?

Will more engagement and influence in business decisions motivate you? The credit department has a unique role within the company; they interact with almost every dept. The credit professional can influence change, can offer insight to how a process works, and can help to make your business more successful. Think big, get involved, and challenge the barriers.

Everyone is motivated differently; I encourage you to think about what motivates you and make sure you strive to keep yourself challenged every day.

Have a great month!

 

Melissa Kobus, CCE, is the Credit Management Association Chairman and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com

What’s on Your Tool Belt?, by Michael C. Dennis

Michael C. DennisWhen I earned my MBA, I learned new skills and added them to my tool belt. Then, I got my first job as a collector and found I needed an entirely different set of tools. CMA offers a variety of educational options that will provide you with some new tools…new ways to think about how you might solve a problem or approach your work differently. When you attend a webinar/seminar/class, think about how you can apply that knowledge to address real-world problems. I am convinced that the ability to effectively apply skills and capabilities (tools) to address new challenges is critical to your success in any job.

Also, for those of you looking for employment, my experience both as a job candidate and as the hiring manager has been that the applicant who can successfully describe how their current talents can be applied to the new task, challenge or position automatically becomes worthy of further consideration.

What’s the biggest factor you consider when hiring a potential new employee, or the one you think was the biggest factor in you getting hired in your job? I welcome your feedback.

Michael is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals. He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events. He can be contacted at 949-584-9685.

If It Ain’t Broke, Fix It Anyway, by Michael C. Dennis

With the so-called “information age,” the business landscape is very different than it was 10-15 years ago. Lots of things are happening faster than ever before: speed to market, speed at which your customers demand information about your product, venues of where your products are sold, decreased budgets (read: do more with less resources) and more data than ever before now available about your customers, and that just scratches the surface.

The conventional wisdom is not to change anything until you are forced to do so, but sustained competitiveness can only come from improved productivity. Improving productivity requires change. Unfortunately, no matter how good or how well-reasoned or how well-documented a proposed change might be, some people on your team will resist it anyway.

In this changed world, it’s necessary to completely evaluate everything you’re doing as a company and be ready to answer the WHY question: “WHY are you doing this task, and how does it add to the whole project?” If you cannot answer the question, it’s time to let go of that project in favor of one that does have an answer. “We’ve done it this way since before I was here” no longer is a good enough answer.

As a manager, lead by example. Change is not easy, but when your staff sees the benefits firsthand of process evaluation, though it may be hard for them to adapt, this evaluation process will (slowly) find its way into your corporate culture. Remember, it’s all about working smarter, not harder.

Have you had any experience in your organization with process changes? We’d love to hear your stories.

Michael is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals. He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events. He can be contacted at 949-584-9685.

Wanted: People in Your Niche Market, by Larry Convoy

Industry credit groups and networks offer CMA members a unique opportunity to network with other credit professionals in their industry.

From July 2013 to June 2014, credit groups exchanged information on transactions in excess of $3.5B. More than 8,680 companies were discussed with advanced notice on $104.5M in total balances greater than 91 days past due.

Credit Management Association offers more than 60 industry credit groups and networks at the local and national level; including food and beverage, construction, health care equipment and more. Active participation in these groups is rated as a top benefit that the association offers.

CMA has been approached by its members to investigate the viability of forming several new credit networks. Here are the proposed new networks we are researching and developing:

  • Fuel Credit Network: Wholesale Fuel, Seiberts Oil, Boyett Petroleum and Robert V Jensen are looking to expand their credit network of fuel jobbers and distributors selling to stations, farmers and business accounts.
  • Animal Feed and Supply Store Network: With champions from Western Milling and Associated Feed behind the formation of this network, it should fill the void of information on retail feed and supply stores.
  • Supply Chain Management Network: Vendor analysis has become a greater priority with many companies. Two experts in the field are leading the push for this CMA network, we hope to start a Best Practices Bulletin Board in the next 60 days.

In all cases, contact me at lconvoy@emailcma.org or 818-972-5323 if you’re interested in joining these groups (or have any ideas of other ones you think we should form.

Thanks for your consideration!

Registration Now Open for 2014 NACM Western Region Credit Conference

Credit Management Association (CMA) announces that registration is now open for the 2014 NACM Western Region Credit Conference (WRCC), titled the CreditScape Conference, Oct. 15-17, 2014, at the Palms Hotel in Las Vegas, Nevada.

The CreditScape Conference offers credit professionals three-days of targeted credit skills training. It is the only West Coast-based conference for credit managers, by credit managers. Credit Professionals at every level can benefit from the conference sessions and keynote presentations. It is designed to provide skills and best practices that can help improve an attendee’s bottom line/profit margin and allow them to sell to more accounts.

“It’s critical for credit managers to attend this conference so that they can stay current with best practices in credit management and bring those practices back to the office to implement immediately,” said CMA president Michael Mitchell. “Tracks are geared towards international credit management, collections, legal issues surrounding credit management, and Credit 101, so that every level of credit manager can benefit from attending this event.”

Registration is now available at www.creditscapeconference.com. Pricing for the conference is $595 for NACM members, while non-NACM members will pay $695. This includes 2 keynote sessions, over 20 breakout sessions, lunches and receptions. NACM members are encouraged to take advantage of special early bird pricing of $495, which is available via the website until August 15.

“With more than 20 session offerings, most of which are exclusive to this event, there’s no other place to get  business credit training at this price, and also get the opportunity to network with some of the top credit managers on the West Coast,” Mitchell added.

All educational sessions qualify for Continuing Education Units (CEUs) and provide roadmap points for those interested in pursuing a Credit Designation.

The Western Region Credit Conference is sponsored by the following NACM Affiliates:  Burbank, Denver, Nevada, New Mexico, Portland, Salt Lake City, San Diego, San Leandro, Seattle, Alaska, Hawaii, and Spokane. Members of NACM receive a discount on Conference fees. To find out more about your local NACM Affiliate and NACM Membership, visit the NACM website at http://www.nacm.org.

Growing Your Knowledge Base, by Melissa Kobus, CCE

Melissa Kobus, CCE, is the Credit Management Association Chair and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com
Melissa Kobus, CCE, is the Credit Management Association Chair and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com

More than 15 years ago, I decided to invest in my future (and my company’s as well) by taking the first steps into gaining my professional designation, signing up for NACM’s Business Credit Principles class. It was a great class.  I had a wonderful instructor who brought a lot of different experiences to us.  One of my fellow industry credit group members held the class in their conference room.  There were 8 students and we all passed.  This class started me on my path to my CCE.

This class also helped me build a network of contacts that I still keep in touch with today.  Every course that I have participated in has other credit professionals just like me who are willing to share.  They may not be in my industry, they may be new or very experienced but we all have one thing in common, we all have the common goal of building a better credit world.

During my service on the CMA Board, I have not been shy about expressing my strong support of the education arm of CMA and NACM.   I believe every credit professional benefits from learning.  Whether it is a seminar, webinar or a certification class, every member should further their education, especially considering how fast the credit world is changing.

Why have you not taken advantage of the NACM / CMA Education?  Did you know that it only takes 3 classes and passing one test to achieve your Credit Business Associate (CBA)?  It is easy, there is a button for that, right?  You need to dedicate time, it is a commitment but the rewards are endless.  As a credit manager with direct reports, I have encouraged my team to get their designations, and I prefer to hire credit managers who have theirs over ones who don’t.

I encourage you to take that first step on the road of growth, the road of certification, become a CBA or take that next seminar or webinar.  I am confident you will not be disappointed with the outcome.

Melissa Kobus, CCE, is the Credit Management Association Chair and Regional Credit Manager for Anixter Inc., based in Anaheim, CA. She can be reached at 714-695-2219, or melissa.kobus@anixter.com

 

Credit Manager Lessons Learned from Watching the World Cup, by Michael C. Dennis

Like many people, I’ve been watching the World Cup soccer matches (time permitting). For whatever reason, I’ve been trying to draw insights from the competitions that are applicable to the workplace. Here are a few I’ve come up with:

  1. It pays to be a winner
  2. Teamwork is critical to your success…
  3. …So is having a good game plan
  4. Don’t become overly reliant on your star performers
  5. Even the most unlikely members of the team can become superstars
  6. Inappropriate behavior can result in red cards [or pink slips]
  7. We have to think more globally
  8. The best teams have the best coaches
  9. Winning is always a team effort
  10. Sometimes, it pays to be aggressive

In sport or at work, there are many things you can accomplish if you remember this: everyone on the team has the same GOOOOOOOOOOOOOOOAL.

How do you choose to manage your team? As always, I welcome your feedback.

Michael is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals.  He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events.  He can be contacted at 949-584-9685.

“Dedicated to Those Dedicated,” by Larry Convoy

At CMA, we are of the mindset that the more effort and information our members put in, the more they will benefit. Regardless, it never ceases to amaze me as to how committed certain members of industry credit groups are.  Below are some examples of credit people making the extra effort.

We have group members like Kevin who flies the company plane from Palm Springs to Fresno for an hour and half meeting. Patti takes the train from San Diego once a month to attend her group’s meeting. Marcie drives from Northern Cal to Bakersfield because she knows the value.

The effort is not just showing up for the group meeting on meeting day. Raj scans web sites daily for industry related news that he can share with his group. TJ has trained his staff to enter alerts as part of their credit duties resulting in 20-30 vital pieces of information per month. Anne reminds her group of conference calls and due dates and looks out for the best travel rates for National meetings.

We have members like Mary Lynn who allows her group to use her company’s facility for meetings; when some companies will not allow competitors on their grounds. There is Linda, who organized a telephone campaign to personally contact members not attending or contributing. Ron brings several employees from his department to every meeting and credit professional event to expose them to the benefits of Industry groups.

To the people mentioned above, we thank you. From your dedication, the rest of the members of the group benefit as well.

Are you participating with the industry credit groups? If you are, you probably know that over the past 12 months, more than 26,000 RFIs were submitted, with more than 14,000 of them being RFIs for new applications. If you’re not participating, what are you waiting for? Contact me and I can get you started.

 
Sincerely,

Larry Convoy
Supervisor-Industry Credit Groups
lconvoy@emailcma.org

CMA Members Patrick Spargur and Pam Craik Honored at NACM National Credit Congress

Congratulations to CMA members Patrick Spargur and Pam Craik, who both received prestigious honors during NACM’s National Credit Congress June 8-10 in Orlando, Florida.

Patrick Spargur, ICCE, received NACM’s 2014 Mentor of the Year Award, while Pam Craik, CCE, received NACM’s 2014 CCE Designation of Excellence Award.

Spargur, of GES, was honored for his tireless mentoring efforts of colleagues and friends on work and life issues. Among his accomplishments, Spargur also works tirelessly with the Project 150 non-profit charity that helps more than 2000 homeless, displaced and disadvantaged students at 34 high schools in Nevada.

Craik, of McKesson, has shown her belief in higher education, as she has integrated the credit manager designation program into her own employees’ jobs. She has mentored employees and colleagues, has been a speaker at CMA events such as the Western Region Credit Conference, and currently serves on CMA’s Board of Directors.

Spargur and Craik are among CMA’s most active members, and we congratulate them for their well-deserved awards.

 

Pam Craik, CCE, received NACM's 2014 CCE Designation of Excellence AwardPatrick Spargur, ICCE, received NACM's 2014 Mentor of the Year Award

Maximizing Your Ability to Collect, by Sam Fensterstock

One of the most frequently asked questions AGA gets from our clients is “how do we capitalize on our ability to collect from our customers?” Our answer is always the same: to be successful in maximizing your cash flow and reducing write-offs you must have three critical policies in place:

1. A Defined Credit Policy – While most companies have defined policies for best practices when it comes to employment, security and many other facets of their business, many companies we speak to do not have a clear policy when it comes to granting and reviewing credit . If you want to get paid after you have delivered your goods or services, you need to made good credit decisions when you decide to engage your customer. If you have not, your chances of collecting, if there is a problem in the future will decrease significantly. What your credit policy should be? Well, that is something that is hard to answer because it needs to be industry and company specific. However, best practices say it should be based on factors such as company risk tolerance, industry standards, gross profit margins and your internal risk assessment capabilities. The bottom line, a good credit policy will help you minimize your risk while maximizing your profitability. The acquisition of all pertinent information about a company such as a fully executed credit application (with verbiage that allows you to add interest and collection fees), financial statements, industry credit reports, trade data as well as a personal guarantee with home address and cell phone information should be a rule of thumb to most credit grantors.

2. A Defined Collection Policy – Just like with your credit policy, your collection policy should be specifically defined, documented and if possible, best practices recommends the use of an order to cash technology solution to help automate part of the collection process. No matter how your credit & collection department is set up, a pre-determined collection strategy that triggers a set of calls and e-mails with specific grace periods based on promises to pay should be deployed. To maximize collection results, the ratio of customers to collectors must also be taken into consideration, given your technology environment. If you’re in a fully automated collections environment you may be able to do more with less, compared to a manual collection process where you may need more collectors to handle the same amount of customers. As we all know, the sale is not complete until the money is in the bank and a defined collection policy will help ensure that your DSO and write offs are in line with company expectations and industry standards.

3. Having Defined Collection Placement Policy and a Strategic Collection Outsourcing Partner – No matter what kind of credit and collection policies you have in place and even if you have state of the art order to cash technology solution deployed, at some point, some customer will ignore all of your all internal collection efforts and not pay you. This is when we believe you should engage with an outside 3rd party collection outsourcing provider. Determining the “point of no return” with your customers is critical. Your collection placement policy should be specifically defined, as it has a direct correlation to your collection outsourcing partner’s ability to successfully recover what you’re owed. Remember, the older a receivable gets the harder it is to collect, so if you want to maximize cash flow from your aged receivables, you don’t need to “beat your customer to death”, just place them in a timely manner and let your partner do their work and you will see more cash come through the door. A proactive and professional approach will also assist in the possible re-acquisition of your customer.

Also, when choosing a collection outsource partner there are several things you should consider such as;
• Is the agency certified by the International Association of Commercial Collectors?
• Is the agency certified by the Commercial Law League of America?
• Does the agency have appropriate bond and liability coverage?
• Does the agency have web based reporting tools that provide you recovery analytics and 100% visibility into their collection efforts?
• Does the agency have the technology capabilities to integrate with your order to cash platform for automated placements?
• Does the agency provide a competitive rate for their services?
• Does the agency have a good reputation in the market?
• How many years has the agency been in business?
• Can the agency provide multiple references of companies who have been customers for more than 5 years?

Choosing the right outsourcing partner is critical in helping maximize the recovery of lost funds. Why is this so? It’s simple, if your company is earning a net profit of 5% and you write off $25,000 you will need and additional $500,000 in sales to offset the loss. In the long run, the success of your collection outsourcing partner can have a tremendous impact on your bottom line.

Sam Fensterstock is Senior Vice President, Business Development,  for AGA, a leading commercial collection agency based in Melville, NY. He can be reached at (631) 425-8800 or samf@agaltd.com.

Patricia Herrera – CMA Student of the Month March 2014

Patricia Herrera
Patricia Herrera

Congratulations Patricia Herrera, Assistant Credit Manager at Hajoca Corporation, CMA Student of the Month for March 2014. Actively working towards her designations, Tricia has already completed the three courses required for the Credit Business Associate designation.  She took Accounting in college, and both Business Credit Principles and Financial Statement Analysis via CMA’s online classes with Paul Beretz in 2013.

What do you like best about your job? “My favorite part of my job is learning more about the credit industry. I learn something new everyday.

Motivation for taking classes is the recognition I get from my superiors for following through with my goals.

I enjoy reading and fishing. I often take weekend fishing trips to clear my mind and relax away from the city.”

 

Annoying Your Customers – Michael Dennis, CBF

Some words that are commonly used by collectors annoy customers. Here are a few examples: ‘Fair’, ‘Reasonable’, ‘Honest’, ‘Rational.’ In the relevant context, a collector might say:

  • We need a fair and reasonable commitment for payment.
  • I want an honest answer.
  • Please provide a rational explanation for the deduction.

Implicit in the collector’s use of these words is the suggestion that the debtor is not fair, not reasonable, not honest and not rational. What’s my advice? Choose your words carefully because more carefully chosen words will open up the conversation, create a dialogue and help you uncover the reasons behind the payment delay. Annoying words, while they may sound reasonable to you, tend to limit your conversations, put customer in defense mode, and make problem resolution less likely.

Alternative phrases you could use:

  • We need to reach a commitment for payment, today.
  • Is there anything more you can tell me about this (transaction, invoice, statement, check) that could help us resolve this problem?
  • There is an unauthorized deduction on the account. I would like to know the reason for it so we can address this deduction, and prevent similar problems in the future.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

What other phrases or words trigger unproductive responses? Please share them with readers below.

Author Michael C. Dennis. Michael is a consultant and the author of the Encyclopedia of Credit, a free, fast online resource: www.encyclopediaofcredit.com

 

Said and Done – Michael Dennis, CBF

In the Drivers Seat
In the Drivers Seat

When it’s all said and done, Collectors either want a commitment for payment, or to gather new information to understand why their customer cannot issue payment.  Once a sale is made on open account terms, the debtor is in a very real sense in the driver’s seat.  Why?  Because they have your product and your money.  They decide if and when and how much you will be paid.

Collectors can influence their actions, many time spur payment, but cannot control their actions.  In other words, collectors cannot make customers issue payment, but they can react appropriately to the collection problems encountered. How?  Perhaps by reducing their credit limit.  Possibly, by withdrawing the open account terms.  Maybe by halting any orders in production for that customer.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

What you decide to do should be based on what the debtor says and does.

By Michael C. Dennis. Michael is a consultant and the author of the Encyclopedia of Credit, a free, fast online resource: www.encyclopediaofcredit.com

Megan Perry, CBA – CMA Student of the Month February 2014

Megan Perry, CBA
Megan Perry, CBA

Meet Megan Perry, Credit Manager at Boyett Petroleum and CMA’s Student of the Month for February 2014. Megan has worked with Boyett Petroleum for 11 years. She attained her Credit Business Associate (CBA) designation in July of 2013.

What do you like best about your job? The daily challenges that credit brings, and the variety of people that I deal with in various industries.  I belong to CMA’s Petroleum Industry Credit Group.

Motivation for taking classes toward the Professional Certification: I wanted to obtain a well-rounded knowledge base in the credit and financial world. Down the road there’s the possibility that I’ll be able to pursue the second Designation, the Credit Business Fellow.

Background and/or Special Interests:  Bachelor’s of Arts Degree in Psychology from California State University Stanislaus.

In my free time I enjoy my show-jumping horses.

Congratulations Megan!

If you are interested in learning more about the Professional Certification program and classes required for each Designation, contact Cheryl Hammond, Education Counselor,chammond@emailcma.org or 831-475-9482.

Exports Fuel Business Growth – Michael Dennis, CBF

EXPORTS-ship
Exports

Exports account for a significant portion of sales for many U.S. based companies. The ability to compete successfully in the global marketplace has become a necessity. So has the need for the credit function to think, act and manage credit risk globally. The procedure for making an export credit decision includes some of the same steps as are used in making domestic open account credit decisions.

In addition to the traditional five Cs of credit analysis, other elements of export credit decision-making include: Country risk; Foreign exchange risk; and the Risk of being misunderstood. Here is an example: If a foreign country refuses to allow companies located there to make payments in US dollars to foreign suppliers, you will likely not receive timely payment irrespective of how creditworthy your foreign customer may be.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Each of these three export related risks can seriously affect when or if you receive payment. Understanding and managing these three risks is at least as important as evaluating the five Cs.

By Michael C. Dennis. Michael is a consultant and the author of the Encyclopedia of Credit, a free, fast online resource: www.encyclopediaofcredit.com

UCLA Extension – Credit Analysis & Management – Free Info Session

Learn about UCLA’s Credit Analysis and Management certificate and how to be at the forefront of this growing field through their free information session. Listen to a presentation by the Credit Management Association President and learn about new trends in the industry and future job growth.

Schedule & Location:
Saturday, March 15 10am-12pm
Figueroa Courtyard: Room 102
261 S. Figueroa Street
Los Angeles, CA 90071

Click to download information. CAM Info Session SP14

“Your Reminders” for Lien Service Users

New to anscers this morning – Construction Forms Filing Service users now have the ability to set up reminders for any project.

double click any image to enlarge

On a project screen, click the “Set A Reminder” button on the right hand side to add a reminder to a project.

Set A Reminder on a project
Set A Reminder on a project

Choose the due date, add a description and select if you want the reminder to be added to your personal calendar.

Select the Date
Select the Date
Add description and send to your calendar
Add description and send to your calendar

On the main Lien page and project pages -you can click on the text “Your Reminders” on the right to display all your reminders. Reminders have three timing filters – Current, Overdue and Complete.

Your Reminders on the main screen
Your Reminders on the main screen
See all Your Reminders
See all Your Reminders

Mark a reminder complete on the Your Reminders page by clicking the box to the left of the reminder. Edit a reminder to change the due date or description.

Patricia Montanez, CBA – CMA Student of The Month – January 2013

In 2014, CMA is celebrating those that are making the extra effort to enhance their credit career. We will be highlighting a new student each month. Sharing with you what they love about Credit and their motivation for furthering their education.

Patricia Montanez, CBA
Patricia Montanez, CBA

Patricia Montanez, CBA – Accounting Supervisor at Oldcastle Precast, Inc. is our first CMA Student of the Month. Patricia achieved her CBA in July 2013 and is currently on track to the CBF designation.

What do you like best about your job? 

What I like best about my job is that I learn something new every day. In Credit there are always new scenarios and circumstances to resolve and learn from no matter how many years of experience you may have there is never a dull work day.

Motivation for taking classes toward the Professional Certification:

Our Director of Credit Management (Josh Nolan, CCE) encouraged me to pursue the CBA designation through NACM because he believed that it would help with my everyday work activities. I took Financial Analysis and Business Credit Principles in 2013 through the NACM on-line courses and was successful at completing the CBA designation in July 2013. Not only has this designation helped me career wise but it has helped me tremendously improve in my daily business credit decisions. I am now currently pursuing the CBF designation as my Business Law NACM on-line course starts today. I have no doubt that this new designation will only make me better at what I do in my career as I continue to move forward.

Background and/or Special Interests:

I’ve been doing different Accounting functions over the past 14yrs. In my career I have enjoyed doing Bookkeeping, Collections (consumer and b2b), Accounts Receivables, Customer Service and Credit Specialist. My special interest is to spend time with my daughters and being the best role model possible to them.

If you are interested in learning more about the Professional Certification program and classes required for each Designation, contact Cheryl Hammond, Education Counselor, chammond@emailcma.org or 831-475-9482.

Learn to Earn USA Program targets disabled veterans for the Credit Boot Camp

Tony Gaeta of Learn to Earn USA
Tony Gaeta of Learn to Earn USA

CMA is working with Tony Gaeta of Learn to Earn USA to bring Eddy Sumar’s Credit Boot Camp to disabled veterans looking to find jobs through training in commercial credit and collections. To promote Learn to Earn USA, Gaeta gave disabled veteran Freddie Sprankel a set of AFC championship game tickets donated by former quarterback for the Denver Broncos Jake Plummer. Denver 9 News interviewed Gaeta and Sprankel:  http://lnkd.in/bQ7kZXT

CMA is excited about working with Learn to Earn USA to help veterans find jobs through training in commercial credit and collections. Through Learn to Earn USA, CMA will be able to expose veterans and their spouses to the many career opportunities that exist in business credit and customer finance, and help them attain entry-level skills and training that could lead to productive, well-paying jobs that receive little notoriety in most college and trade skills programs. Learn to Earn USA will give CMA a unique opportunity to fulfill its mission of advancing the credit profession by promoting a career path that goes largely unsung and by helping member companies find qualified candidates who will receive proper training from industry experts.

For more information about Learn to Earn USA visit http://www.learntoearnusa.org/

Meet the Graduates of the Credit Boot Camp, Winter 2014 – Glendale, CA

Graduates of the Credit Boot Camp
Graduates of the Credit Boot Camp

GLENDALE, CALIFORNIA – In joint effort of the government and credit trainer/consultant Eddy Sumar’s dream to help disadvantaged young adults,  The Credit Boot Camp educational training took place from 8 AM to 5 PM, Monday, January 13 through Friday, January 17 at the Verdugo Jobs Center.  With professional support and facilitation from the Credit Management Association and funds from the Glendale Youth Alliance, the Boot Camp was made available for 10 underprivileged Glendale Community College students.   Funding for the program comes from the Workforce Investment Board, part of the federal Workforce Investment Act.

“We are delighted to team up with Eddy,” says Michael Mitchell, CEO of the Credit Management Association.   “His enthusiasm and commitment to helping disadvantaged young adults find employment is a gift we cannot ignore. The support of the Glendale Youth Alliance and the Verdugo Workforce Board suggests the importance to the community of training these young adults.  As a business in neighboring Burbank, CMA is proud to be part of this effort.”

 “This is my dream come true,” says Eddy Sumar, the creator and instructor for the Credit Boot Camp.  “Our goal with this boot camp is to assure that these kids have a solid chance at an entry level job.  No one needs a job more than kids who are disadvantaged and struggling.”

Mr. Sumar’s boot camp training started three years ago in Riverside County for peer level professionals and business owners.  Then a high school principal came to him and suggested he create a training program for continuation school students.  “These are the kids everyone’s given up on,” says Mr. Sumar.  “I took everything I know about the credit management profession and created the Boot Camp for young adults.”

He says some were appalled thinking the term “credit” was a huge negative involving credit cards and tough collectors.  “But I deal in business-to-business credit, not consumer credit.  Credit is the lifeblood of any company and a traditional, uniquely American way of doing business. Credit and collection training touches on every aspect of a business, from customer relations to international  credit management to understanding there is a company culture.”

Using his nearly 30 years of experience as a credit and international trade professional, Mr. Sumar’s training has resulted in several of his attendees getting entry level jobs.

“It’s critical they get that first job, even if it’s file clerk,” says Mr. Sumar.  “From there they can grow into a better job within the company using what they learned in our workshop.”

Mr. Sumar’s program also has earned the respect of the National Credit Management Association, which is offering four units of accreditation for those completing Mr. Sumar’s course.

Below is a picture of Eddy with the graduates (middle row, center right), Don Nakamoto, Executive Director of Verdugo Jobs Center, JUDITH VELASCO, Manager at Verdugo Jobs Center, and Mike Mitchell, President of CMA.

Credit Boot Camp, Winter 2014
Credit Boot Camp, Winter 2014

 

Reactive Downsizing Has Limited Upside

Caution Downsizing
Caution Downsizing

The economy has many companies evaluating downsizing the credit function. Employers rationalize this by defining credit and collections as either (a) a cost center or (b) as a “non core business function.” Since account receivable is often a company’s largest Current Asset, concerns about staff reductions in credit and collections are well-founded.

Downsizing affects effectiveness. Even with careful re-allocation of resources, it may simply not be possible to do the work necessary to control delinquencies and manage credit risk effectively. Some employers are so focused on cost cutting that they are willing

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

to overlook the increased risks associated with reactive rather than proactive credit risk management.

Maybe your company has already downsized. If so, what was the result?

Credit Managers Index for December 2013

CMI
CMI

Market-watchers looking for holiday cheer would be hard pressed to find any in the December Credit Managers’ Index (CMI), published by the National Association of Credit Management (NACM). The Combined Index fell dramatically from 57.1 to 55.6, erasing most of the gains made in the last few months and taking the CMI back to levels not seen since the middle of summer. Though the manufacturing index fell by a full point from 56.7 to 55.7, it was the service sector’s two-point fall from 57.5 to 55.5 reflecting a slow response to Christmas and a slowdown in the housing sector that delivered the hardest blow.

The CMI’s four favorable factors registered the biggest declines, as the gains made in the second half of the year seemed to evaporate. Overall, the favorable factor index fell from 61.3 to 59.3, driven by a sharp reduction in sales, which stumbled from 63.4 in November to 58.7 in December, marking the fifth lowest sales reading in the last 12 months. New credit applications dropped by two points from 59.2 to 57.2, a reading not seen since April, and dollar collections slipped a full point from 59.7 to 58.7. The smallest drop occurred in amount of credit
extended, from 63.2 to 62.6, which could be the only silver lining in the favorable factor index. “This suggests there might be an opportunity to recover in the coming months,” said NACM Economist Chris Kuehl, PhD. “It gives some faint hope that many companies are still interested in making credit available to the customers they trust.”

Read the full report: CMI_dec2013

 

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Time For A Change? – Michael Dennis, CBF

Charles Darwin, photographed by Julia Margaret...
Charles Darwin, photographed by Julia Margaret Cameron (Photo credit: Wikipedia)

Charles Darwin theorized that success went to individuals best able to adapt to change, not necessarily to the strongest or the smartest or the fastest.  Changes are most likely to affect, most dramatically, individuals who are the least able to adapt effectively to them.  What’s my advice?  The next time you consider pushing back or dragging your feet in response to a change…. Don’t.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

By Michael C. Dennis.  Michael has authored more than 1,000 essays on the Encyclopedia of Credit.  Please visit:  www.encyclopediaofcredit.com

 

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What prompt do you put on your Past Due invoices to customers?

Final Demand
Final Demand

CMA Poll Results:

  • Stamp “Past Due” 25% 81 votes
  • Second Reminder or Second Notice 14% 47 votes
  • Hand write a note 13% 42 votes
  • We do not send second copies of invoices 28% 91 votes
  • Other 21% 68 votes

Comments:

mary Raynoha
We have the sales person contact past due customer within 5 days of becomming past due. This seems to work good for us as the sales person usually has a relationship with customers. I only contract if they cannot collect

Fay D’Amico
We have moved in a paperless direction so we not longer mail out statements, invoices or correspondence it is all done via e-mail.

Linda Reynaga
We either call, e-mail or send a past due letter at 45 days and follow up with a call in 1 week. If no response we send a statement with a “past due” stamp at 60 days. Of course, if an order is placed we hold util payment secured.

Barbara Giras
We too try to be proactive. We contact the account at 45 days. Send copies, POD’s etc as needed.

Linda Olsen
We do not sent out copies, nor do we send out statements. We try to be a proactive as we can up front. If an account goes beyond terms, we start contacting the account, the sales team and the GC.

Manny Geronimo
I do all of the above…if necessary. Certain customers require a call, but mostly I get paid as long as I knock on their door one way or another.

Jaime Figueroa
We send e-mails with copies of invoices, POD’s and any supporting documentation as needed. CREDIT HOLD on new orders pays hugh for remit resolution.

Maya deBourguignon
We send a past due letter & current statement or aging report when invoices reach 15+ days past due requesting pmt ASAP

Raj Prasad
For customers who are always paying late, we also notify them with a “Credit Hold” prompt.

Feelin’ Groovy – Michael Dennis, CBF

Every credit professional I know is under increased pressure to go faster; to get more done in less time and with fewer resources.  Ignore for the moment the additional stress associated with producing better results at a lower cost, and you are left with this:  The time pressure that most of us are under will result in oversights and errors.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Often, the time you save by reacting rapidly will be spent cleaning up the problems created by responding too quickly.  By reacting rapidly, we are failing faster.  What’s the solution?  My answer is:  Slow down, you move too fast….♯♪

By Michael C. Dennis.  Michael has authored more than 1,000 essays on the Encyclopedia of Credit.  Please visit:  www.encyclopediaofcredit.com

Congratulations New Designees

 

Cheryl Hammond, CMA
Cheryl Hammond, CMA

Congratulations to the following Designees who took their Professional Certification exam on November 4th.

Deborah Crowe, CBA  – Anixter, Inc.
Stachia Currie, CBA – Anixter, Inc.
Sangeeta Ram, CBA – Anixter, Inc.
Alexis Doulton, CBA – Deckers Outdoor
Lindsay Fletcher, CBA – Deckers Outdoor
Todd Whiteside, CBA – E & J Gallo Winery
Tracy Rosenbach, CCE – Silgan Containers

For more information on how to achieve your Designations, please contact Cheryl Hammond, Education Counselor at 831-475-9482chammond@emailcma.org.  She will be holding a free webinar on Wednesday, December 18th at 9:00 PT to discuss the process.  You can register for it by clicking on the Education tab at www.anscers.com.

Now Accepting Nominations and Applications for CMA Board of Directors

CMA Board 2013-2014
CMA Board 2013-2014

The CMA Nominating Committee is now accepting nominations and applications for service on the 2014-2015 Board of Directors. If you would like to nominate a candidate for service, or you are interested in applying for a Director position directly, please complete a Candidate Nomination or Application form and return it to CMA by January 10, 2014. Download the form –CMAdirectorap14

Board of Directors Qualifications and Responsibilities

As provided by the Bylaws of CMA, the Board of Directors oversees the general operation and sets policy for the Association. It is, therefore, essential that members of the Board understand their responsibilities and be willing to commit the time and effort necessary to do justice to this great organization.

The responsibilities and qualifications of a member of the Board are as follows:

  1. Read and be familiar with the Bylaws of the Corporation.
  2.  A Board member is required to be the authorized representative of his/her company to CMA.
  3.  Attend the Annual Meeting and Installation of Officers and Directors, April 10, 2014 (or a similar Chapter Annual Meeting).
  4.  Attend regular Board meetings, four times per year.
  5.  Attend the Annual Board Retreat (two days in February).
  6.  Review and accept financial and operating statements of the Association.
  7.  Review and approve reports of committees, project teams and Boards of Governors.
  8.  Serve on various committees of the Association as assigned by the Chair of the Board.
  9.  Show support for the Association and its programs by participating in CMA’s member services and by attending educational and social functions, and promote CMA’s services to other members and prospective members at every opportunity.
  10. When possible, attend the annual NACM Credit Congress held each May or June, and/or the NACM Western Region Credit Conference in September or October, sponsored by the NACM affiliated associations of the Western Region.

A Tribute to Erna Ohlsson

Erna Ohlsson
Erna Ohlsson

For many of us, the major part of our life has us going to work, interacting with our co-workers and customers for 8 hours and then returning home to our family, friends and loved ones. If you are lucky, some of these people become your friends making the work experience that much more enjoyable.

For Erna Ohlsson, her 50 years of Industry Group Management has taken her far beyond this level of acquaintances. Her customers or “group members” have become her family and loved ones. She has not only opened her home to her groups but has forged lifetime friendships that have seen her included in their family gatherings. For many, the first call made after a job promotion, job change or family news is to Erna.

But don’t let that “Swedish Charm” fool you: This is one tough lady that entered a male dominated fraternity and not only earned their respect but became a trusted confident to many who help grow LA’s business community. All this while running a department responsible for administrating over 150 credit groups per month before fax machines and the internet, relying on the United States Postal system to insure that all group members received their reports.

Sometime in Mid-December, she will secretary her final meeting, pass out the 3 statements she has heard read thousands of times, distribute reports and carefully monitor the proceedings . Being that it is the holiday season, she has most likely organized some type of gift exchange and I am willing to wager that a bottle of Champagne, her beverage of choice, will make an appearance. At the conclusion of the meeting, she will pack up her group book for the final time.

In January, new group secretaries will be assigned to administrate her groups. Like Jay Leno taking over for Johnny Carson, they will have one tough act to follow. We ask for your patience during this transition. We are aware of the task ahead of us replacing someone who conducted her meetings much like her own life, with class, dignity and professionalism.

To Erna Ohlsson, thank you for a job well done. Enjoy retirement!

Author: Larry Convoy, Supervisor-Industry Credit Groups

Who Approved That? – Michael Dennis, CBF

Who Approved That?This is a question often asked in relation to the write off of unearned cash discounts.  The people with the authority to approve writing off an unearned discount, or alternatively not charging back unearned cash discounts, often have a vested interest in making the unearned discount disappear.

For example, the salesperson wants a positive working relationship with their customer and may believe charging back unearned discounts is unnecessary.  The Cash Application person certainly knows that it is more work to write off a cash discount than to charge it back.  The Collector assigned to the account knows how difficult it will be to convince the customer to repay an unearned discount if it is charged back.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

I don’t think the solution is to require management approval to write off unearned discounts – either before or after the fact.  That would be slow and cumbersome.  In my opinion, the best solution is to create a policy for use in cash application that addresses when discounts must be charged back as unearned.

Do you have a current policy for handling unearned discounts ?

By Michael C. Dennis.  Michael has authored more than 1,000 essays on the Encyclopedia of Credit.  Please visit:  www.encyclopediaofcredit.com

Small Business Credit Index – Q3 2013

Small Business Credit Index
Small Business Credit Index

Credit quality for small businesses improved in the third quarter, lifting the Experian/Moody’s Analytics Small Business Credit Index 2.3 points to 118.5. Indicators show that the small business lending market is starting to thaw. Small companies are developing a bigger appetite for credit, and banks are loosening credit standards.

The improvements, however, come at the risk of putting off investment, lower wages and deferred hiring. Government policy uncertainty and consumer spending growth also contribute to slower growth.

The Q3 2013 Experian/Moody’s Analytics Small Business Credit Index can help you with your business decisions and forecasting. The index includes:

  • The overall performance of small business in Q3
  • The potential impact of the government shut down and policy uncertainty
  • The credit performance differences across U.S. regions

Get a copy of the full report.

Experience is Overrated – Michael Dennis, CBF

Repetitive Tasks
Repetitive Tasks

Looking back, I believe that one of the mistakes I made when interviewing for collectors was to focus too much attention on experience and talent, and not enough on other attributes of candidates including: trainability, enthusiasm and work ethic.

Why? Because I equated ‘more experienced’ with ‘better at their job.’ I don’t think I am alone in making this mistake.

More experience is not always better. Five years of collection experience can be either: (a) 5 years of constant learning involving new and progressively more challenging assignments in business debt collection, or (b) One year of experience involving mind-numbingly boring, repetitive, unchallenging work repeated 5 times.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Please consider this suggestion: The next time you are hiring, think about these factors at least as much as you consider an applicant’s related work experience: Attitude, Aptitude, Enthusiasm, Personality and Work Ethic. This is what I plan to do.

What are your thoughts?

Michael C. Dennis is a key contributor to the Encyclopedia of Credit, a free, online resource for Credit and Collection professionals: www.encyclopediaofcredit.com

Spargur Receives FCIB Development & Growth Award

Patrick Spargur and Karen Schmidt
Patrick Spargur and Karen Schmidt

From the NACM Business Credit magazine – CMA Member Patrick Spargur receives a well deserved award!

A speaker at several NACM and FCIB events and a dedicated contributor throughout FCIB’s recruitment and online presence efforts, Patrick Spargur, ICCE, was the latest to join the list of FCIB Service Development and Growth Award winners.

Spargur, credit manager with Bally Technologies Inc., was honored at the 24th Annual FCIB Global Conference, held this month in Philadelphia. The award is designed to recognize the valuable contributions of volunteers are making to further grow and develop FCIB’s member services and to encourage more people to serve. For his part, Spargur has played an important role in FCIB’s LinkedIn groups, member recruitment and the FCIB website member discussion board, among other pursuits. FCIB Director of Business Development and Membership Ron Shepherd made sure to point out Spargur’s various charitable efforts during Global, including working with a group that serves Las Vegas residents badly affected by the city’s deep economic downturn and real estate bust.

“It is always great to receive recognition from your peers and those who you serve,” Spargur said. “FCIB is a very well-known and respected organization that has been instrumental in my career development. Their members and resources are invaluable to me as a credit professional.”

The last FCIB member to receive the Development and Growth Award on U.S. soil was John LaRocca, CICP, of Hitachi Data Systems Corp., in 2012.

-Brian Shappell, CBA, CICP, NACM staff writer

– See more at: http://blog.nacm.org/blog/shappell/spargur-latest-to-join-prestigious-fcib-award-list#sthash.2KC8HEbm.dpuf

 

With Apologies to Poe – Michael Dennis, CBF

Once upon a mid-day dreary,
While I labored bored and weary,
Came a knock upon my door,
Came salesman to implore,
Using words I’d heard before,
Ship the Orders, nothing more.

Pleased I was not by his tapping,
Wakened me from almost napping,
With a comment I abhor:
Ship the Product, nothing more.

To the salesman this I said,
The only words they fear or dread,
Ship the order I can do,
But mark these words I say to you,
Lest they pay and right on time,
In payment get you not one dime.

Standing at my office door,
Face a mask of hate and more,
Said the salesman in reply,
Angry or about to cry,
Perhaps you should consider longer,
Else my statement should be stronger,
I do think this deserve repeating,
While my heart is still a-beating,
Your action’s not what I would take,
Decision’s yours not mine to make.

Your answer now please be amending,
On your words I am depending,
The debtor’s fine, I know they’ll pay,
Late not sooner, that’s their way,
So my friend I do implore,
Ship the Orders, nothing more.

If I ship them at this time,
Paid us this month not one dime,
Higher slow pay I’d be fearing,
With lame excuses I’d be hearing,
From you and them now that’s my fear,
So please come in and listen clear,
You have an option from my end,
If payment now this debtor send,
then ship to them I will again.

Twas a time with payments turning,
Orders too were then a-churning,
Happy was my job back then,
Wish do I those times again.

Of hearing me he gave no token,
Heard no words that I had spoken,
So answered him I did once more,
And just to get him out my door,
When will things be like before?
My answer friend is Nevermore.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Happy Halloween!

 

Cash Flow Analysis Is Paramount to a Superb Credit Scoring System

Cash Flow
Cash Flow

By: Gene Tanguay

Don’t overlook cash. It is often overlooked and yet the most critical component of financial statement analysis. Cash ratios are essential to credit scoring and to greatly mitigating credit risk. Incorporate in-depth, highly proficient and sophisticated cash ratios into your credit scoring model to assess cash retention, cash generation and cash burn rates. Cash scoring ratios demonstrate a high correlation in a customer’s ability to meet its ongoing debt obligations, capital expansion and future working capital requirements from the company’s operation. Cash scoring analysis is the true indicator of a company’s solvency as it depicts the sources and uses of funds generated from the income statement and balance sheet activity to determine the financial viability of a company. Save your company from a detrimental financial decision or provide an integral decision making tool to justify credit extension to a customer using cash scoring analysis.

Traditional credit scoring focuses primarily on the income statement and balance sheet with a lack of emphasis on the statement of cash flow. A strong credit scoring system can reviews 75 financial ratios or more including over 30 cash ratios. It should be based on a direct review of thousands of trade/financial accounts. Utilizing a comprehensive credit scoring system, with about 75 financial ratios, provides a company the ability to assess customer risk from all different industries with the same credit scoring model and achieve operational efficiency.

Credit scoring, with a strong emphasis on cash flow analysis ( as outlined in examples below), essentially sets credit limits for viable customers, provides prudent risk ratings, increases sales, profits and cash flow, decreases bad debts and improves decision making, resulting in lower operating costs.

Scenario One: Income statement shows a large net loss stemming from non-cash items such as a write down of assets, restructuring charges and early extinguishment of debt resulting in no credit limit.

Solution: Use the statement of cash flow to demonstrate positive cash flow from operations and no cash burn rate. Operations are profitable outside one time charges, consequently, major support for a credit limit.

Scenario Two: Highly leveraged company with total debt to equity in excess of three to one causes extensive concern that customer will not be able to meet their current debt obligations. Credit limit is declined.

Solution: The statement of cash flow reveals the company is generating significant cash flow from operations, with no cash burn rate, enhancing cash reserves to meet payments for accounts payable, short term debt obligations of principal and interest; consequently, justification for credit extension.

Scenario Three: Manufacturing firms who have long lead times to drive products to markets (slow inventory turnover) exacerbated by slow turnover of accounts receivable can exhibit cash flow problems and slow pay vendors. As a result, company may not have credit extended to them.

Solution: The company is generating strong cash flow from operations derived from normal operations to offset cash shortfalls created from slow accounts receivable and inventory turnover. Also, the company has strong cash flow from operations to cover its investing and financing activities. As a result, the customer has ample cash resources to meet vendor payments, thus major support for a credit limit.

Scenario Four: It is possible for a company to be showing profits from a one-time sale of a division or early extinguishment of debt or a satisfactory working capital ratio but yet there could be a potential major cash flow problem.

Solution: Upon closer inspection it is revealed that the company is incurring a net loss from normal operations. Also, the customer has slow turnover of accounts receivable and inventory, strong cash burn rate and a significant diminution in its cash balance correlating with potential severe cash flow problems and bankruptcy, thus major support for revocation of credit limit.

Scenario Five: Regarding bad debt reduction, watch for large or small companies that have mature business products with little sales growth, eroding gross margin, weaker cash flow due to lower profit margins and deteriorating customer base. A culmination of the above facts precipitates a company to increase its borrowing and leverage its position.

Solution: A strong credit scoring system is designed to catch these red flags and revoke credit limit privileges when liquidity, cash flow, profitability and leverage are all negatively impacted leading to a potential bankruptcy.

Credit scoring with financial statements is not completely inclusive of all credit risk; for example, it does not aid in prediction of losses due to natural disasters, fraud or inadequate audit reports. However, it should be based on thousands of credit reviews to greatly strengthen the risk scoring classifications and ultimately the credit operation. Credit scoring through financial statement analysis presents the best model to evaluate credit risk. It can be used as a standalone credit decision making tool in 80-90 % of the credit decisions.

All other scoring modules that exclusively use metrics such as: pay performance, management history, strength of competition or customer base, years in business, lien and suit searches, fall short of the pertinent information contained in financial statements. But there are certain situations where other data outside financial statements is important. For example, other sources (D&B, trade/bank references) need to be consulted when there are no financial statements, borderline credit decision, and new customers to ascertain if a company is a legitimate business or advise of any prior bankruptcies.

In summary, credit scoring with financial statement analysis benefits include the following: increase sales, profitability and cash flow, reduce operating expenses and mitigate bad debt.

Due to SOX compliance measures it is most difficult for public companies to commit fraud which heightens the integrity of credit scoring model. Credit scoring with financial statement analysis should be based on 75 or more financial ratios representing thousands of companies from small to large, different industries and all parts of the world. It should be low priced, has financial scoring analysis that assesses customer strengths and red flags plus credit limit recommendations. Also it is recommended that this credit scoring model has the flexibility to fit customers from a variety of industries including: retail, manufacturing, biotechnology, software, construction and finance companies.

An excellent credit scoring system with financial statement analysis is designed to average out risk between leverage, liquidity/cash flow and profitability to ascertain the true financial viability of the customer. Don’t overlook cash; cash ratios are essential to risk management.

Author: Gene Tanguay, BA, MBA Founder of Credit Scoring for Success, Former Certified Credit Executive Passed CPA Exam. Expert in accounts receivable credit risk assessment for portfolios up to $2 billion. Performed customer credit reviews up to $500M credit limit.  Received management awards for outstanding performance in financial statement analysis. Published credit articles for Credit Management Association and Credit Today. Conducted credit presentations at Hitachi and Advanced Micro Devices.

 

It’s Creepy – Michael Dennis, CBF

Risk Creep
Risk Creep

In business, there is a theory called risk creep. It states that if an organization is not actively seeking out potential sources of risk, then its overall risk is increasing. If you are not actively managing customer credit risk, then your overall portfolio credit risk is increasing.

Some readers might ask what I mean by “actively managing credit risk.” Some people might point to the fact their DSO is low as proof that they proactively manage risk. Others might point to procedures in place to ensure that all new applicants are evaluated before open account terms are offered… and they would be wrong.

“Actively seeking our potential sources of risks” suggests a proactive approach to credit risk management. Calling delinquent customers for payment is reactive. Evaluating new accounts in response to a credit application received is also reactive, not proactive.

These three steps can reduce credit risk creep:

  • Score new customers from low risk to high risk, and please make sure the ratings are objective
  • Update rankings periodically based on changes in the risk characteristics of individual customers, and
  • Develop processes to address credit risk [and credit risk creep] at the account level as risk increase or decrease over time.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Managing risk requires action. It may be hard to know what action to take to manage credit risk creep, but taking action is the only way to more effectively manage this creepy issue.

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com

CREDIT MANAGEMENT ASSOCIATION & AG ADJUSTMENTS FORM ALLIANCE

Strategic Alliance
Strategic Alliance

AGREEMENT ASSURES SUPPORT FOR STRONG ECONOMIC GROWTH

BURBANK, CA – Credit Management Association® (CMA), which provides extensive services to companies and corporations that sell goods and services through credit transactions, has formed a strategic alliance with AG Adjustments (AGA), one of the nation’s most trusted and respected business-to-business collection agencies in the U.S. The alliance blends the expertise and reach of two of the nation’s largest credit management entities. The agreement will take effect rapidly, launching on November 1, 2013.

CMA chose AG Adjustments as their strategic partner to support the economic growth CMA’s membership predicts as they see a trade credit increase in the marketplace. “Our membership is at the center of day-to-day commerce and our members, credit professionals in a variety of industries, show renewed optimism,” says Mike Mitchell, CMA CEO.

CMA polls its membership quarterly with a Credit Confidence Survey to assess their businesses’ current status and anticipated growth. “Our Credit Confidence Scores show a slow and steady growth in confidence. Our members are convinced that the economy is ready to grow and they are ready to extend credit and take risk,” says Mr. Mitchell. “They’re on the front lines, so when they tell us things are going to improve, we need to do all we can to support them, including helping them manage risk. Our partnership with AG Adjustments will ensure our members receive excellent service and high rate of return on past due accounts that head to AGA for collection.”

The agreement with AGA will deliver AGA’s commercial collection services to CMA members. CMA will outsource their collection operations to AGA and CMA’s members will benefit from AGA’s decades of expertise in the commercial collection market. AGA clients will also have ready access to CMA services, which range from industry-based credit management working groups to cost effective construction industry services and CMA’s popular credit management data base, anscers.com.

Robert Gerstel CEO of AGA says, “From wholesalers to manufacturers, from distributors to finance companies to service providers – across the spectrum – the businesses which drive the economy are built on credit. Collecting on your accounts receivable is an essential by-product of that system; it assures adequate cash flow. Our services, merged with CMA’s, will help all our customers work at their best. When credit is strong, our economy is strong, but you still need to collect your cash. Our alliance will help the thousands of businesses which make the economy hum.”

Credit Management Association, which serves industries primarily located in the western U.S., is headquartered in Burbank, CA, and operates a second full-service office in Las Vegas. AGA provides collection services across the nation from its New York base.

Credit Management Association® (CMA), is a non-profit association that has served business-to-business companies since 1883. CMA delivers a variety of services to large and small companies across the full spectrum of the business credit economy. In addition, CMA assists insolvent companies with workouts or liquidation through cost-effective alternatives to bankruptcy. It is one of the largest affiliates of the National Association of Credit Management (NACM).

AGA is a commercial debt collection agency based in Melville, New York. AGA is a charter member of the Collection Agency Association of the Commercial Law League of America and a Platinum Partner to the Credit Research Foundation. Thousands of leading manufacturers, wholesalers, distributors and finance companies rely on AGA to help sustain a healthy balance sheet while adding profits to the bottom line.

If An Alert Saves You Money, Does Anyone Hear?” – Larry Convoy

If a tree falls...
If a tree falls…

We have all heard the expression about the tree falling in the woods with no one around, does it make a sound? To relate this to Industry Credit Groups, if an alert posted by a member of your group results in your company avoiding a big loss, does senior management ever hear this?

Within the confides of group confidentiality, do you ever tell your superiors that you rejected the new customer your salesmen “finally” landed because the RFI you requested shows 2 members recently withdrew credit or the alert just posted told you that a member placed them for collection. Do they know that their company got paid in full on the bankrupt account because of what you learned about UCC’s or Lien Laws as part of a group discussion? Or are they aware that the expensive new software package that you voted against was the result of first-hand information gathered at a group meeting by asking people who are actually using it?

May I suggest giving your management a tour of the anscers website, show them the alert page, how you can do an RFI and get instant feedback from the group or check the anscers credit report for historical information. Tell him about your monthly discussions on best practices and how that has not only made you a better credit manager but provided you with tools to save the company money. Emphasize that you cannot get this information if you miss the meetings or conference calls. However, make it clear to them that the information is confidential and any slip can jeopardize your standing in the group and potentially cut off the stream of information.

Making more of your financial team aware of the group benefits, will not only insure group renewal, but encourage them to allow you to attend conferences such as the Western Region Credit Conference or other educational seminars.

Have a great October.

Larry Convoy, Supervisor-Industry Credit Groups
lconvoy@emailcma.org – 818-972-5323

So What? – Michael Dennis, CBF

So What?
So What?

I recently received an email from an old friend who just completed a long-term temp assignment asking if I knew of any temp or permanent positions.  Naturally, Ann included her resume.  I reviewed that resume, and provided these comments:

  1.  A three page resume is too long
  2. The resume includes too much information in too much detail
  3. The resume is long on listing job duties, but short on describing your accomplishments

An applicant typically has less than a minute to convince the screener that their resume should be forwarded to a decision maker.  A three page resume is too long to review in 60 seconds.  Therefore, the goal is a resume of two pages or less.

The resume included information about every job since 1984. I don’t think anyone cares that she was a credit administrator for the XYZ Corporation from 1984 to 1988.  Fifteen years of employment history is usually adequate.

Ann’s resume included details such as this:  I reduced the over 90 day balance from 5.31% to 2.19% within the first 6 months.  I think this is much too detailed.  I rewrote it to read:  Within 6 months, I increased the percent current from 89% to 97% by conducting one-on-one aging account reviews & training sessions with each collector each month.

Please stop telling potential employers what your job duties are or were.  Instead, describe your accomplishments.  Here is an example from Ann’s resume: I performed reviews of the files of every active customer focusing on risk management.  My response was:  So What?   This rewrite focuses on what Ann accomplished:  By ensuring appropriate safeguards were in place, I reduced bad debts from more than $800,000 in 2011 to less than $200,000 in 2012.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

So what does your resume look like?  If you want my candid [and brutally honest comments], send your resume in confidence to:  mcdennis13@yahoo.com

‘Tis The Season – Michael Dennis, CBF

'Tis The Season
‘Tis The Season

For some reason, post-audit claims always seem to arrive in bunches. I just received two post-audit claims in less than 30 days. I know from experience that post-audit claims are time consuming and can be costly IF your company cannot provide the necessary documentation. Post audit claims typically involve a claim that a customer:

  • Overpaid invoices, and/or
  • Did not receive credits owed, and/or
  • Never used credits issued to them

If you have the support of your senior management, it is not as hard as you think to turn the tables. With management’s support you can and should:

  • Refuse to deal directly with the post audit firm.
  • Immediately reject the auditor’s deadline (which is always too short anyway).
  • Tell your customer how long you need to review the post audit claims.
  • Inform your customer in writing that any deduction taken by them prior to you completing your analysis will result in an immediate credit hold.
  • Prepare a specific, detailed, and comprehensive list of the documents that you require from your customer in order to begin your analysis, and
  • Reject certain types of claims immediately. For example, if you are asked for proof of delivery but the time frame for obtaining a POD from the freight carrier has already passed, that claim should be rejected = thrown out.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

I have been told these ideas are “too confrontational” and that is why it is so important that you have your management’s support in dealing with these post-audit organizations.

These are my suggestions. What has worked best for you in the past?

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com

Personal Pet Peeves – Michael Dennis, CBF

Pet Peeves
Pet Peeves

These are a few of my (least) favorite things:

  • Too many meetings lasting too long with too many attendees talking too long about too many things that are not relevant to the meeting agenda
  • Along the same lines, attendees who prolong meetings by asking one or a series of inane questions
  •  Anyone who tells me there is “no region like this region” or “no customer like this customer” or “no request for an exception to your standard policies and procedures like this request”
  • Other departments that are willing to save time by doing their work in such a way that it wastes our department’s time having to clean up their mistakes. Hint:  Order entry
  • Anyone who does not spend most of their time on issues that have the highest impact
  • Along the same lines, anyone who allows their inbound email to dictate their work and their priorities
  • Credit decision-making by committee.  Hint:  Eventually, one person is ultimately responsible for each decision, and if for whatever reason two or more people are assigned to make a credit decision, in reality, neither one is responsible for that decision or its outcome
  • Credit department members who are supposed to be responsible for specific decisions or specific activities but are not held accountable.  Hint:  The credit manager is ultimately responsible for whatever happens in the department, but individuals delegated certain tasks must be made accountable for their successful completion.
  • Double negatives in business correspondence or conversations.  Example:  I cannot say that I do not disagree with your comments.
  • Also, any correspondence in which the sender does not know the difference between its or it’s and between they’re, their, and there.  And also, any use of Emoticons in business correspondence
  • People who don’t cover their mouths when they sneeze
  • Also, people who do cover their mouths when they sneeze… with their hand or their hands
  • And people who treat their pets better than they treat most people… as well as people who treat their kids like pets
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

What are your Personal Pet Peeves?

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com

The Law Of Diminishing Returns – Michael Dennis, CBF

Diminishing Returns
Diminishing Returns

One aspect or application of the Law of Diminishing Returns states that there is a break-even-point at which the cost of additional resources [including time and energy and effort] does not match the benefits associated with the application of these resources.   This is true in manufacturing, as well as in credit and collections.  At a recent credit group meeting, I took an informal poll over lunch and found that no one at a table of 12 worked less than 50 hours a week and the majority worked 55 hours or more.  Every one at that table agreed that they wanted were trying to demonstrate their commitment to the success of their employer, and not one credit manager wanted to be labeled a clock watcher. Next, I asked:  How many of you work more hours than your peers and your manager?  The answer was almost everyone.

Here are some indications that you ether you have passed the break-even-point:

·         You are working more than 50 hours a week

·         Your spouse, or children, or co-workers or manager consider you to be a workaholic

·         At least once a week, you return to the office less than 12 hours after you left the previous day

·         You start reviewing your messages and emails before arriving at the office

·         You work weekends more than once a month

·         You gather more information than is necessary to make the credit decision based on the rationale that More is Better

·         When performing financial analysis, you calculate more financial ratios than you actually need or use to in the decision-making process

·         When internal customers request an explanation, you provide a lengthy narrative attempting to answer questions that have not been asked which may or may not be relevant to the internal customer

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Please visit the Encyclopedia of Credit at www.encyclopediaofcredit.com for time management and time saving strategies.

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com

Younger & Clueless – Michael Dennis, CBF

No Clue
No Clue

Years ago, I misjudged the negotiating power of one of our largest customers. The customer was a national retail chain that routinely paid 20 to 30 days beyond our terms. I decided to draw a line in the sand when the account slipped to more than 45 days past due with no payment commitment offered. I left a voicemail message with the customer’s Controller indicating that if payment was not received within 7 days, the account would go on shipment hold. I expected a quick return call.

Instead, the division President [meaning my manager’s boss] received a call from their Purchasing Manager who said something like this: “We were just told that our account will be on credit hold 8 days from today. If this happens, your company will be taken off our preferred supplier list that day, meaning you can forget about the $10 million a month in purchases we have forecasted. Let me know what you decide to do.”

I often write and speak about the need to be more assertive in debt collection. From time to time, I have to remind myself that creditors are not always in the best negotiating position. In the situation described above, in return for (1) my sincere apology to the customer and (2) a promise never to test the limits of our bargaining power with any of our 50 largest customers again, I negotiated a deal to keep my job.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

The moral of the story is this: Know with whom you are negotiating, and adjust your strategy accordingly.

Have you ever had a negotiation take an unexpected turn?

By: Michael C. Dennis. Michael is the co-author of the Encyclopedia of Credit. Please visit www.encyclopediaofcredit.com

When the Going Gets Tough, The Best Get Going – Michael Dennis, CBF

When the Going Gets Tough
When the Going Gets Tough

I spoke to a friend of mine recently.  I have always considered her to be a truly accomplished and knowledgeable credit professional and manager.  She told me that she received a 2% increase at her most recent annual performance review.  Her said that her manager told her that 2% was “the best the company could do.”  He added that many employees would be receiving no performance increase this year.  She was not pleased by a 2% increase which she pointed out was not even keeping up with inflation.

She asked if her manager thought that her performance over the last year actually warranted only a 2% increase.  He  responded that the 2% increase was not based on her performance; It was based on the company’s sales and profitability, and also on the Board of Director’s decision about the amount of money available for raises.

She told me she was both befuddled, demoralized, and demotivated and she planned to evaluate all of her options.  I asked if that meant she would be looking for other employment.  She said, almost matter-of-factly, that she could think of no incentive to stay but would not leave until she had secured other employment.

When one considers the huge costs associated with replacing any employee and in particular a key decision maker such as the credit manager, I find it hard to understand why companies would risk the

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

attrition / defections that are likely as a result of a maximum 2% annual performance increase… because when the going gets tough, the best get going.

What are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com.

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

The Most Expensive Type of Mistake – Michael Dennis, CBF

Most Expensive Mistake
Most Expensive Mistake

The most expensive type of mistake to make is one that you do not learn from.  Why?  If you do not learn from your mistakes, you are likely repeat them.

In my opinion, every time a company has a bad debt write off, an examination should take place to determine if the credit risk was properly evaluated and monitored, and if the account was properly managed once there was a reason to believe the customer was in financial trouble.  I look for information such as this:
  • Who made the credit decision?
  • Was it properly documented?
  • When was the last time the credit file was updated?
  • What was the first indication that the debtor was in trouble, and what action was taken at that time?
  • What steps were taken to collect the past due balance?
  • When was management informed about the problem?
  • More fundamentally:  Was everything done that could be done to prevent the problem in the first place, and to minimize the impact on the creditor company once the problem became apparent?
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

I believe that an objective review is critical, and that any and all of the lessons learned be shared openly with the entire credit team.  The intent is not to embarrass anyone.  The goal is turn lemons into lemonade. To make the best of a bad situation and ideally to reduce the chances that the company will lose money as the result of a similar problem in the future.

Do you try to put past problems behind you as soon as possible, or do try to learn something from every bad debt write off?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com.

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Cold Dead Fish Served on Rice – Michael Dennis, CBF

Cold Dead Fish On Rice
Cold Dead Fish On Rice

I believe there is a tendency among credit professionals to sell themselves short.  If we described Sushi as “cold dead fish served on rice” people would think long and hard about ordering it because that is selling Sushi short.  Every successful credit professional I know is a solution provider. They have a unique set of skills and capabilities that benefit both internal customers and external customers.  So, don’t sell yourself short. Remember the solutions we offer include:

  • The capability to evaluate and understand external customers’ financial condition and understand how financial distress impacts their ability to pay you
  • The flexibility required to address dramatic changes in workload that can and do occur from day-to-day
  • The foresight necessary to recognize that one important way creditor companies succeed in the marketplace is by making fast and accurate credit decisions
  • The core group of skills necessary to assign appropriate credit limits
  • The expertise to select from various tools to mitigate credit risk when necessary
  • The ability to effectively and efficiently collect delinquent payments, as well as to address disputes and deductions
  • The skills required to address the interrelationship between higher risk and higher sales and to find the ‘right’ balance between the two
  • The ability to make our decision making process transparent to our internal business partners
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Next time someone asks you what you do for a living, remember how you contribute to your company’s survival. Credit is not “cold dead fish served on rice;” it is the lifeblood of the company and each of us are striving to master the skills necessary to be an artisan of the craft of managing business credit risk.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com.

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Poll – Have you ever had a customer cross out Terms & Conditions on your credit application?

Now this is overkill!
Now this is overkill!

Have you ever had a customer cross out Terms & Conditions on your credit application?

  • Tammy Adams  Incomplete, unsigned or altered Credit Applications are not accepted for consideration of open account terms. This information is clearly communicated at the time a Credit Application is emailed, faxed or personally handed to a ‘prospective’ new account.
  • John Lysdahl  We do not accept a credit application that has any such type of change made by the customer (potential customer).
  • Mike Puccinelli  Every customer signs a MSA contract and all Ts and Cs Re in the contract. No business can be conducted without a signed contract and signed sales orders.
  • Yvonne G. Our credit application is written and reviewed by our legal dept thus allowing any changes to the terms and conditions will undermines the intent of the credit application which is to protect the company. The only change or cross outs we allow and its on a case by case basis is the personal guarantee. Otherwise the customer is advised the cross outs and/or changes to the verbage is not acceptable.
  • Nina There is no such thing as a one-size-fits-all contract, so we’re willing to take a look at the changes they request. We’ll review the changes, and decide whether we’re willing to accept the adjusted risk. Most of the time, we won’t lend on the altered terms and contact the customer to let them know we can’t lend to them under those terms. That usually opens up the discussion to where we either come to a mutually acceptable agreement, or they decide to do business with us on a COD account instead.
  • Robert Simmons On the rare occasion a customer has elected to dictate our terms and/or conditions of sale by crossing out or changing the wording, I have advised sales the credit application is unacceptable and will be unable to establish an account. Credit would need a new application, unchanged, to restart the process. Very few resubmit a unchanged credit application. Only once has management over written my position and after a couple of years with this customer, management finally understood why I took the position I took and wrote off a 5 figure dispute, partly based on the changes in the credit application. Expensive lesson.
  • DMarc We review this carefully and there are only a few items we will allow to be crossed off, otherwise we view it as a possible red flag about the future relationship. If they cross off important items we don’t set up an individual account for them, they can purchase on the generic cash/credit card account & be taxed instead. Sr Mgmt can make a business decision to allow an override on the important items but they rarely make an exception. Would a bank or finance company allow it…
  • Dianne Talbert In addition to crossing out the terms the Credit App will not be signed.
  • Tina Smith  When this does occur, it is best to contact the customer to discuss. Even for minor issues, this helps to build a good relationship and to avoid any future mis-communication.
  • Donna Sweet  We do not accept altered terms and conditions. President/Owner will sometimes accept as a business decision.
  • Julie Ramos I would love to see those same companies try and cross out sections on their credit cards terms.
  • Theresa Golden You can live with some modifications, but there are a few (like modified terms) that you cannot accept.
  • Matt Johnston  We understand that some items can be struck from the application, however some simply cannot.
  • Ron Childs There are a few T&C that we can live without but there are some that will prevent approval of an open account

Update on the Overworked – Michael Dennis, CBF

Overworked Update
Overworked Update

A couple of weeks ago, I wrote about a fellow credit manager working 60+ hour weeks with no end in sight.   I commented that he was putting his health and his marriage at risk and challenged him to either (a) take action, or (b) choose to do nothing and accept the consequences.

I have an update.  He met with his manager and told him the workload was not sustainable.  His boss said that he had no idea that anyone in the credit department was working 60+ hour weeks.  In fact, all his boss knew was that the work was getting done, including special projects assigned to the credit and collection team.  His manager said that he assumed and believed that since things were operating effectively and all tasks were being completed even with the reduced credit department staff that no increases in headcount were required.

My friend has agreed to:  (a) Work 11 hours a day for the next two weeks, followed by (b) 10 hours a day for the following two weeks.  After that, he has committed to work a solid 9 hour work day going forward. Meanwhile, my friend is tracking and reporting on how much time he spends on the various tasks he performs each day.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

I am convinced that addressing or confronting this problem head-on was the right decision.  He told me he was not going to pretend that his manager was happy to learn he was no longer prepared to work 60 hours or more a week.  However, he is convinced that the time studies he completes each week will highlight the workload problem for his manager in a short amount of time.

When you have found that the volume of work assigned outstrips your bandwidth, what steps have you taken to change things?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Can You Walk and Chew Gum at the Same Time? – Michael Dennis, CBF

Multitasking or Managing Priorities?
Multitasking or Managing Priorities?

If your answer is Yes, do you consider this to be multitasking?  I believe multitasking is impossible.  If you disagree, try this simple experiment:  Can you: Add 8+13+9 and spell the name of your first pet at the same time.  If you can, you are capable of multitasking.  Here is a work example:  Can you type a final demand notice and give your full attention to a difficult negotiation with a seriously delinquent debtor at the same time?

What most or all of us do every day is not multitasking.  It involves managing multiple, competing priorities.  In my opinion, the keys to doing so successfully include:

  • Keeping track of the tasks you are required to perform/complete
  • Prioritizing these tasks
  • Spending the appropriate amount of time on each task
  • Delegating work whenever possible
  • Making sure nothing gets missed
  • Finding appropriate ways to cope with the stress associated with managing multiple priorities
  • Helping subordinates and co-workers understand how to prioritize this type of work
  • Documenting your successes, and learning from your failures

The first step is often overlooked, but it is the most important step for any member of the credit team. The first step is to make certain that you and you manager agree what you top priorities are.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Once this is resolved, your goal of managing multiple, competing priorities will be easier.

If you establish your own priorities, please consider this question:  How do you know you are right?

So, do you multitask or do you handle multiple priorities?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Discretion is the Better Part of Valor – Michael Dennis, CBF

Discretion In Action!
Discretion In Action!

From time to time, everyone must deal with an irate customer.  Sometimes, I feel like I am talking to a child throwing a temper tantrum.  Over time, I have learned by trial and error what not to do or say when a customer is having a meltdown on the phone.

I learned to be patient.  Temper tantrums usually blow themselves out.  I learned that people are often upset because they feel their needs are being ignored or no one is listening to them.

One of the biggest challenges is to stay calm.  If the customer shows no sign of slowing down, I think it is time to disengage. Something that works for me is to say this to the customer —and yes I have it written down on a 3×5 card.

“I recognize things are pretty tense right now and I don’t think we are going to make a lot of progress today.  I will give you a call the same time tomorrow.  In the meantime, I will discuss your concerns with senior management and I do appreciate your time.”

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Whenever possible, I ask my manager to join the follow up call.  I am often amazed by the difference in the customer’s demeanor.

How do you deal with temper tantrums?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

I Am Now Working Part-Time – Michael Dennis, CBF

Get In Balance
Get In Balance

I was talking to a friend of mine recently at an industry credit group meeting.   He told me over lunch that he was now working half days.  I congratulated him.  He told me his comment was meant as a joke and that half-days meant he was working 12 hours a day, every day.  He explained that his credit team had shrunk by 50% over the last 2 years because senior management would not approve job requisitions as people left the credit department.

He has been working at least 60 hours a week for more than a year, and told me it was taking a toll on his family life and probably his health.  I asked what he planned to do differently, and he told me that in this economy he felt lucky to have a job… but that if a better opportunity presented itself then he would certainly consider it.

In my opinion and in my experience, job opportunities rarely present themselves.  People normally change jobs after an extensive job search.  The math works something like this:  For every 100 jobs you apply to, you will receive perhaps 10 responses.  For every 10 responses, you are likely to become a finalist for one of those ten jobs on average.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

My advice was for him to either (a) change his present working conditions starting with a candid face to face discussion with his manager, or (b) change his employer through an active job search.  After all, all he has to lose was his health and /or his marriage.

When you are stretched to the max at work what approach(es) do you take to reduce your stress level and the impact on your personal life?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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UCLA Extension Launches Credit Analysis and Management Course

ucla_summer_session
UCLA Extension

by Mike Mitchell, CAE – CMA President

I have long wondered why institutions of higher learning have not offered courses in business credit. When I was pursuing my graduate degree in business administration, I don’t recall that credit ever came up as part of the course curriculum. I began working for CMA shortly after I completed my degree, and this is where I learned that business credit is really what makes the US economy as unique, competitive, and robust as it is. NACM does a great job of supporting professional development and recognizing credit professionals through its Professional Certification Program, but that only touches practicing credit professionals. What about the many more college graduates and job seekers who don’t know that credit jobs exist? How do we reach out to those people who are pre-career or looking to change direction and let them know about credit as a career? What about small business owners who don’t have the staff to delegate credit decisions?

A year ago, CMA was invited to participate in the development of a credit analysis and management certificate program at the University of California Los Angeles (UCLA) Extension to expose an entirely new audience to credit as a career. The program is intended for the credit community in banking and finance, trade credit management and small business owners. Roger L. Torneden, Ph.D., CFP®, the Director of Business, Management and Legal Programs at UCLA Extension, actually worked as a credit manager at JC Penny. He saw the same opportunity as we did to reach people working outside of credit.

In anticipation of this course offering, the CMA Board of Directors created a new student membership category to encourage students to join the Association while enrolled in credit courses. CMA can help student members network and learn from experienced credit professionals, and bring qualified job candidates to member companies that are looking to fill internships or entry-level positions that require specific skill sets in credit management.

Mike Mitchell, CAE
Mike Mitchell, CAE

14 students successfully completed the pilot course in January 2013, and now CMA is helping UCLA Extension promote summer enrollment. With training from UCLA and professional networking and services from CMA, our collaboration could seed the next generation of credit managers and expand the NACM brand.

For more information:
visit www.uclaextension.edu/credit

Or download program brochure

CMA Members receive a 10% discount on these classes. Use promo code H5278 when registering. Summer Sessions start June 27!

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When Less is Really More – Larry Convoy, CMA

Less Is More
Less Is More

At a recent National group meeting, 2 members took totally opposite routes to reach the same credit decision on a potential new account.

In one corner, we had a credit manager who utilized a comprehensive D&B, a Experian Business Owner Profile report on the individual principles and data from Hoovers and various internet sites.

In the other corner, a credit manager had a one page anscers report showing 2 lines of information, both being “account placed for collection”. By running his cursor over the reporting member numbers, he was able to identify the group members reporting and called them to get a further explanation.

Besides the disparity in costs and time involved they came to the same decision. The highlight here is the value of an Industry specific report from members in your group. The members of the Outdoor Living group know and that is why they all contribute their A/R to the CMA database. Many of their credit decisions are made simply by clicking on the anscers report.

Your group can experience the same ease in clearing accounts by contributing A/R to the CMA database. It is not a hard or long term project. If all or a majority of your group commits, it can be up and running in 1-2 months. The reduced expense of your third party reporting contracts should be attractive to management. The ability to look up an unlimited number of customers each month plus a pro-active group submitting alerts will make you aware of potential problems months ahead of non-group members.

Discuss this with your group in June and have a great credit tool at your disposal by the end of the summer. Our staff is here to assist.

Larry Convoy
Supervisor-Industry Credit Groups
lconvoy@emailcma.org
818-972-5323

How I Start My Work Day – Michael Dennis, CBF

starttheday
Start The Day

I start every day with five to ten outbound phone calls. The reasons for making these calls include:

· Ensuring that problems previously identified have been addressed and resolved
· Thanking customers and salespeople for their assistance
· Requesting help from other employees in addressing open issues
· Following up with customers to make sure documentation sent was (a) received and (b) understood and (c) addressed the specific question or concern
· Asking customers or fellow employees for specific supporting documentation
· Asking for feedback about what I can do to help them avoid recurring problems in the future
· Soliciting feedback… and in particular complaints and concerns about the work done by me or my team
· Requesting a heads-up on any events that will require additional resource allocation by the credit and collection team.

The information exchanged is valuable, but this is only part of the reason for placing these calls. As you know, it is easy for credit department become both insulated and isolated. For the credit department to remain relevant, it cannot operate independently.

One of the easiest ways to stay relevant is to reach out every day to your peers, your customers, and your superiors by phone. Some credit professionals try to build rapport and improve working relationships via email. Email messages are less

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

time consuming but also less effective than phone calls in developing or improving personal relationships.

So, how do you start your work day?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Why Do We Have to Call Customers Every Week? – Michael Dennis, CBF

Why?
Why?

A friend of mine is a credit manager. She told me that during a regularly scheduled staff meeting, one of her newer collectors asked why they were required to speak with a delinquent debtor no less frequently than once every seven days — in contrast to simply leaving voice mail message for them. My friend said that she quickly considered a range of answers, including these:

  • Because I said so
  • Because it is your job
  • Because you could be terminated if you don’t do it
  • Because follow up is an important part of your job duties
  • Because calling customers works; it is an effective collection tool
  • Because if the debtor answers your call, at least we know they are still in business
  • If for no other reason, because we measure this, meaning this is one way we evaluate your job performance

Instead, she asked the other members of the credit team to explain why calling delinquent debtors each week is important. They responded:

  • Because it works as a collection tool
  • So the debtor does not become complacent
  • To remind the debtor that we are not going away
  • Because if we don’t call, it can easily become a matter of: “Out of sight, Out of mind”

In my opinion, rather than always being the one that answers these questions, it is important for the Credit Manager to encourage peers to address issues such as this. To do so requires little more than a simple question such as this: Who would like to take a shot at answering this question?

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Sometimes hearing the answer from peers rather than management makes acceptance of the answer easier.

Does anyone reading this have another answer as to why calling delinquent debtors weekly is important?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

So What? – Michael Dennis, CBF

Answer- So What?
Answer- So What?

A couple of years ago, I joined the Financial Executives Networking Group (FENG). Networking is often the key to finding a new position, especially when you are out of work. For me, one of the advantages of FENG membership is that I can repay in-kind the people who helped me through two layoffs. I volunteered to review resumes submitted by FENG members for peer evaluation. Some resumes are simply outstanding. Many are not. A good resume might open doors for a job candidate, but a poorly written resume will slam them shut, especially when you remember that individual resumes are normally screened by human resources in a minute or less.

A friend of mine was laid off recently, and asked me to review his resume. It ignored a basic rule I now call: So-What? For example, his resume stated: “I managed a staff of 9 collectors.” So What? If his resume stated: “I managed 9 collectors and with my guidance we reduced DSO by 40% and bad debt losses by 60% within 12 months” then every potential employer would have an answer to the So What question.

Here is another example from the same resume: “I developed and ongoing dialogue with the sales management team to foster closer collaboration.” So close, but so what? His resume could have said: “I developed a collaborative working relationship with sales management resulting in an incremental increase in sales of at least $15 million a year.”

In my opinion, resumes need to be more focused on accomplishments, and far less on job responsibilities. Remember, you have one chance in about one minute to impress one resume screener enough to include your resume in the “for further review” pile. Don’t waste that chance.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my experience, most resumes break the “so what” rule. What do you think of resumes you receive that break this rule?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Hire a Credit Professional Who Is Certified To Do The Job

NACM
NACM

Accountants have CPAs, Attorneys have Esq., Association Executives have CAEs, Business Professionals have MBAs, and many Professors and Scientists have PhDs.

Business Credit Professionals can also receive professional designations that identify their level of knowledge and skill at the credit profession. There are three professional designations that demonstrate a commitment to excellence in the credit field: CBA – Credit Business Associate, CBF – Credit Business Fellow, and CCE – Certified Credit Executive.

Credit Management Association (CMA) provides online educational programs that fulfill the course requirements for credit professionals to achieve their NACM (National Association of Credit Management) designations.

  • CBA is an academic-based designation which signals mastery of three business-credit related subjects: Business Credit Principles, Basic Financial Accounting, and Financial Statement Analysis. No minimum work experience is required. Applicants must be registered with NACM National (nacm.org) prior to applying to sit for the exam.
  • CBF is both academic and participation-based and signals competence in two intermediate courses: Business Law and Credit Law. Applicants must also have accumulated 75 Career Roadmap points, and be registered with NACM National. One cannot achieve a CBF without first having achieved a CBA designation.
  • CCE is NACM’s highest designation that endorses its achievers as capable of managing the credit function at an executive level. There are several ways to qualify for the CCE, and candidates must pass a rigorous exam that tests them in accounting, finance, domestic and international credit concepts, management and law. Applicants must also have accumulated 125 Career Roadmap points. Certified Credit Executives are also required to recertify every three years. Once they reach 60 years of age or have formally retired at age 55, they are exempt from recertifying and receive a lifetime certification status.

Registration with NACM National is required prior to applying to sit for each of the Designation’s exams, which can be proctored at the students’ company location. Exams are held only four times per year in March, May or June (only at Credit Congress), July, and November. CMA helps facilitate the certification process by providing information on all our education programs (classes, seminars, webinars, and conferences) to National for the students lifetime file.

NACM has just introduced a new designation called the Certified Credit and Risk Analyst (CCRA). This is academic-based which signals mastery in the analysis and interpretation of financial statements. It was created to support the need to

Cheryl Hammond, CMA
Cheryl Hammond, CMA

maintain sound financial analysis skills. Three courses are required along with a final exam, but Career Roadmap points are not needed for this lifetime designation.

CMA hosts free webinars every other month on the Professional Certification process called “Destination Designation”. If you have are interested in any of the Designation programs, please contact CMA at 831-475-9482 or email Cheryl Hammond at chammond@emailcma.org.

I Just Don’t Have Time – Michael Dennis, CBF

Don't Have Time
Don’t Have Time

At a recent industry credit group meeting, the morning guest speaker talked about the need for periodic financial statement updates from customers. One of his strongest recommendations involved updating statements no less frequently than once a year…an idea I agree with completely.

Over lunch, several of the credit managers at my table basically scoffed at the idea of annual updates. One common concern or complaint involved not enough time or resources. One especially vocal credit manager said: “If I actually had to update financial statements once a year, it would take nothing less than 40% of my time.”

In my opinion, annual customer financial statement analysis is a critical success factor for any credit department. I am not convinced that credit managers can effectively manage credit risk without period financial updates and analysis… even if

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

doing so does take 40% of the manager’s time. Of course, this work is routine and can and probably should be delegated to an employee of the credit and collection team as quickly as possible.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

What are your thoughts?

Alerts Are Essential – When You Submit is Vital

Submit Alerts
Submit Alerts

Aside from supplying a case number, does it really help your fellow group members if the first alert you send out on a common customer is a Bankruptcy notice?

Alerts work went they are reported at the first sign of payment problems.  Would your exposure and possible loss be reduced if you received the information contained in alerts 1-3 below early in your dealings with the account?

Is there still time for action if the first alerts are #4 and #5?

Is this account doomed for a write-off if your first alert was #7?

Would you be optimistic of any recovery after alert notifications #8-10?

  1. Paid first order 45 days late

  2. Slowing, invoices are being paid 60-90 days beyond terms

  3. Constantly requesting copies of all invoices,.

  4. Phone calls and emails not been responded to

  5. A/P contact gone, calls go to voicemail

  6. 10 day demand sent

  7. Mail being returned, phone disconnected

  8. Salesmen reports storefront is empty

  9. Placed for collection

  10. Bankruptcy Notice Received

HAVE YOUR GROUP COMMIT TO SUBMITTING ALERTS AT THE FIRST INDICATION OF A PAYMENT PROBLEM?

by: Larry Convoy, Industry Credit Groups, Supervisor

 

Must Do – Michael Dennis, CBF

Must Do List
Must Do List

A decade or so ago, I carried around a particular brand of Day Planner about 2 inches thick.  I attended a workshop on how to use it, and other workshops on related topics including Prioritizing and Creating a To-Do List.

That was then, and this is now.  I no longer focus on generating daily To-Do lists.  I no longer worry about classifying tasks as: A, or B or a C priority.  Now, I have a Must-Do list which is far shorter than my To-Do list would be.  This allows me to focus on the tasks that must be completed…or else.

Instead of assigning tasks as: A, B or C priorities, I now focus on identifying and completing only A priority tasks.   The rationale for doing is as follow:  I will be very lucky just to complete the A priority tasks each day.  Therefore, I can ignore B and C tasks unless they, at some point, become A priorities.

When I share this technique, I am sometimes asked this question:  How do you keep track of B and C tasks so they do not get overlooked?  The answer is that I don’t track them.  When a B or C task becomes an A priority, I add it to my list and take care of it.  The only time I work on B or C priority tasks is on those rare occasions when I have completed all my A priorities.  Another common question is:  How do you track your Must-Do’s?  As I mentioned earlier, I generate or more precisely update my Must-Do list every day.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my opinion, everyone should have a Must-Do list, and focus on it.   In this way, each of us can focus our time, energy and attention on the tasks that are the most important.  I also believe this process may not work for everyone…but it works for me.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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Share the Burden – Michael Dennis, CBF

Build Your Network
Build Your Network

As a credit manager, you know that unless the credit limit requested exceeds your level of authority, the responsibility for making the decision is yours.  Many, and probably most credit managers carry this responsibility alone.  I believe this is a serious mistake.

In my opinion, credit managers should develop a network of advisors.  This is not a network of people simply to commiserate with.  Instead, it should be a group of individuals with whom you can share issues and concerns, and with whom you can request feedback about the more difficult credit decisions.

I joined a network of credit professionals more than five years ago.  I know this network has helped improve the speed and accuracy of the decisions I have made, and I am convinced that every credit manager should consider forming their own network.  Just be careful that you

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

do not violate any antitrust rules when discussing ways to mitigate credit risk.  For example, I never reveal the name of the customer that I am calling about when requesting guidance from my circle of trusted advisors.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Credit Executive of the Year 2013 – Melissa Kobus, CCE

Melissa Kobus and Karen Schmidt
Melissa Kobus and Karen Schmidt

Our winner of this prestigious award has 17 years of credit experience.

Serving on the CMA Board of Directors since 2008 and was this year’s Treasurer.

Our winner serves on the CMA membership committee and is Chairman of the CMA Board of Governors.

An active participant in the Young Credit Professionals committee and participates in two CMA credit groups in Sacramento and Las Vegas.

She helped schedule CMA networking events, offers her employer’s facility for CMA meetings, seminars and networking breakfasts.

This winner has obtained all three NACM designations, CBA, CBF and in July of 2011 the CCE. Demonstrating a strong belief in these educational designations she held a Business Credit Principles class onsite to inspire her staff to obtain designations and subscribes to unlimited CMA webinars for her staff of 8.

She attends and sends representatives to WRCC. She has presented at WRCC and her next goal is to attend the NACM Graduate School.

She is the kind of CMA member that we aspire to attract; committed, engaged and willing to help make the Association successful in all CMA offerings.

Congratulations to CMA’s Credit Executive of the Year Melissa Kobus, from Anixter Inc.

CMA Mentor of the Year 2013 – Patrick Spargur

Patrick Spargur and Karen Schmidt
Patrick Spargur and Karen Schmidt

The Mentor of the year was nominated by a member of his industry credit group.  Employed by Bally’s Technology  In Las Vegas, NV, he was a collections manager for years before his became Instrumental in building  the Gaming Supply group in Nevada. He is number one  in providing referrals and talking about CMA to other credit professionals.  Group members look to him for advice in the gaming industry in the US and Overseas.

It was said that his advice goes beyond work, he assists friends and co workers with difficult life issues.  Giving his knowledge back to his community he co-founded a non profit organization for homeless teenagers in Las Vegas to provide food, clothing, and school supplies.

The Mentor of the Year award goes to Patrick Spargur of Bally’s Technology, Las Vegas

 

CCE Designation of Excellence – Pamela Craik, CCE

Pameil Craik and Karen Schmidt
Pameil Craik and Karen Schmidt

This award goes to someone that has been inspired to higher education since beginning with her company1989. Working hard during the beginning years, while mentoring with a few great Credit Managers, was promoted to the Area Credit Manager for Northern CA and the Northwestern states in 1999.

To further career goals, this individual obtained a bachelor’s degree in 2001 and continued pursuit of education by completing the CBA, CBF, and ultimately the CCE in 2007. While doing a time consuming job, she was raising 3 children and a husband, and was still able to complete her MBA in July 2011.

A member of CMA Board of Governors, she has presented Credit Jeopardy at WRCC the last two years, and also gives her education back to the community at the local chamber of commerce, local government for Bond Oversight Committee of the School District, and small business activities with former MBA classmates.

The CCE Designation of Excellence goes to Pamela Craik of McKesson Pharmaceuticals, Sacramento.

CBF Designation of Excellence 2013 – Tracy Rosenbach, CBF

Tracy Rosenbach and Mike Mitchell
Tracy Rosenbach and Mike Mitchell

This honoree, was nominated by her Director of Financial Services. The winner has consistently shown dedication to higher learning as evidenced by an MBA, CBA and CBF designations.

Continuing to exemplify the qualities of leadership and excellence by participation and involvement with NACM, and as a CMA Board Member, clearly demonstrates willingness to exchange and share knowledge. This member is a valuable source of information beyond the field of credit. Education development in her department is evidenced by her department’s motto, “Be relentless in the pursuit of knowledge”.

The CBF Designation of Excellence goes to Tracy Rosenbach, Financial Services Manager for Silgan Containers in Woodland Hills.

CMA Instructor of The Year 2013- Paul Beretz

Paul Beretz
Paul Beretz

Paul Beretz was awarded the CMA Instructor of The Year 2013 at CMA’s Annual Meeting on April 11, 2013.

Paul was unable to attend the meeting – but sent us this message.

“It is truly an honor to be selected as “Instructor of the Year” by CMA.

When I look back on my 30 + years as an instructor, I really see my role as a “facilitator” rather than “teacher,” my goal being to expedite learning with and for working adults.

My first teaching experience was an evening credit course for NACM San Francisco, many years ago, while I worked in corporate credit. I’m proud that I have been a part of CMA’s growth in educational offerings to members, especially with the on-line programs initiated over seven years ago. These certificate courses have been greeted with enthusiasm …….. perhaps some in the audience have already completed some of the programs???

Unfortunately, I cannot be present to accept this award, ironically for educational reasons. I am on the faculty of St. Mary’s College in northern CA in the undergraduate and graduate programs of Leadership and Organizational Studies.

As an instructor for working professionals who are either trying to complete their BA or MA at St. Mary’s, I am meeting with a group of my current Masters students today who are in the process of completing their theses and will graduate in May.

Thank you again – to the membership and Board – for this prestigious award which I really value and will proudly display.”

Congratulations to Paul Beretz and thank you for your dedication to CMA and its members.

 

Willing to Walk Away – Michael Dennis, CBF

Willing to Walk Away
Willing to Walk Away

A new credit applicant company refused to sign our credit agreement or list bank and trade references, or provide financial statements, or sign a personal guarantee.  The VP of Sales stopped in to tell me that this applicant was “important” and could become one of our larger customers.  He added that he would have to “pull out all the stops” if this applicant was rejected.

With this conversation in mind, I met with my manager and explained the situation.  I said I was uncertain how to proceed, but based our standard tools for credit evaluation; the applicant clearly would not qualify for open account terms.   Even if they did, the credit limit I might assign on a good day would be perhaps one-tenth of the credit limit our salesperson had requested.

My manager told me to:

  • stop straddling the fence,
  • stop hoping that she would make the decision for me,
  • stop worrying about the Sales VP’s comments,
  • start thinking logically,
  • start doing my job.

Later that day, she asked what my decision was.  I told her I refused to extend credit.  Her only comment was that if an applicant is unwilling to provide basic information to a new creditor that there is good reason for concern.  In my opinion, this company either (a) had something to hide, or (b) had an inflated opinion about

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

their creditworthiness.   In hindsight, I realized she was right.  I had all the information I needed to reject the application. Her approach was a great way for her to reinforce my role and my responsibilities.

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Fishing For Information – Michael Dennis, CBF

Fishing For Information
Fishing For Information

In the last week, I have received calls with questions from two different members of our industry credit group.  In both cases, the answer to the question was essentially a click away and I referred the callers to the Encyclopedia of Credit.  As some of you already know, access to the Encyclopedia of Credit is available at no charge, and it is searchable by subject.  At present, the Encyclopedia of Credit contains well over 1,000 essays on a wide variety of credit and collection related topics, with additional information being added or updated every week.

Don’t get me wrong.  I enjoy speaking with other credit professionals, and I consider many of the people in my credit group to be friends as well as colleagues.  That said, my decision to refer the callers to this online resource is reminiscent of this old adage:

Give someone a fish and you feed them for a day.  Teach someone to fish and you teach them to feed themselves forever.

So, if you are fishing for information on almost any business credit related topic, I think your first step should be to visit the Encyclopedia of Credit website, located at:  www.encyclopediaofcredit.com

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my opinion, the information it contains is practical, pragmatic, factual and authoritative.  I think it is one of the most valuable resources Credit Management Association makes available to its members and probably one of the least frequently used.

Do you have any other online sources of information that you visit and would like to share with other CMA Members?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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What’s in an Effective Final Demand Letter, by Michael C. Dennis, CBF

Final Demand
Final Demand

I recently received a final demand notice from a Supplier.  After I read it, I sent it to our A/P Manager.  Whenever I receive something from another credit department, I try to see what I can learn from them.  In this case, there was essentially nothing to learn.  The final demand letter was too long, and it took more than a paragraph to get to the point.  Add in the fact that it was addressed to the “Credit Manager” rather than to our A/P Manager, or the Controller or CFO, and it was even more of a mess.

Our basic demand letter says this:  “As of today, there is a balance past due of $x.  I hoped this matter could be resolved amicably, but I am almost out of time.  If payment in full is not received within ten days, your account will be placed with a third party for immediate collection or legal action.”

More broadly, I think the keys to generating effective correspondence include:
  • Making certain your message is clear and concise;
  • Not repeating yourself;
  • Avoiding the use of jargon;
  • Sending correspondence directly to an individual – never to a job title;
  • Indicating the action you need the recipient to take, and the deadline for completing it;
  • Not being overly formal;
  • Trying to appeal to the reader’s needs;
  • Keeping your message brief and professional;
  • Using templates for routine correspondence.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What is yours? How about sharing the highlights of your Final Demand letter in the Comments section?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

 

Sequester, Austerity – I’m Confused – How About You?

April 11, 2013
Money Matters

Every day we hear more economic hardship news. It’s hard to understand, to keep up with and to determine how it might affect your life and your business.

I’m expecting some clarity during Economist Chris Kuehl’s presentation at the CMA Annual Meeting. How about you? Have you reserved your seat for the Annual Meeting on April 11, 2013?

If you have, hopefully you and I will be the ones with the lightbulbs that go off as the economic turmoil starts making more sense.

If you have not reserved, please follow this link to learn more and consider attending. It’s only $69 per person, for CMA Members, and this includes lunch and parking at the Disneyland Hotel.
What do other CMA Members think?

“Chris Kuehl is my daily dose of caffeine. I wake up to his early morning emails from
his daily Business Intelligence Brief. He has inspired me to actually pay attention to the entire world of economics, politics, international barriers, and expectations. His special personal stories are full of humor and provide personal antidotes while keeping his morals intact. He is probably the only economist that will actually keep your attention throughout very intellectual subject matter.” Karen Schmidt – McKesson

“We are very fortunate to be able to have such a renowned speaker and economist as Chris Kuehl at our annual meeting again this year. If you do not follow Chris’s daily briefings or have never had the opportunity to hear him speak, do not miss this opportunity. Those of us who do follow him and have heard him before will not miss the chance to hear him speak again. You will walk away with a much better understanding of what is going on in the world of economics today.” Darrell Horton – Shufflemaster

If your attending on April 11, you’ll get the added bonus of two highly rated speakers – David Osburn and Eddy Sumar.

A Better Mouse Trap? – Michael Dennis, CBF

A Better Mouse Trap?
A Better Mouse Trap?

I recently attended a Lunch-And-Learn program sponsored by our credit reporting agency.  Their guest speaker spoke about the importance of accurate bad debt forecasting.  His presentation described a study he had conducted for the credit reporting agency in which customer ratings were used to establish appropriate bad debt reserves.  I was intrigued.

He recommended that every creditor company rate its customers on a scale of 1 to 5, with 1 being the lowest risk and 5 being the highest risk customers.  Without repeating the actual formula used to calculate the bad debt reserve, suffice it to say that accounts rated a 5 had significantly higher reserves as a percent of open A/R than low risk customers.

On the drive back to the office, it occurred to me that problem with this process was that the classification of customers into one of the five risk categories was largely arbitrary.  Once that became clear to me, the idea of testing this methodology for establishing an appropriate bad debt reserve was abandoned.

However, my manager liked the idea.  He said our outside auditors would love reviewing the documentation used to calculate the bad debt reserve.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my experience, bad debt reserves are difficult to calculate and usually incorrect… often grossly inaccurate.  I think that the idea of building a better mouse trap is good, but that this was not a winning design.

How do you estimate bad debt reserves? How accurate have your estimates been? Maybe someone out there has the better mouse trap.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Opportunity Is Knocking – Michael Dennis, CBF

Opportunity Is Knocking
Opportunity Is Knocking

Today’s business climate provides an excellent opportunity for credit managers to refine and sharpen the collection and risk management skills and to refine the process within their departments. 

Credit managers across all industries face continual pressure to:

  • (1) reduce DSO
  • (2) minimize bad debt losses
  • (3) offer more reports, analysis value-added services to internal customers or to their senior management team. 

Unfortunately, many credit managers spend so much time on items 1 and 2 that they dedicate far less time to item 3 than it deserves.

Improving the effectiveness and efficiency of every task performed in the credit and collection function has become more important than ever. The current economic climate provides a perfect opportunity for credit professionals to redesign and refine credit department operations including:

  • The risk mitigation process
  • The collection process 
  • Dispute management 
  • Process automation 
  • Develop more collaborative relationships

One new task that the credit department is ideally suited to accept involves evaluation of the financial health and viability of potential suppliers, as well as existing suppliers.  The impact on an organization when a single source supplier fails to deliver products on time, or worse, or goes out of business can be devastating.  It takes very little imagination to see how the information resources available to the credit department combined with the financial statement analysis skills can be used to evaluate the financial condition and long-term viability of a supplier.  This information provided by

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

the credit department to purchasing/procurement could be used to proactively manage this risk.

Opportunity is knocking – do you see other opportunities for credit at your company?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

You’re a Warmonger! – Michael Dennis, CBF

Warmonger
Warmonger… really?

I have been called a lot of things. An email I received recently from a division sales manager was the first time I was called a warmonger.   I had to look up the definition.  A warmonger is someone who tries to stir up wars.

I called and asked what he meant when he wrote this.  The divisioin manager told me there was a widespread feeling that I enjoyed conflicts with customers, and that maybe I got a rush when I had to handle disputes between sales and credit, or between credit and an applicant, or between credit and an existing customer.

I told him that he was totally wrong.  I reminded him that no one is thrilled to hear from me or my team.  No one likes to be told that their orders are on hold.  No customer likes to be in a position in which they must make a specific commitment to clear a past due balance.  Also, no one likes to be proven wrong when we document that deductions were taken in error and must be repaid.  No company wants to be told they do not qualify for (a) open account terms or (b) a higher credit limit.

In response to the warmonger comment, I said:  I am not looking for a fight with anyone.  I do not look forward to disagreements. However, I cannot back down just because a customer is disappointed, angry, irate, profane, belligerent, dismissive, demeaning, sarcastic, caustic or

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

otherwise unpleasant.  These difficult interactions help limit bad debt losses and reduce serious payment delinquencies.

That’s my opinion.  What is your opinion?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

 

Conflicts with Customers – Michael Dennis, CBF

Conflict
Conflict

In a meeting last week with our VP of Sales,  this comment was made after a particularly lively discussion about whether or not a seriously delinquent customer with two broken payment commitments should be on credit hold:  “I think you enjoy situations involving conflicts with our customers.   It is almost like you made the decision to place this customer on hold because you can… and that you did not take time to look at all the facts including:

  • How devastating placing them on hold will be to them and to their production schedule
  • How much damage you caused our business relationship
  • How much business they so with us every year, or that their sales have been trending up
  • How bad it would be if we lost this customer, and how difficult it would be to find a replacement for our lost sales.
Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In my opinion, the decision to hold was necessary and appropriate.  I also think thisjob is not a popularity contest.  I don’t think anyone enjoys conflicts, but conflicts in credit and collection are unavoidable and inevitable.

That’s my opinion.  What are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

No Alerts or RFI’s – What’s Up?

anscers RFI and Alerts
anscers RFI and Alerts

TO ALL CREDIT GROUP MEMBERS:

As I navigate around anscers.com, I am amazed at how many groups have no alerts and no RFI’s on their group page.

Are we to assume from this that the members of these groups get :

NO NSF CHECKS, PLACE NO ONE FOR COLLECTION, NEVER WITHDRAW CREDIT, NEVER FILE LIENS, NEVER HAVE A CHANGE OF OWNERSHIP, CUSTOMERS PHONE NEVER DISCONNECTED, ETC.

As for RFI’s, wouldn’t free information from industry specific references be more effective than expensive credit reports where you cannot identify the provider of the trade line or it may be old information.

These services are a means for you to communicate with your group every day of the month, not just meeting day. The groups that actively use these services are weeks ahead of the general trade in knowing when a particular account is having problems..

IF YOUR GROUP IS SUCCESSFULLY USING THESE SERVICES, I WOULD LOVE A TESTIMONIAL WE CAN SHARE WITH THE OTHER GROUPS. SIMPLY SEND TO MY EMAIL ADDRESS BELOW. A GIFT CARD TO THE BEST ONE.

My staff and I are always available to train members or groups on the procedures for entering alerts and submitting RFI’s.

Please make a commitment to actively use these resources.

Sincerely
Larry Convoy
Supervisor-Industry Credit Groups
lconvoy@emailcma.org
818-972-5323

Honors & Awards Nominations Now Accepted

Mike Mitchell, Kathy Tomlin, CCE and Mike Puccinelli, CCE
Mike Mitchell, Kathy Tomlin, CCE and Mike Puccinelli, CCE

The Honors and Awards Committee of Credit Management Association is now accepting nominations for CMA Credit Executive of the Year and the following Member Awards:

  • CMA Instructor of the Year
  • CMA Mentor of the Year
  • CBA Designation of Excellence
  • CBF Designation of Excellence
  • CCE Designation of Excellence

This is an opportunity for you to recognize those Credit Professionals who have demonstrated outstanding leadership, exemplary commitment to the Credit Profession, and who have inspired or have worked to promote the advancement of the Profession. Any nominations received by February 21, 2013 will be considered. The recipients will be awarded at CMA’s Annual Meeting on April 11, 2013 and held at the Disneyland Hotel in Anaheim, California.

Nominees will be judged on the basis of professional experience, education, leadership ability and participation in CMA groups, committees and activities.

Download – honors_nomination2013

 

Is Credit Insurance the “Silver Bullet”? – Michael Dennis, CBF

The SIlver Bullet
The SIlver Bullet

In response to a recent blog in which I suggested that companies not reporting bad debt losses are not taking enough credit risk, I received an email suggesting that I had overlooked an important option which would allow B2B creditors to offer credit to less creditworthy companies with little or no credit risk.  His comment was essentially this:  Credit insurance is a “silver bullet.”  Bad debts are the problem and credit insurance is the solution.

Of the 25 years I have worked in credit and collections, I spent at least ten years with companies that purchased credit insurance including my present employer.  In each of those ten years, my company experienced bad debt losses, and in only one of the ten years were the costs associated with credit insurance offset by the recoveries we received.  How can this be true?  The answer is that there are a variety of factors, including these:

  1. My company [and most applicant companies] cannot not get credit insurance on every account for which coverage is requested.  Unfortunately, it is often these higher risk accounts (the zero credit coverage accounts) that fail
  2. Credit insurance is never first dollar coverage.  Insurance policies have (a) an annual deductible, (b) a per loss deductible and (c) a minimum dollar loss threshold below which losses were not insurable.  Put these together with the annual credit insurance premium and it is relatively easy to see how hard it could be to receive more than you put in.
  3. Each credit insurance policy issued had an annual dollar cap on payments.  If and when the cap on payments is reached, all bad debt write offs above the dollar cap are not covered by insurance and are bad debt losses.

In my opinion, credit insurance is not the silver bullet solution to bad debts.  However, I have a slightly different perspective on a statement I made previously that “bad debt losses are inevitable for companies offering open account terms”  which is this:

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

“Bad debt losses are inevitable for companies offering open account terms… unless the company’s credit department refuses to accept appropriate credit risks.”

That’s my opinion.  What is yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

“Trust, but verify” creditworthiness

Trust and Verify
Trust and Verify

Data from CMA’s Credit Confidence Survey was used to created this article by Sageworks, Inc. You can participate in this quarters CMA Credit Confidence Survey using this link.

“Trust, but verify” creditworthiness 

By Mary Ellen Biery, Research Specialist, Sageworks, Inc.

More than four years after the peak of the U.S. financial crisis, bankers, businesses and borrowers still remain cautious about their exposure to risk.

In a recent survey, only about 6 percent of senior loan officers atU.S. banks said that credit standards for commercial and industrial loans or credit lines had eased over the past three months. Instead, most respondents said that standards were basically unchanged. And among banks that had eased credit standards or loan terms, it was more often due to aggressive competition from other lenders – not a more favorable economic outlook.

Credit managers outside of banking, too, are exercising caution in their own extensions of credit. The Credit Management Association found that 30 percent of respondents expected to tighten credit policies in the upcoming quarter. At the same time, corporate credit managers are under more pressure to evaluate credit because demand, as measured by the number of received applications, had picked up.

How can a business keep a pulse on the companies with which it interacts?

All too often, companies trust that a potential business partner is creditworthy with very little evidence to support the assumption. Ronald Reagan made popular the catchphrase “Trust, but verify” regarding the former Soviet Union, but the maxim is a good one for businesses considering new business relationships, too.

“Most [business-to-business] credit risk is really of a 30-, 60- or 90-day nature, so it’s very short term,” says Hugh W. Connelly, CFA, president of Univest Capital Inc., a small-ticket corporate finance business.

“As long as the customer pays their bills within 30 days, I don’t think people even look at the creditworthiness of the customer. They just assume that because they paid their bill on time last month, they’re going to pay their bill on time this month.”

But that’s dangerous. Many businesses examining a company’s trade-credit history are evaluating data that is 90 days or older — ancient by business terms, according to Connelly.

Connelly says payment histories can be valuable, but he recommends that credit managers shouldn’t rely too much on them, either. Depending on the situation, it makes sense to perform a more thorough financial analysis.

If a company’s risk appears to be above a given threshold or even if payment history is spotty, says Sageworks analyst Libby Bierman, deeper analysis like a review of financial statements or cash flow may be merited. Additionally, requesting and analyzing financials might be a necessary step in the review process for suppliers that are particularly crucial to the supply chain or for customers requesting credit lines over a certain amount.

Conducting due diligence on a supplier could also help credit managers “trust, but verify” the integrity of a supply chain, a significant operational exposure. “Checking a supplier’s likelihood of default based on current finances could save you money and trouble,” notes Bierman. “If they go out of business, you could be out of a key line of credit and a key supplier, or if they do not make their payments on time to their suppliers, that could affect your whole supply chain,” she notes.

Michael Mazzarino, founding partner of strategic advisory firm The SCA Group LLC, says that in addition to quantitative verification, credit managers should consider qualitative checks. “It’s extremely useful to get in a car or airplane to visit the supplier, partner or customer,” he says. “You see a lot that you don’t often see in the analysis of financial statements or projections.”

For example, walking through a customer’s warehouse may reveal boxes of very old inventory. “You may or may not have a problem with cash being tied up, but at least you have the genesis of a question,” Mazzarino adds.

No Bad Debt Losses? – Michael Dennis, CBF

No Bad Debt?
No Bad Debt?

A friend of mine called to ask if it was possible to have no bad debt losses. My flippant response was: “Sure, if you don’t take any risk.”

Another friend of mine was fired after three years with no bad debt losses. Why? Because management said he was not taking enough risk. It is easy to limit risk if you limit sales to marginal or high risk customers and applicants for open account credit terms. However, there is a cost associated with this benefit.

If your credit granting criteria are set too tightly, you will turn away profitable business because of the possibility of slow pay or non-payment by one or more of these high risk accounts.

I told my friend that the role and the goal of the credit department is not to eliminate credit risk. Instead, it is to manage risks so that losses are contained and controlled. Of course, this is a lot more work than simply taking no risks and incurring no losses.

Why do most companies take these risks? The answer is simple: The companies do so because they are convinced that over the long-term the additional profits that will be generated on the open account sales made to marginal or high risk accounts will more than offset the bad debt losses that will be taken.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

Here is the bottom line: I do not know of any well-managed, growing, profitable company that does not require their credit department to manage risk rather than avoid them. In my opinion, any company that routinely reports no bad debt losses is too conservative and is leaving profits on the table instead of in their pockets where they belong.

That’s my opinion, what are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

anscers RFI Enhancements

Several new enhancements were added to anscers RFI this weekend.

The first enhancement – My RFI – can be found on the RFI Main page. My RFI is a new display filter that when clicked will display all the RFI’s entered by your company in the last 30 days. This feature was requested several times in the past few months by anscers users.

My RFI
My RFI

The next enhancement occurs in the RFI Reference area. We are now requiring a phone number for all RFI References added and those that currently exist on your Reference List.

Phone entry on new references
Phone entry on new references

The phone is necessary for two purposes. First we are trying to increase the reply ratio for references added to RFI’s. Currently 38% of all references added to RFI’s reply with either a tradeline or no experience. CMA will be making phone contact with all references added to RFI’s to double check the information provided, answer any questions about anscers RFI and obtain their permission to fax (and in the future email) the RFI reference to them. Which leads to the second purpose for requiring the phone number – obtaining their permission to fax will make them aware of the coming fax increasing the reply percentage.

Phone required for current References
Phone required for current References

If you have any questions or suggestions for anscers RFI please call our Customer Support line at 800-541-2622 option 6.

 

A View From Under The Bus – Michael Dennis, CBF

View From Under The Bus
View From Under The Bus

I had lunch with a friend and former manager last week.  When I left the company, he was VP of Finance.  Since then, that company has been acquired by a competitor.  Since he is still employed, I assumed things were going well.  Wrong!

I asked him how he liked working for the new company.  He said the first day following the acquisition, he was demoted and that he is now the Director of Finance.  His base salary was left unchanged, but his bonus was reduced “so he could be in line with his peers” at the parent company.

I said things could be worse.  He said they were… and asked me if I wanted to hear about the view from “under the bus.” He told me their new General Manager does not have a good thing to say about his work.  He said the only time the GM calls is to complain, and that he often complains about issues over which my friend has no control.  I asked if he thought they were trying to get rid of him, and he said he was sure of it.

Some companies do a very poor job of terminating employees.  Of all the ways to do so, the idea of nagging, harassing, complaining and criticizing people until the give up and leave ‘voluntarily’ seems to be a completely unprofessional approach, but one that is used far too often.

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

In your career, have you been pushed under the bus? If so, please share your story.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Group “To Do” List for 2013 – Larry Convoy

Ta-Da! List
Ta-Da! List

Losing 10 pounds, eating healthier, exercising regularly, and learning how to use Excel are just a few things from my 2012 “To Do List” never accomplished that I will definitely make a priority in 2013. Do you have a “To Do List” that has some tasks not completed?  Does taking full advantage of your Industry Credit Group fall into that category?

Here are a few items for your 2013 list.

  1. Give everyone in your credit department access to anscers. It is FREE and you can delegate duties such as posting alerts, answering RFI’s and doing your monthly reporting.
  2. Mark your calendar for the entire year of group meetings. Know instantly and weeks in advance that the office meeting scheduled for the 21st conflicts with your Industry Group Meeting.
  3. Simplify your group tasks; reduce time spent by contributing an A/R file monthly. CMA’s Paul Guillen, pguillen@emailcma.org, can work with you to make an easy transition.
  4. Commit to bringing in that one industry leader that has not joined the group and whose information would be beneficial to all.
  5. Become a group officer, be a mentor to a new group member or offer to call members not participating. Groups need strong leadership from within to grow and maximize the benefits.
  6. Acknowledge and thank those who report, attend meetings and give of themselves and their credit knowledge freely.
  7. Learn what members have expertise in credit topics and dedicate 15 minutes per meeting to educational discussions.

If on December 31, 2013, you can look back and say that you completed half of the items on your list, you and your group will have had a successful year.

Thank you for your continued support of CMA.

Sincerely,

Larry Convoy
Supervisor-Industry Credit Groups

lconvoy@emailcma.org

818-972-5323

My New Year’s Resolutions – Michael Dennis, CBF

Be Awesome
Be Awesome

For years, I have been writing New Year’s Resolutions every year.  These resolutions usually addressed perceived deficiencies.  For example, one of my resolutions last year was to become more proficient at analyzing foreign financial statements.  Another resolution was to lend my expertise to the Purchasing Department by becoming more active in qualifying new suppliers.  This year, my Resolutions are quite different.  They include:

·         Have more fun at work
·         Take work less seriously
·         Try to stop worrying about things I cannot change
·         Find out what the boss wants, and make sure I deliver it
·         Leave on time at least one day a week and ideally more than once
·         Follow through on the promise I made to delegate work more frequently
·         Address problems but don’t forget to focus on the person and the problem
·         Take real vacations by not responding to messages and emails while on holiday
·         Follow through on the commitment to build bridges, not fences, between sales and credit
·         Never turn down an offer of assistance, and ask for additional resources if/when you need them
·         Give up on the idea that every customer related dispute can be resolved provided enough effort is put into addressing that dispute

I think every credit professional should develop new resolutions like these that help them to:

·         Focus on the positive aspects of work and life
·         Change the focus from addressing perceived deficiencies to developing a better balance in life
·         Help you to focus on what is important rather than simply urgent resulting a fundamental change involving a broader perspective which in turn should make me more rather than less valuable as an employee

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

How To Handle a Bribe – Michael Dennis, CBF

No Bribes
No Bribes

A friend of mine called recently to share this story.  A member of his credit team was contacted by a customer.  She was asked if she responded to trade reference inquiries.  She answered yes.  The customer asked if the trade reference she provided would be done“faster and better” if she received a $250 expediting fee.  She told the caller: “After this call, I will meet with my manager to discuss your offer.  If he agrees that there is nothing inappropriate about it, I will be happy to accept your offer…but I can only guarantee the reference request will be answered faster – not better.”

My friend’s question was this:  How would you address this situation?

I responded that I would not confront the customer about the $250 bribe offered if for no other reason than the accusation would be based on hearsay.  I suggested that based on the customer’s unethical behavior that this account should be flagged for special attention which would include:

  • Updating the credit file more frequently
  • Requiring the customer’s financial statements more often
  • Possibly having the credit manager handle the account personally for a period of time
  • Calling more often and sooner once the account is past due
  • Holding orders sooner when the account is past due

Someone said:  You never get a second chance to make a good first impression.  I think the corollary is this:  You rarely get a second chance to convince me that your company operates ethically once you have

Michael Dennis, MBA, CBF, LCM
Michael Dennis, MBA, CBF, LCM

lied to me or done something that causes me to question your ethics and honesty.  That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Poll Results – The Value of Monthly Statements

Monthly Statement
Monthly Statement

Rate the value of sending out monthly statements to customers? 193 Total Votes

  • Highly Valuable 43%
  • Valuable 34%
  • Not Valuable 8%
  • We do not send monthly statements 12%
  • Other 3%

Comments from the participants

  • Ben Bahadori

    How do you handle credit card Fees ?

  • Ken Zanolini,CCE, MBA

    Statements are another great collection tool if required by your customers.
    All statements should be emailed if possible in order to save mail time and cost.
    After all everything is about time and money!

  • Bill Curran

    We issue statements to all dealers, unless they specifically request to not receive a statement.
    In our 100 Distribution Centers, we have a high amount of dealers that are ‘statement payers’ and cut a check once a month.
    Our direct accounts and larger distributors accounts usually have better financial systems and pay by invoices.

  • Veronica Wooten

    We send statements monthly according to the type of customer account they are. To the remaining customers we send them out by request.

  • Tammy Adams

    We send statements and invoices to our customers on a monthly basis. Depending on our customer’s preference, their monthly billing statement and invoices are sent via fax, email or USPS. For our customers who wish to receive their invoices on a daily basis, we send those via email or fax (again, according to their preference). We do not send daily invoices via USPS mail. In addition, customers requesting copies of invoices are directed to our website where they can log into their account and print copies of invoices and/or statements.

  • Debra Davis

    We send out weekly, bi-weekly and monthly statements, depending on the type of customer and the terms of sale on the account. We find them to be a good tool for our customer’s to ensure they have not misplaced an invoice. Our invoice copies are left at the time of the delivery.

     

  • Manuel Gonzales

    Most of our customers pay by invoice and not by statement. My department feels that sending statements is a beneficial method of collecting past due balances and showing customers missed invoices and credits. However, our senior management feels that this is not a good investment in time or resources, even though we’ve shown our DSO has increased since we stopped sending out statements.

  • Ed Roth, CCE

    We only a send statement to our customer who request it. Most of our customers pay by invoice.

  • Tracey Beylerian

    We send statements monthly to all customers as we want them to have an accurate statement of their account including credits that they are entitled to. We generally receive calls asking for copies or clarification.

  • ROGER SLABOCH, CCE

    Over time, we’ve educated our customers to look for their monthly statement. We are sending more and more invoices by email or automatic fax, but the printed Statement is send by USPS as a safety measure in case some invoices were not received, or were sent to an email address that might not be checked daily.
    When conversing with a customer about their past due balance, reminding them of our Statement is a great response to the “lost invoices” and “I didn’t know how much I owed” comments.

  • Randy Clark

    Depends on whether or not your Customer will pay off of a Statement, or only off of invoices.

  • Angie Knecht

    We do send monthly statements although I notice that many customers don’t open or use them to pay their accounts with.

  • Debbie Polson

    I don’t send statements every month. More like every other month and only to customers that I feel need one. A little reminder that the bills are still unpaid.

A Vote Of No Confidence – Michael Dennis, CBF

Inconsistent Choices

A friend of mine was invited to a meeting in his manager’s office. The VP of Sales and the Controller were waiting when he arrived. He was told that sales management had no confidence in the credit department because the decisions made by the four people in credit with the authority to release orders or increase or decrease credit limits were “wildly” inconsistent. I asked an obvious question: Is there a difference in the way you and the other approvers evaluate risk and make credit decisions? He admitted there were differences.

He then asked the tough question: What should I do now? I responded that he had to focus on winning back the trust of his manager and the sales department, and that this was not the time to do anything in half measures. I said it was important to review all ship / hold decisions being made along with the credit limits assigned as well as the risks associated with applicants rejected. I added that if the problem was not addressed quickly that my friend’s job is at risk.

In my opinion, when credit decisions being made are inconsistent from person to person, the decisions appear arbitrary and poorly understood. I think it is critical for every credit manager to review ship/hold decisions and credit limits approvals from time-to-time as a way to be sure that the decisions being made are consistent irrespective of which member of the credit department

Michael Dennis, MBA, CBF, LCM

made the decision.

That’s my opinion. How would you handle a vote of “no confidence”?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Quality Wins The Credit Report Battle

Quality Wins!

Quality Wins The Battle

The results are in and Quality of Info beat Quantity of Info by a wide margin – 80% to 20%.

93 participants gave us some reasoning behind their choice forming some of the best feedback on credit reports I have seen in a while.

Here is some reasoning behind choosing Quality:

“Current and up to date information is more valuable than greater quantities of information that may not represent an accurate picture of the company at the present time.”

“I am interested in the information within the same industry I work in. Quality will provide me with just the info that works for my company.”

And some arguments for Quantity:

“Historical data is just as important as current information and that was the standout reason.”

“The more the information, the more you know about the customer overall. Not just a current snapshot in time. They could have seasonal issues that could be reflected in the historical data.”

Many participants had a tough time choosing between the two:

“This was a tough one for me because I can see the merits of both. I chose quality over quantity because feel better about the information contained in the report. Quantity shows trends which is also important.”

You can download all the write in comments by clicking the link below.

Download Credit Report Battle Results (366)

The five winners on the Quality side – chosen at random for a $10 Starbucks giftcard are:

  • Susan Powers, Foxy Produce
  • Doreen Sugihto, Birkenstock, USA
  • Roger Fritzlar, Ottobock
  • Edwina Bustamante, Active Sales
  • Dawn Durbin, AV Net

Thanks to everyone who participated! Watch for our next Credit Report Battle coming soon.

Thank You To My Industry Credit Group – Larry Convoy

Click to see the dance

As we close out 2012, we have much to be thankful for. Naturally – family, health and living in the greatest country on the planet are at the top of the list. Somewhere on the list should be those people you meet with that make your job easier by sharing their knowledge and credit experiences with you.

So take a minute to thank the members who:

1. Entered the alert regarding a bankruptcy that allowed you to stop a delivery in transit
2. Responded to your RFI quickly, providing you with trade specific data to make an informed decision
3. Contributed their entire A/R to the CMA data base which included information on an obscure account
4. Shared their credit application with you explaining the various features that allowed them to maximize the revenue while reducing the risk.
5. Explained to you what a UCC is
6. Remembered that the new owner of a business you inquired about was the old owner of a business you placed for collection
7. Contribute every month to the group report/past due list and never missed a meeting/conference call
8. Provided you with a resource, recommended a service or a legal professional that saved your company $$$$
9. Always took your phone call when you had an urgent question or credit inquiry
10. Shared an incredible dessert with you

On behalf of the Industry Credit Group staff at CMA, we thank you for your support this year and wish you and your family a healthy and prosperous 2013.

Have a Great December,

Larry Convoy
Supervisor-Industry Credit Groups
lconvoy@emailcma.org

NACM Credit Congress – Rio Hotel in Las Vegas

Credit Congress 2013

In May 2013, NACM’s Credit Congress & Exposition celebrates 117 years of education, enlightenment, unity of purpose, professional excellence and so much more.

Join us at the Rio Hotel Las Vegas for the year’s largest gathering of business credit professionals in the country.

NACM Members receive a special rate if they register before 12/14/2012. The rate is $679 per person – a $50 savings off of the normal rate.

Download the Credit Congress Registration (494)

 

Not A Great Idea! – Michael Dennis, CBF

Not a Great Idea

Last month, I was invited to attend an industry credit group meeting as a guest / prospective member.  FYI, this group was not part of CMA.  I was also invited to the group’s reception the night before, which is a regularly scheduled event because many attendees fly in for the group meeting the night before.

 During the reception, I was introduced around, but as often happens I hung out for most of the evening with two members.  After the reception, they invited me dinner.  The only reason I declined was that I had filled up on appetizers.

The next morning, I joined my new friends for breakfast, and sat with them for the group meeting.  Soon after the meeting started, I wondered if they worked for competitor companies.  During the first break, I asked that question and I was told:  “Our companies compete.  We don’t.  The only thing we want to accomplish is to reduced bad debts and delinquencies.”

Were they colluding?  Were they doing anything unethical, unlawful or contrary to the credit group’s rules?  Who can say.  However, the amount of time they spent together might cause an impartial observer to wonder whether their discussions ever strayed outside of the lines that define appropriate conduct.  I think each of us should try to avoid even the appearance of impropriety during credit group meetings.

Michael Dennis, MBA, CBF, LCM

Some might say I am being overly cautious, but everyone is entitled to their opinion… and this is mine.  What’s your take on this?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

The Encyclopedia of Credit: 1800 Essays and Counting

Encyclopedia Of Credit

CMA’s online Encyclopedia of Credit has grown dramatically.  It now contains more than 1,800 essays of interest to credit and collection professionals at every level of experience.  Our goal in creating this online resource was and is to provide information that will help the credit community to be more effective and efficient.  Other goals include providing an online training resource that addresses many of the more common question and problems facing our members.  Another goal was and is to provide guidance and advice that can help reduce payment delinquencies and reduce bad debt write offs.

For anyone who is not aware about the Encyclopedia of Credit, it can be found at this URL:  http://encyclopediaofcredit.com. Access and downloads are free.  The entire site is searchable using a standard search function, and you do not need to be a current CMA member to access any part of this one-of-a-kind online resource.

CMA wants to offer a special thank you to one of our members, Michael Dennis.  Michael has authored or edited more than 1,000 pages in the Encyclopedia of Credit.  Michael continues to update existing essays and add new content on a regular basis and we appreciate his efforts to support Credit Managers and the Encyclopedia of Credit.

How Strong is Your Group Commitment?

Commitment

I am sure many of you remember Industry Credit Groups pre 2006. Plenty of money in your budget to travel around the country for meetings, enough staff that being out of the office for a few hours was never a problem, even ordering the most expensive item on the menu was not a concern.

Unfortunately, those times are gone for the foreseeable future. Out of area meetings have been replaced with conference calls, the job of Credit Manager now includes A/P, Human Resources and at times receptionist making it more difficult to leave the office. Group invoices, once automatically approved are being looked at carefully.

So what is the answer? In my opinion, it is to MAXIMIZE the resources currently available. A one hour conference call can provide updates on dozens of accounts, educate you on best practices and keep you in touch with your peers around the block or the country.

The cost: ZERO
No travel expenses, no hotel, no meals, no down time waiting in airports.

ONE HOUR OF YOUR TIME

The monthly meeting: If you take a normal lunch break, the extra hour (plus some travel time) can provide more benefits than the conference call. Some of the smallest, least staffed companies never skip a meeting because they know that hearing about one troubled company can save them big money.

The cost: gas, meal 

TWO HOURS OF YOUR TIME

So how committed are the members of your group?  If you have a call or meeting coming up, contact the members prior and encourage them to join in.

Larry Convoy, Supervisor-Industry Credit Groups

lconvoy@emailcma.org

It’s A Trap – Michael Dennis, CBF

It’s A Trap

I recently received an email from a credit manager friend of mine I will call Al.  The email explained that Al’s employer just hired a new CFO.  The CFO told Al that the company’s bad debt loss history was unacceptable and that something had to be done immediately.  Al suggested the following:

1.       Hold orders more frequently and more quickly on past due accounts

2.       Lower credit limits on marginal credit risks

3.       Refuse to grant open account terms to high risk applicants

4.       Require collateral or security from high risk customers and applicants

5.       Update credit files more frequently

6.       Attend industry credit group meetings more often

The CFO responded that these ideas would result in fewer sales and higher administrative costs.  She told Al to “think outside the box” and come up with better suggestions before their next meeting.

Al asked me for my suggestions.  I responded that his new boss was setting a trap.  Al was being given a task that he could not complete if for no other reason than this:  In order to reduce credit risk, you have to limit credit lines as well as hold orders on past due accounts.   This scenario reminds me of a story a friend of mine told me.  He was a pitcher and his coach walked out to the mound during a game and told him:  “Don’t throw anything this guy can hit, but whatever you do don’t walk the batter.

Michael Dennis, MBA, CBF, LCM

The truth is that everyone knows how to reduce credit risk, and the six suggestions listed above are a great start.  We know and the CFO should know there is always a trade off when a company tries to reduce credit risk.  Under similar circumstances, I have made this commitment to management:  I will guarantee lower credit risk and fewer write offs if you can guarantee to take the heat over lost sales opportunities.

That’s my opinion on this issue.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

That is Not the Way This Works – Michael Dennis, CBF

Now not Later

On numerous occasions, delinquent debtors have given me this ultimatum in connection with payment of their past due balance.   “We are not going to discuss payment status until and unless you release the orders you have on credit hold.”  Often, credit department employees are so surprised by this tactic that they are at a loss for words.  After several incidents, I developed a standard response along these lines:

My reply:  I suggest we start this discussion all over again, only this time without the threat of non-payment.  That is not the way this process works.  Your account is past due.  Our decision to extend credit to your company is based on trust.  We trusted that when we extended credit and shipped product to your company that invoices would be paid when they became due.  Now, you are threatening not to pay these past due invoices unless I agree to release the orders on credit hold. This does not inspire trust, but you are demanding I trust you by shipping additional products on open account terms. 

As you know, orders are on hold because your account is past due.  You can start to re-establish credibility by issuing an immediate payment for the past due balance, but without the threat and the preconditions.  When I receive that payment, I will review the status of your orders pending.  What I cannot do is allow you to use the threat of non-payment to get orders released.  This is not the way that business partners treat each other, and to be completely honest, no one likes to be threatened.  So, let’s start again.

Michael Dennis, MBA, CBF, LCM

In my opinion, it is a very serious mistake to allow any debtor to use extortion to get orders on hold released.  It is a poor precedence to set for future interactions with that debtor.

Those are my thoughts.  What do you think?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Setting The Bar – Michael Dennis, CBF

Setting the Bar

When I was a consultant, it was always difficult for me to understand how or why a credit department would not have specific goals and objectives for every one of its collectors.  I think that setting the bar for collectors is an essential part of a managing the department and a great way to increase cash inflows.  Setting the bar for collectors is not the same thing as harnessing them to a plow.  It does not mean they need to turn rabid when a customer tells them they cannot clear a past due balance.

I think of setting the bar as involving things like this:  Determining how many outbound collection calls should be made in the average week.  Setting a limit of x percent of total accounts receivable in the oldest aging bucket.  Determining the frequency of calls to delinquent accounts, and setting targets in terms of the percent past due in each of the aging buckets.

Even when collection goals did exist,  I often found that the bar was set far too low.  In one memorable instance, the collection goals of each of the collectors combined were lower than the collection goal established for the credit and collectione department.  Specifically, the department’s goal was to have total A/R at > 90% current but none of the collectors’ individual goals were higher than 85% current!

Most of us know about S.M.A.R.T. goals.  The A stands for achievable.  My opinion is that an achievable goal should be potentially achievable, not

Michael Dennis, MBA, CBF, LCM

readily achievable [or worse] easily and regularly achievable.  One last comment:  If one or all of your collectors achieved their collection goals last quarter and/or last year, I think time right now to raise the bar.

That is my opinion. What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

A Compromising Position – Michael Dennis, CBF

Backed Into A Corner

About a year ago, I attended a half-day training program geared primarily toward our sales department in which the speaker emphasized communicating, connecting, and compromising as ways to rapidly increase sales and profits.  At one point, we were asked to break into smaller working groups.  My group consisted of me and 6 salespeople and not surprisingly, they wanted to talk about compromise!   On a flip chart, they listed the compromises I could make that would increase sales.  The list included:

  • Automatically release more orders
  • Release all orders under a certain dollar amount
  • Offering longer payment terms
  • Make it easier for customers to get higher credit limits
  • Accept extended payment proposals made by delinquent debtors
  • Do not require updated financial statements unless there is clear evidence the customer is in financial difficulty
  • Approving applicants more quickly by reducing the number of checks we do

I was feeling backed into a corner…until I remembered that while I can offer input, I did not have the authority or ability to establish the goals and objectives for the credit department.  So my response to their suggestions went something like this:

“These are all great ideas, and they each involve compromise.  In addition to increasing sales, the compromises would also: (a) increase credit risk resulting in (b) higher bad debt losses and (c) higher payment delinquencies. Therefore, all you have to do to make these recommendations a reality is to convince my managers that the benefits outweigh these risks.” I added that in my opinion they do not.

Most credit managers do not have the authority to accept higher risk, to make exceptions, and to disregard standard practices.  These are decisions that need to be made by senior management.

Michael Dennis, MBA, CBF, LCM

What about compromises?  Credit departments compromise every day — every time a decision is made to ship to a past due customer or to extend credit to a marginal risk.

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them

Credit Automation – 5 Years Later – Michael Dennis, CBF

5 Years Later

Five years ago, I wrote an article entitled “Twenty-Five Tips on Deduction Management.”  This article resulted in several speaking engagements for me.  I ran across this article quite recently, and I was amazed by what I read and by what I didn’t read.  Only 1 of the 25 tips addressed credit automation and more specifically deduction management software.  That 1 tip was exactly 25 words long.  It read:  “Develop your own, or purchase commercially available software that allows you to track the status and the actions taken to address and resolve customer deductions.”

If I were going to write this article again, the main focus would be the effectiveness of deduction management software.  I would focus on how deduction management software has matured and is now a ‘need to have’ rather than a ‘nice to have’ tool for many credit departments — especially those whose customers routinely and aggressively take deductions.

I have said before that the ‘worst thing’ that can happen when a customer takes a deduction is they may eventually have to repay a deduction taken in error.  However, in the mean time, the customer gets what amounts to an interest-free loan from your company.  The key question is how long that interest-free loan will remain outstanding.

Without a tool that enables your team to systematically address customer deductions, managing customer deductions is like trying to hold back the incoming tide with a mop and a bucket.  What is the solution?  In my opinion, one strong candidate for a solution to the problem is deduction management software.  I think you will be impressed by its capabilities, its ease of use, and how effective it is in helping the creditor to resolve deductions quickly and efficiently.  That’s my opinion anyway.  What’s yours

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them

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Help Elect Michael Puccinelli, CCE to the NACM National Board

Michael Puccinelli, CCE accepts the first National O.D. Glaus Credit Executive of Distinction Award from NACM at the 2011 Credit Congress.

Michael Puccinelli, CCE is running for the Western Regional Director on the NACM National Board. Michael currently serves as CMA’s Chair of the Board, he has been a longtime member and supporter of CMA and NACM, and I strongly encourage all CMA members to cast your vote for Michael in the upcoming NACM National Board election. Michael is running against three candidates from other Western Region Affiliates, so it is really important that each of our members participates in the election to ensure that Michael receives enough votes to win the Western seat.

All CMA members will receive notices from NACM National on Monday, October 8th and October 15th, inviting you to cast your vote electronically. The NACM Director Election ballot also will appear in the September/October issue of Business Credit magazine with voting instructions and deadlines.

Thank you for your attention and participation in this important election.

Respectfully submitted,

 

 

Mike Mitchell, CAE
President & CEO

About Michael Puccinelli, CCE

Mike “Pooch” Puccinelli, CCE has worked in credit for over 36 years, with the last 20 in the high-tech industry. Mike is currently Director, Credit & Collection, Billing and A/R for Equinix, Inc., headquartered in Redwood City, CA. Equinix is the leading global interconnection platform providing data center services to protect and connect the information assets for the enterprises, financial services companies and content and network providers primarily in the Americas, Europe, the Middle East, Africa and Asia-Pacific region. Recently, he led the implementation of Oracle Advanced Collections and Oracle Credit Management
modules, which went live in January 2012. Additionally, he is leading the finance track on Equinix’s process reengineering to implement these modules in EMEA and APAC in 2013 with an additional goal of implementing a new billing system in 2013. Mike has facilitated dozens of systemic process solutions to eliminate manual efforts over the two-plus years he has been at Equinix. Prior to joining Equinix, Mike held previous senior level credit positions with VWR Scientific, Businessland, Verisign, and ProBusiness.

Mike graduated from the Haas School of Business at the University of California, Berkeley. He earned the Credit Business Associate (CBA) and the Credit Business Fellow (CBF) designations in 1994 and went on to earn NACM’s prestigious Certified Credit Executive (CCE) designation in 2006. Mike completed NACM’s Graduate School of Credit & Financial Management executive education program, conducted on the campus of Dartmouth College, earning the Executive Award in 2006.

Mike is a true advocate of the credit profession, and has served on professional panels, most recently at the 2012 NACM Credit Congress in Dallas. He’s a frequent speaker at the NACM Western Region Credit Conference and has led several sessions at Oracle World. He is a certified NACM instructor and has taught many classes since 1983 for NACM Affiliates and the University of California, Berkeley.

Throughout his career, Mike has been an advocate of continued education and pursuit of NACM professional designations. He has inspired everyone working in his department to earn a professional designation. Mike was honored in 2010 when his Affiliate, Credit Management Association (CMA), chose him as the Credit Executive of Year. Mike was again honored in 2011 when he received the first National O.D. Glaus Credit Executive of Distinction Award from NACM.

During his career in credit, Mike has been a member NACM Tampa, the Chicago Midwest Credit Management Association, NACM Southwest in Dallas and NACM Northern & Central California (NCC). Mike is currently the Chairman of the Board of NACM Affiliate CMA located in Burbank, CA. He has served on their Board of Directors for the past six years and has been a member of the CMA Executive Committee for the past three years.

Mike recently authored a white-paper about systemic process innovations entitled “Re-Engineer Your Cash Flow Cycle with Oracle Credit and Collection Suite.”

Mike believes that the most significant challenge for the NACM organization is to increase membership. At CMA, multiple membership campaigns have been undertaken to add to the membership rolls. Mike believes that there needs to be a continued effort to tell non-members what value NACM brings to the table. While challenging, it is rewarding when a new member is gained. Mike also believes that credit department staff should engage with NACM so that if one of them becomes a manager at a different company, and that company is not a member of NACM, they will join through the new company.

Mike prides himself on questioning the status quo, asking for improvement in today’s environment which requires that we look at things differently. If elected, Mike hopes to bring this philosophy with him to the NACM Board of Directors.

Mike prides himself on questioning the status quo, asking for improvement in today’s environment which requires that we look at things differently. If elected, Mike hopes to bring this philosophy with him to the NACM Board of Directors.

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CMA Revised Bylaws Proposal

CMA Bylaws

Notice to all CMA Members: On September 18, 2012, the CMA Board of Directors proposed revised bylaws and authorized actions to adopt them as prescribed in the current bylaws Article XVII, Section 1. The revised bylaws proposal will be available as a download on this page for 60 days, after which all members will receive a ballot by email to approve the bylaw revisions.

CMA Revised Bylaws Proposal (506)

Updated: 10/9/12 – Our current bylaws are available for download – Current Bylaws (339)

Mike Mitchell, CMA President has also provided and explanation of the changes that have been proposed to the bylaws – Bylaw Changes Explained (337)

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Nice To Know Meetings – Michael Dennis, CBF

Nice to Know

Like most managers, credit managers are invited to attend numerous meetings.  A friend of mine works for a company where he routinely spends 15 hours a week in what he calls Nice to Know meetings.  These are not special meetings called to address and resolve particular issues or concerns, and the most painful to attend is a 4 hour long meeting each Monday in which every department manager provides an update relating to their progress relating to plans, processes and problems.

As the name suggests, a Nice to Know meeting is one in which the information being discussed may not be necessary for attendees to perform their work.  The issue that I want to address is how to avoid attending Nice to Know meetings.  The first trick I learned is that when I receive an automated invitation to a meeting, rather than accepting or rejecting, I select the third option… which is to tentatively agree to attend.  This means if I find the subject matter interesting I might attend unless: (a) I get a better offer or (b) a project or a problem requires my attention or (c) I am too busy to attend, or (d) I am just not in the mood to attend.

Another useful tool is to respond to an invitation with a series of questions, such as these:

  • Have you published a meeting agenda?  If not, please send it to me ASAP so that I can decide if my attendance is necessary
  • Will I need to attend the entire meeting, or can I attend a portion of it?
  • What specifically will you need me to share during this meeting?
  • Do you have any objection if I delegate the task of attending to someone else?
  • Is there a dial in?  I ask this question even if the meeting is down the hall.  Why?  Because I prefer to attend by phone so I can get other work done while listening to the meeting with my phone muted

I think you will be pleasantly surprised how easy it is to avoid attending many Nice to Know meetings.  Some of you may be asking if there has been any backlash relating to avoiding Nice to Know meetings.  I think the answer depends on the individual.  If you tend to isolate yourself anyway, or if your department is ostracized to some degree within your company, you probably want to attend some of the Nice to Know meetings.

Michael Dennis, MBA, CBF, LCM

What should you do with the time you save by not attending Nice to Know meetings?  To most credit managers, I would say this:  Try leaving on time once or twice a week.  I think you will find it to be a pleasant experience.  That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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That’s Not Intimidating to Me – Michael Dennis, CBF

That’s Not Intimidating To Me

My father was an NCO in the British Army.  When I was growing up, if you were easily intimidated, you didn’t get a lot to eat at the free-for-all that we called meal-times…. So I am not easily intimidated.

Delinquent debtors frequently use intimidation as a negotiation tactic.  Often it takes this form; the debtor says:  “If you don’t release the order(s) pending, we will take our business elsewhere.  When we are asked why, we will be sure to list you and your behavior as the primary reason for the decision to move to a competitor.”

I was invited to take a trip to visit a local customer to discuss the status of their past due account and to review the status of orders on hold.  When I arrived, I was escorted into the main conference room in which six or more of the debtor company’s executives waited for me.  After the introductions, the debtor company President told me:

·         The decision to place their account on hold was “a serious mistake”
·         He said he “could not imagine” what I was thinking at the time
·         Their account was one that should never be placed on credit hold
·         He told me the orders I held needed to be released immediately, and that doing so would benefit his company and my employer
·         He expected an immediate affirmative response – meaning the orders on hold would ship no later than the next day
·         Once the goods were received, they would open a dialogue with me about a mutually beneficial debt repayment plan

The debtor company President told me that this was my last and best chance to remedy the problem, and make amends for my past errors.  He said he was prepared to call my company President, but preferred to work things out with me rather than pointing the blame at me.  My response was to request 24 hours to make a decision.  The decision was actually already made.  I would consider releasing the orders on hold if and when the past due balance was paid in full.

The debtor called my company President within two hours of my meeting.  By the time he called, I had already provided my boss and through her, the company President, with an update.  As a result, the debtor had no bargaining power, only threats.

Michael Dennis, MBA, CBF, LCM

Does intimidation work?  Yes.  It is a popular negotiation strategy.  It is especially effective if the credit manager is not certain their decision is fully supported and/or supportable.  If you are confident that you understand your company’s tolerance for credit risk, then customers’ attempts to intimidate you to influence your credit decision-making is unlikely to work.

That’s my opinion.  What is yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

anscers Advanced Search – RFI, Alerts, & anscers Reports

Advanced searching is now available in the RFI, Alert and anscers Report area. Advanced search gives you access to 4 more search variables:

  • anscers ID – (the number on the anscers Reports, RFI Reports and Meeting Reports)
  • DBA
  • Principal
  • Phone

To use the Advanced search click on the text link in the search window – Advanced Search.

Advanced Search Link

This will lengthen the search area and display the four new variables.

New search variables

Being able to search by Principal and phone number was a highly rated request from anscers users. We hope these new features help you find the subjects your looking for in anscers.

Cynthia Lynn Kinney (07/08/1967 – 08/28/2012)

Cindy Kinney

MARINA – Cynthia Kinney passed away at her residence August 28, 2012 after a two-year battle with ALS. She passed quietly and peacefully, surrounded by her family.

Cynthia was born in Monterey and spent her youth in Marina. After graduating Marina La via High School in 1985, Cindy ventured to Michigan where she resided for a few years, ultimately returning to Marina in 1988, rejoining the majority of her family. Once back in California, she attended Central Coast College studying business, and then pursued a career as an escrow officer. In 2006 Cindy switched careers and found her niche as the credit manager at Granite Rock; this being her final place of employment.

Cindy enjoyed traveling, cooking, numerous types of arts and crafts and being involved with church activities.

Cindy is survived by her two daughters, Marisa Childers with husband, Aaron and Samantha Kinney; parents, Joseph and Darla Messner; and sister, Tanya Hobbs with husband, Jason; aunts, Linda Northcutt and husband, Leon; Karen Rodrigues, Jeane Rodrigues; and cousin, Christine Deason.

Cindy was an amazing woman who gained strength from her Christian beliefs and she was an inspiration to many in her final days. Cynthia, a mother, daughter, sister, niece, cousin and friend, will be missed beyond measure.

In lieu of flowers please send donations to either Central Coast Hospice or Calvary Baptist Church of Marina.

You can sign Cindy’s remembrance book here.

Published in The Monterey Herald on August 31, 2012

 

The Easy Way To Add Value – Michael Dennis, CBF

Add Value Using Current Tools

Every company is both a seller and a buyer of goods and services.  The credit department has an array of tools, techniques, processes, policies, procedures and best practices that enable it to evaluate new applicants as well as existing customers. These tools offer insights about the company’s Liquidity, Financial Leverage, Profitability, Efficiency and Long-Term Viability.  One way that I have added value involves using these tools to evaluate the financial health of key suppliers as well as potential new suppliers.

About a year ago, I recommended against establishing a new relationship with a potential supplier based on my concerns about the would-be supplier’s long term viability.  The quote given by this company was more than 25% lower than other suppliers’ quotes.  As a result, the purchasing department was not happy about my recommendation. However, based on declining sales, negative cash flow and significant net after tax losses, I was not comfortable having this company building a critical component for us.

About 5 months ago, the would-be supplier filed for Chapter 7 bankruptcy protection.  Our production line could have been down for weeks if we had selected that supplier.  The purchasing department got some of the credit for the ‘save’ but my

Michael Dennis, MBA, CBF, LCM

contribution was also recognized by senior management… and the best part was that it was easy.  If you are not doing this type of work for your company, consider volunteering to do so.  I have yet to work for a company whose purchasing department would prefer to make these decisions independently.

Anyway, that’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Poll Results – Cash Application

Where does your cash application role fall within your company?

  • Accounts Receivable   69%  173 votes
  • Accounts Payable 3% 7 votes
  • Accounting 13% 34 votes
  • Finance 5% 13 votes
  • Customer Service 3% 8 votes
  • Treasury 1% 3 votes
  • Outsourced 2% 4 votes
  • Other 4% 10 votes
252 Total Votes
Comments
  • David Ingham – It is not proper Accounting and Audit Procedures for a Credit Manager to handle cash or cash application. Credit and Cash Application should be separate functions to avoid the possibility for fraud or misappropriation of cash receipts.
  • Tracey Beylerian –  Cash posting is part of the Credit & A/R function

A Recipe For Disaster – Michael Dennis, CBF

I recently had lunch with a friend of mine.  As we talked, he shared his concern that the deduction specialist he had hired about a year ago was not working out.  He dreaded the idea of firing her because he did not want to take the time necessary to train someone to replace her.  Based on the details he provided, I guessed that he was using the deduction specialist position as the entry level position in credit and collections.  He confirmed this was true.  When asked, he told me that the deduction specialist was trained by one of the collectors, and agreed that her training was focused more on collection practices than on dispute resolution.  I asked if there was any formal training program for the deduction specialist position.  The answer was no.  I asked if he had created operating procedures and working instructions.  Again the answer was no.

Since he asked for my comments, I told him that I thought hiring an entry level person to handle deductions for his department was a recipe for disaster.  I added that reconciling customer deductions and resolving them through customer payment, credit or write off is far more complicated that collecting undisputed past due invoices – which while more complicated than simply dialing for dollars does not reach the same level of complexity as researching and resolving deductions.

Michael Dennis, MBA, CBF, LCM

I suggest that the person selected as the deduction specialist should be promoted from among the collectors meaning this should never be an entry level position.  Given how complicated the deduction resolution process can be, I think that processes, policies and procedures along with work instructions must be developed for and provided to the deduction specialist.  Anything less will result in less than optimal results.  Anyway, that’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

I Needed A Job, But… – Michael Dennis, CBF

Toot Your Horn

In the 1990s, I was interviewing for a position as a credit manager.  The negotiations were going well.  The CFO and I had discussed an annual salary.  I met with the company President and I thought the interview was largely a formality.  It was not.

The President told me he wanted to offer me two-thirds of the amount mentioned by the CFO.  I responded that I knew of at least two people who would be excited about working for him for that lower salary.  I told him they were good at their jobs, well trained, diligent, detail oriented, etc.   The company President asked why he shouldn’t hire one of them. I responded that he definitely should do so.   He asked why I would offer these candidates, and I responded that I thought the position would be a great growth opportunity for either of the two individuals I had mentioned by name.

The President finally asked me the right question. Why should I hire you for one-third more than I can hire one of the two people you recommend?

I responded that this was the right question, and my answer to this question got me the job.  I said that by hiring me, you get someone able to start with the status quo and improve on it from there.  In contrast, the other candidates would have to grow into the job.  I added that for one-third more he would be hiring someone who could make an immediate impact on his company’s bottom line.

I was confident.  I was calm.  I was right.  My final comments went something like this:  If you want to stay within your new budget, these candidates are arguably the best you are going to find, and they are worth every penny.  If you want to hire the teacher rather than one of the students, hire me.

Michael Dennis, MBA, CBF, LCM

I got the job at the original salary.  To me, the lessons are:  (1) be willing to toot your own horn because no one will do it for you and (2)  if you are going to toot your horn anyway, make sure you do it loudly.

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Winning the Gold – Michael Dennis, CBF

English: U.S. swimmer Michael Phelps shows off...
(Photo credit: Wikipedia)

Carrying on the Olympic analogies in this Blog, I was watching the medal rounds of the swimming events which, I admit, are my favorite Olympic events.  A couple of the medalists won based on raw talent despite being young and inexperienced in international competition.  However, the majority of the athletes that received medals were experienced, seasoned athletes who won in part because of their physical attributes but also based on their commitment to excellence, practice, and exceptional technique.  I don’t know how many times I heard a commentator say that these winners make it look almost effortless.

Raw talent is rarely enough to win in a race, nor is raw talent or enthusiasm enough for successful negotiations with delinquent debtors.  Debt collection is not just about effort.  Effort and proper technique result in success.  Some people believe that experience is a great teacher.  In the commercial debt collection field, collectors can gain experience through (a) trial and error or (b) on-the-job training.  I am not a proponent of either approach.

Olympic swimming coaches do not allow their athletes to learn by experience; floundering in the deep end before giving them the tools to succeed.  Instead, they observe and study the swimmer’s technique. They point out areas requiring improvement. I think the same approach can and should be used by credit managers.  Specifically, for every member of the credit and collection team, the credit manager (the coach) should:

(1) Observe,

(2) Point out problems

(3) Correct those problems and

(4) Reinforce correct technique which results in better outcomes.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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The Internet – A Resource For All Needs – Good And Bad

UT Drivers License – Google Image

One of the primary benefits of membership in an Industry Credit Group is being able to tap into the knowledge, expertise and ingenuity of the other members.  Below you will read about the extra step taken by a member that not only saved her company thousands of dollars but by sharing her method of investigation with the group, saved others from heavy losses. A fake driver’s licenses, an altered credit card with a stolen number are the elements of this scam.

The Set-Up– A phone order for an in-demand product to be delivered to obscure location and paid for by a stolen credit card number.

The Procedure– Send customer Credit Card Authorization form and request copy of driver’s license and front and back of credit card. Customer supplied necessary documents. Card cleared when initially entered.

The Extra Step– To check what a Utah drivers license looks like, the credit manager went to Google images. The first SAMPLE on the page had the same picture, height, weight, date of birth, renewal date as the one presented to her. She did the same for the copy of the American Express card she was sent and the same results, just with some slight alterations (the stolen card number) Google images provided everything needed.

Conclusion– The internet can be a valuable tool to the credit investigator and to those looking to rip you off. By making her group aware of this tool, 12 companies will have reduced the chance of being scammed for thousands of dollars.

Make time at each meeting to have your members discuss the various tools, resources and “tricks of the trade” that they have learned and utilized over the years. Their experiences are priceless.

Larry Convoy

Supervisor-Industry Credit Groups

lconvoy@emailcma.org

On the Balance Beam – Michael Dennis, CBF

On the balance beam

Fairly recently, and for the first time in a long time, I was invited to attend the annual sales meeting. My boss described is as a great networking opportunity, and she was right.  Having breakfast, lunch and dinner with salespeople and sales managers is a great way to demonstrate that people working in credit and collections are not one-dimensional robots who are looking for reasons to say No.  Some of the feedback that I received was that the overall perception was that the credit decision-making process was:

  • Slow
  • Complicated
  • Rules based
  • Risk averse and
  • Focused on finding excuses to say No rather than on reasons to say Yes.

During the three days I attended the sales meeting, I had time to address these misperceptions direct and formally, as well as informally.   For example, I explained that one way we were evaluated was based on turnaround time.  This necessitated fast decision making and a simple rather than complicated approval process.

I actually had fun addressing the suggestion that we were so risk averse that we were looking for reasons to say no.  I started with statistics about what percent of total orders ended up on credit hold.  The answer was far less than one percent.  My response to the comment that we looked for reasons to say No was to point out that there was almost always a reason I could point to if I chose to do so with any applicant if I really needed an excuse.  The simplest explanation was this:  My role is to manage credit risk – not to eliminate credit risk because doing so would limit our growth, our sales and our profits.  I also tried to humanize the credit decision making process by pointing out that saying Yes always made my life easier, so saying No was something I tried to avoid whenever possible.  Finally, I pointed out that I would almost certainly be replaced if senior management thought my decisions were incorrect and too conservative so the fact that I was still working suggested that management considered my decisions to be the right blend of risk and reward.

Michael Dennis, MBA, CBF, LCM

My role, your role and our role is to not get into a tug of war with the sales department or the applicant.  Our role is to find the right balance between risk and reward.  That’s my opinion anyway.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Are You Bulletproof? – Michael Dennis, CBF

Executive Body Armor

I have been laid off twice.  The first time was unpleasant.  The second time, I was out of work for five months and had to move five hundred miles in order to get another position.  I consider myself lucky.  A good friend of mine was out of work for eighteen months before he found work and another friend has been out for two years and counting.

Sometimes, layoffs are unavoidable.  For example, if your employer is acquired by another company there is very little you can do to bulletproof your job.  However, I believe that there are things that each of us can do to make it less likely that our position will be eliminated as a result of downsizing.  Here are a few ways to distinguish yourself from your co-workers:

  • Find ways to improve productivity
  • Never disagree in public with your manager or senior management
  • Focus on creating error-free documents and presentations
  • Accept additional responsibilities; better yet, volunteer for them
  • Be self-confident; including being confident enough to admit your mistakes
  • Demonstrate a positive attitude, honesty, enthusiasm and flexibility

Your goal is to distinguish yourself from your peers.  Remember this old joke — When you and your best friend are being chased by an angry bear, you don’t need to run faster than the bear, you only have to run faster than your friend.

Michael Dennis, MBA, CBF, LCM

My opinion is that each of us should make sure we are running faster than our peers.  What’s your opinion?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

This Credit group just might be for EVERYONE

Monet's Mini Mart and More
Monet’s Mini Mart and More (Photo credit: swanksalot)

Have you ever noticed how many different items are sold in a Mini Market, convenience store, liquor store or gas station?

Food (human and pet), Paper goods, beer, alcohol, candy, fuel, auto products, detergent, milk, dairy, tobacco, to name just a few.

With California bursting with Mom and Pop convenience markets and no resource to clear, alert or share with others potential credit issues, vendors Foster Farms, Wine Warehouse, Jacmar Food Services and 8 other distributors in conjunction with CMA formed the “Mini Market Credit Network.”

Utilizing CMA’s online network services of credit alerts, RFI’s and a monthly conference call, these companies have been able to reduce the risk in selling throughout California with a minimal time and resource commitment.  With limited information available through the traditional credit reporting agencies, this network quickly alerts you of the stores passing NSF checks, those whose credit has been withdrawn, Bankruptcies and change of ownership.  The conference call also allows for discussion of Best Practices in dealing with this unique portion of your A/R

For further information on this network or to join in on the next conference call on August 8th, contact your CMA account executive or call Larry Convoy, ICG Supervisor at 818-972-5323

And for our members in Nevada, how about starting a Mini Market Network for your state?

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Got Change? – Michael Dennis, CBF

Got Change?

Change in the workplace is both inevitable and unavoidable. Change can be positive or negative. For example, if your job is being outsourced the change, from your point of view, is negative. However, some changes can have a positive impact on the credit function. Some changes foster and encourage positive changes including more teamwork, better communications, and shared goals.

When big changes are on the horizon, the credit manager can help control any negative impact of these changes by using these tools and techniques:

  • Explain when, why and how changes will be implemented
  • Encourage an open dialogue about the upcoming change
  • Invite people to express their concerns with you in private if they are not comfortable doing so in public
  • Allow people to vent their frustration or express their concerns about the planned changes
  • Discuss ways to manage the change process to help ensure it happens as smoothly as possible

Changes in the workplace can be overwhelming. When people are overwhelmed, there is often productivity and morale drop along with motivation and enthusiasm. This results in more mistakes as well as missed opportunities. Look for these early warning signs that people are not happy:

  • Tardiness and higher absenteeism
  • More mistakes and less attention to detail
  • Missed deadlines and substandard work
  • Moodiness or anger
  • Withdrawal
  • Turnover
Michael Dennis, MBA, CBF, LCM

If you are initiating the change, it is best for that try to build support for the change. How? The first step is to share your vision and goals relating to the planned changes. As a general rule, the more detailed information the credit manager can provide about how an upcoming change will affect each and every member of their department, the better.

Anyway, that’s my opinion. What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CA Mechanics Lien Law Revisions and Forms

SACRAMENTO — The Contractors State License Board (CSLB) is reminding licensees of revisions that were made to the state’s mechanics lien laws on July 1, 2012. Legal revisions mainly change the wording and format of the mechanics lien notice. Because of the changes, CSLB has updated release forms to reflect the new language. Contractors can use these documents to protect their lien rights on construction projects. The forms are available on the CSLB website (www.cslb.ca.gov).

The 20-Day Preliminary Notice is now simply called Preliminary Notice. In addition, the wording of the Notice to Property Owner statement, required as part of the Preliminary Notice, has changed. Subcontractors and suppliers should use the newly worded Notice for private home improvement projects. The Preliminary Notice should be delivered to the homeowner in person or by certified, registered, or express mail, or overnight delivery, with a receipt of the mailing as proof. You may give notice any time before work starts or products are delivered, and up to 20 days after. If you give notice more than 20 days after work or delivery, your lien rights only apply to the work or products provided 20 days before the notice was given, and anytime thereafter.

The Notice of Mechanics Lien wording also changed in the new law. This notice must accompany the lien claim and be sent via certified, registered, or first class mail, with a certificate of mailing as proof. Failure to send the properly worded Notice with the lien claim could result in the lien being unenforceable.

The conditional and unconditional lien release forms also have changed. Make sure subcontractors and suppliers sign the new conditional forms as progress payments are owed, and when the project is finished before they are given final payment. Have them sign the new unconditional release forms after they receive progress payments and their final payment. The new law gives homeowners 15 days instead of 10 to file a Notice of Completion with the County Recorder. If a notice is filed, the contractor has 60 days and subcontractors have 30 days to record a lien. If no notice is filed, all parties have 90 days to record a lien.

Download the forms and statements:

Unconditional Waiver and Release Upon Partial Payment (750)

Unconditional Waiver and Release On Final Payment (625)

Conditional Waiver and Release On Progress Payment (608)

Conditional Waiver and Release Upon Final Payment (494)

Preliminary Notice statement (566)

Notice of Mechanics Lien (497)

 

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Only Superman Can’t Delegate – Take Two – Michael Dennis, CBF

Can’t Delegate This!

Years ago I wrote an article entitled: “Only Superman Can’t Delegate” which was published in “Business Credit” magazine.  I wrote that it was essential to delegate, and that delegation benefits the delegator and the person to whom work has been delegated.

A colleague contacted me recently.  She is a credit manager. Her question was why her boss cared whether she did the work herself, or delegated certain tasks to other members of her team.  I asked why she was not delegating, and got the answer I expected.  She told me she could do the work faster, better and with fewer mistakes.

I told her I thought it was likely her boss wanted her to delegate more work more frequently based on some or all of the following reasons.  Your boss thinks:

  • You are micro-managing your subordinates,
  • That you may burn out if you don’t slow down,
  • You may be holding subordinates back by not delegating since delegation usually involves cross-training others to do the work you are doing right now,
  • Delegating is a simple and effective way to help the credit department to operate more efficiently,
  • You won’t delegate because you don’t enjoy training the members of the credit team or because you don’t trust them,
  • You are insecure about your position and believe that by not delegating and not cross-training you can make yourself indispensable to your employer, but at the cost of a less efficient department,
  • Your boss thinks you are capable of performing higher value added work, but he or she recognizes that until and unless you delegate more routine work you will not have time for new assignments no matter how important they are to your employer and to your manager.

Work should be delegated to the lowest level at which it can be performed competently.  When this happens, it frees up time for managers to think and act tactically or strategically rather than operationally.  When the credit manager think more tactically and strategically, their employer’s investment in accounts receivable is better managed. My advice was to consider her boss’ “suggestion” not as a request but as an order.  Start making lists that day about what tasks could be delegated to whom.

Michael Dennis, MBA, CBF, LCM

My opinion is that everyone reading this who has someone working for them has work that could be delegated… and if it could be delegated then it should be delegated.  Anyway, that’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Experian/Moody’s Analytics Small Business Credit Index

Q1 2012 highlights
The Q1 2012 report shows that although access to credit remains tight, U.S. commercial credit conditions are improving, with fewer small businesses falling behind on bill payments.

“The Q1 analysis has shown that small businesses are finally getting some relief from the credit crunch that has plagued many of them since the Great Recession. The recent improvement in small-business credit growth and quality bodes well for the broader economy and job market.” — Mark Zandi, Chief Economist at Moody’s Analytics

Other trends seen in the Q1 Experian/Moody’s Analytics Small Business Credit Index include:

  • The overall health of U.S. small businesses has improved, thanks to rising consumer confidence and spending, but balance sheets are strengthening unevenly.
  • Most metrics of small-business credit quality were essentially unchanged from last quarter, but the average commercial risk score improved on a year-ago basis due to a drop in the percentage of dollars delinquent.
  • Not surprisingly, states where the labor market is healing more vigorously typically have small businesses with stronger credit standings. Similarly, small firms in states with high unemployment and lackluster housing markets are struggling.

Download the full report: Experian/Moodys Q1 2012 Report (393)

Group Member Vacation Checklist

1. CHANGE VOICEMAIL AND EMAIL MESSAGES
2. CANCEL APPOINTMENTS
3. PLACE ANY HOLDS OR RELEASES ON ACCOUNTS
4. SUBMIT GROUP INFORMATION AND ARRANGE FOR ASSOCIATE TO ATTEND MEETING
5. WATER PLANTS

In our haste to begin a well deserved vacation, we sometimes miss some important tasks that need to be handled prior to our departure. You certainly do not want to return to see dead plants. By the same token, an unexpected surprise from one of your accounts can bring back the just relieved stress.

To insure that there are no “summertime surprises”, encourage your group members to make arrangements to either submit their group reports prior to leaving or have a member of their staff handle in their absence. This is also an excellent opportunity for them to introduce a staff member to the group experience by having them attend a meeting. Having a trained backup will guarantee your company will not miss any valuable information at meetings that the primary contact cannot attend, will reduce workload by having another person available to enter alerts, respond to RFI’s, and will make the transition smoother should there be any personnel changes.  To make this easier, I am available to do online training sessions for any company that wishes to get more people involved in the group process.

The Bottom Line is: Bad debt does not take a vacation, let’s make sure that the flow of information does not take time off this year.

A July Discussion topic is attached.

Enjoy your summer

Larry Convoy
Supervisor-Industry Credit Groups
818-972-5323
lconvoy@emailcma.org

National Summary of Domestic Trade Receivable – Survey

Through a special arrangement with the Credit Research Foundation, Credit Management Association is making available for the benefit of its members the opportunity to participate in the quarterly National Summary of Domestic Trade Receivable survey conducted by the Credit Research Foundation. As a participant you will receive the results free of charge as soon as they are compiled.

This quarterly survey, which has been conducted by CRF since 1960, will provide you with median performance measure results, such as DSO, Best Possible DSO, Average Day’s Delinquent, Collection Effectiveness Index, Percent Current, and Percent over 90 Days, from other businesses within your industry. It serves as a basis of comparison to see how your department stacks up in relation to businesses similar to yours.

To participate click http://www.crfonline.org/surveys/dso/nsdtrpage.asp and fill out this simple 5 minute survey by July 31st.

CMA Poll Results – Small Claims Court

CMA Member Poll: Have you personally used the Small Claims Court to help collect past due accounts? (248 responses)

  • Yes I have used the Small Claims Court: 40%
  • I have not personally, but our company does: 12%
  • No I have not: 47%
  • Other: 1%

You can participate in CMA’s monthly polls on CreditManagementAssociation.org

Poll Comments:

Sherry Raoso
I would rather just turn it over to CMA to get collected instead of using Small Claims.

Annette Morris
Yes, I have used small claims court many times but mainly for collection of NSF checks that I could not get the customer to pay up front. I use a NSF check letter that is sent out by way of certified mail for verification that the customer has been contacted which also proves to the court that they have been notified.
All such cases have been won with payment in full by customer……

Ray Ballard
When all else fails, small claims court is an option. I can’t remember the exact cost in CA, but it was less than $100.00 to file a claim. If the defendant doesn’t show, and you win your case you will still have to collect. I saw a few comments stating on this board stating how difficult it is to collect, but I disagree.

After you win your case there are a couple highly effective legal ways to collect. You can file a request to value the defendant’s assets. This requires the defendant to show up at court and divulge all of their assets. If they fail to comply with this request, a warrant for their arrest can be issued if you choose to do so for an additional $50.00. Once they are in custody the judge can force them to disclose their assets and place a lien on those assets until their debt is paid. This will also prevent them from being able to sell their assets until their debt to you has been paid.
Another option (in CA) is to have the sheriff’s department do a Till Tap. This is where the sheriff goes into the business and takes money to pay your judgment from a cash register.

I’ve found that judgment debtors tend to ignore all court orders until the day before the warrant is issued for their arrest…then they call and beg to settle.
Good Luck

Ken Zanolini,CCE,MBA
If at all possible settle, negotiate or compromise before going court!
The legal process is time & cost consuming.
However, it is a highly effective way of getting a judgment on the debtor that they can only escaped from by filing Bankruptcy! Remember, judgements are sometimes worthless.
Thanks & Good Luck!

Manuel Gonzales
We have used Small Claims Courts a few times in the last year alone and have had good success in either being paid prior to the court date or getting a default judgement due to the defendant being a no-show.

Tina Langan
I would love to use the the small claims process. Perhaps CMA could put on a webinar or seminar on it? I would love to attend.

Penny Blount
I handle the Small Claims in Las Vegas Nevada for all of our members that have Vegas accounts and I have only lost 1 in 5 years it is a good way to collect but it is time consuming. I am not sure where the person that made the comment about you have to have an attorney to handle this is you are a corp. but that is not the case. Please see (NRS 73.012 Representation of nongovernmental legal or commercial entity by its director, officer or employee. A corporation, partnership, business trust, estate, trust, association or any other nongovernmental legal or commercial entity may be represented by its director, officer or employee in an action mentioned or covered by this chapter.) Please keep in mind this is for Nevada.

F. Scott Wilson
Small Claims Court is an *excellent* way to speed up judgment and collections for small amounts. I have personally won about forty cases, all of the ones an old employer had me pursue this way. All of these cases were business to business, with about half of them against sole proprietors.
The use of an attorney is specifically and expressly not permitted by Small Claims statutes, at least in California. This is to discourage endless litigation on small matters, and to let the judge hear the matter and decide swiftly.

As far as collecting on a Small Claims judgment goes, this can be done with some care and forethought. NOLO Press has some excellent books on Small Claims procedures, including steps you can take to make good on the judgment. I have successfully collected judgments from Small Claims matters in all but one of the above forty instances, and that was because the owner (sole proprietorship) had died between the case being heard and our receiving the judgment.

Scott
The only problem is if you are a corp., technically you must have a Lawyer represent you. Then if or when you do win, try and collect…. The system is structured for degenerates and crooks, not honest people.

Cliff Nehamen
Yes, I use Small Claims, matter of fact just returned from a case on a STOP PAYMENT check. Defendant showed and arrangements were made to resolve check; including filing fees and processor fees.

Deb
I have about 50/50 luck in having defendants show up and/or settle vs no show. It’s a simple process to rubber stamp the default and as I’m dealing in construction, that gives me the avenue to attach their contractors license bond.
The one major flaw is in B to B situations, there is the cap on how many actions that can be brought annually at the $5k limit so use your quota judiciously. It may be a wiser course to drop a moderate claim amount down below the $2500. limit (unlimited for B to B).

Alan Greenberg
I would say usually the defendant try to settle it on the steps of the court house, or they do not show up.

Soft Skills Needed For Leadership – Michael Dennis, CBF

Soft Skills Needed For Leadership

A credit manager can have exceptional technical skills but be considered an ineffective department leader because of poor interpersonal, communication or relationship-building skills.  I believe that any credit manager that does not have the skills needed to effectively lead, manage, mentor, and train their subordinates will not be a particularly effective manager.  Why?  Because department managers succeed or fail largely based on their ability to properly manage, retain, train, retrain, cross-train, lead, manage and motivate members of their credit team.

There are many credit professionals with exceptional technical skills who unfortunately have not developed the kinds of soft skills they need to be seen as a leader rather than simply as a manager.  What can you do if you feel that your soft skills have not kept pace with your technical skills?  The answer is that there are plenty of things you can do, including these:

  • Spend more time out of your office.  Get out to where the work gets done
  • Get to know the professional goals of each of your team members.  If you don’t already know the answer to this question already I can almost guarantee at least one surprise.  For example, someone’s goal may be to have your job, and another person’s goal might be to retire from the company in the same position they hold today
  • Stop focusing exclusively on improving your technical skills.  If you have any aspirations about advancement, remember that senior managers are selected more on their ability to manage people, projects and processes than on one or more technical skills.  To illustrate this point, consider this story about the legendary industrialist and innovator, Henry Ford.  When asked what Mr. Ford knew about his company’s tax and cost accounting processes, he responded that he knew where his cost accounting manager and tax accounting team sat — and that was exactly all he needed to know.
  • Read a book or take a class or attend a webinar about something unrelated to financial analysis, collections, deductions, and negotiations.  It could be a program on creative writing or speed reading.  The point is that to broaden your horizons you have to get out of your comfort zone
  • When interacting with people, think about how you can make the interaction more effective… not more efficient.  Your goal is to be efficient performing tasks and effective managing and interacting with the people you work for, the individuals who work for you and of course your customers and your sales team
Michael Dennis, MBA, CBF, LCM

Anyway, that’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Supersize or Specialize – Michael Dennis, CBF

Supersize or Specialize

Another friend of mine lost her job after many years when her credit department was combined with customer support and order entry and her position as credit manager was eliminated.  I honestly and sincerely don’t get it.  The skills required to be effective in the collection role are very different from the skills required to handle the order entry and customer support functions.  How do I know?  At various times, I have managed all three departments… and I never once thought:  What a good idea it would be to take an order entry representative and turn them into a collector… or… Wouldn’t it be great to cross train everyone and make one supersized Collections/Order Entry/Customer Support department!

I don’t disagree that creating a larger combined department would enhance the customer’s experience when placing an order, asking a question, or requesting assistance for the simple reason that more people working generally means shorter waits and quicker responses.   That is certainly good for your customer.  However, I cannot imagine how combining job functions could possibly improve collection performance for the company for all of the following reasons:

  • Not everyone is cut out to be a collector, but this Supersized department assumes that individuals will be equally adept at collections as they are in their other roles
  • The economist Adam Smith wrote that specialization leads to greater efficiency.   Creating generalists, which the Supersized department requires, is the opposite of specialization
  • Expecting most if not all the employees trained in customer support to become effective collecting outstanding debts is unrealistic.  Why?  Because collections is not for everyone and given a choice, I believe that most people will spend more time helping customers and less time calling for payment
  • The skills needed to manage a Supersized department are different than the skills required to manage the collection process, and
  • By eliminating the credit manager’s position this company apparently overlooked a very basic fact.  The credit manager’s biggest value add involves establishing appropriate policies to monitor and manage risk before orders are released, not in managing the collection team.  Unless credit limits and credit terms are set appropriately and credit risk is managed proactively, the chances of collections improving as a result of this departmental merger and the layoff of the credit manager are somewhere between (a) highly unlikely and (b) it’s never gonna happen!
Michael Dennis, MBA, CBF, LCM

That’s my opinion anyway.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

 

Garbage In, Garbage Out – Michael Dennis, CBF

Garbage In, Garbage Out

A friend of mine asked for my comments about a scenario in which an applicant stated it was their company policy not to release bank information to any creditor. I responded that my concern is the applicant has something to hide.  Examples include a loan default, low account balances, NSF checks, or loan covenant violations on their outstanding debt.  Requesting bank information is normal – as normal as requesting trade references from the applicant.

Her underlying question was more nuanced.  She asked: How can I make a good credit decision in the absence of basic information?  The answer is of course that she cannot do so.  My recommendation was that she refuse to do so, and I suggested that she frame the response to her manager this way:

  • I am trained to make sound credit decisions based on adequate but not necessarily perfect information
  • I am not trained nor authorized to make guesses based on incomplete and inadequate information, and the information I have gathered is incomplete and inadequate to make an informed decision

For this reason, I am forwarding this to you to request that you:

  • Approved the requested credit limit and payment terms, or
  • Reject the applicant, or
  • Provide me with additional guidance or instructions about how we should proceed in a way that minimizes or more accurately optimizes the relationship between risk and reward.

Occasionally, a manager will counter that the credit department must make its best decision based on the available information, whether or not it is complete.  In my opinion, it is important to push back.  When I have been given this assignment, I have responded that I will require training and guidance relating to:

  • What facts and factors go into making business decisions
  • How these decisions are documented to make it clear that the decision to extend credit was not based on standard or sound review of appropriate information
  • Who must approve business decisions in the organization
  • Whether higher bad debt reserves should be established for these accounts if open account terms are approved
  • Whether management wants reports showing the amount of credit extended based on credit approval vs. business decisions
  • Whether my performance evaluation will be negatively affected if one of these business approvals goes south and we are unable to collect
Michael Dennis, MBA, CBF, LCM

Using these tools, the risks described are at the very least shared by the credit decision maker and his or her managers.  This can be quite helpful for the credit department if losses start to add up on these marginal accounts.  That’s my opinion on this issue.  I would welcome your comments.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Turn Up The Heat On Past Due Accounts

Turn Up The Heat

Studies show, debtors are more likely to pay once a third party (the heat) gets involved. After three months, the probability of collecting a delinquent account drops to 69.6%, after 6 months 52.1% and after one year 22.8%

It’s time to turn up the heat on accounts that have cooled their payments.
Let CMA collect those accounts at a special 17% collection rate
(a 3% to 8% savings on our regular rates).

17% Collection Rate

CMA COLLECTION RATE OFFER

All new domestic placements over $500, placed from June 11, 2012 to July 31, 2012, will receive a rate of 17% (Attorney referral 25%, litigation and lien foreclosures 35%). Recovery fees are contingent upon collection, you don’t pay unless we collect. 

This special offer is for CMA Members only.

CMA is bonded for your protection and certified by the Commercial Law League of America.

PLACE YOUR CLAIMS TODAY!

Log into anscers.com – Go to the Collection Tab

Voice Mail Jail – Michael Dennis, CBF

Voice Mail Jail

I believe any collection call that does not result in a payment commitment being made by the debtor must be considered a failure, and a collection call resulting in a payment commitment of less money than the creditor expected must be characterized as only marginally productive.  Many times, collectors never speak to anyone in accounts payable.  Instead, they leave voice mail messages and end up in voice mail jail.

In my experience, as often as not creditors voice mail messages are ignored.  Why?  As a former accounts payable manager, my experience was that the volume of incoming collection calls far exceeded the time that the members of the accounts payable team could spend updating creditors on the status of payment.  The question that we must all consider is this:  Is there a way to make collection calls more productive?

I have found that one approach works particularly well.   It involves simply refusing to leave a voice mail message. Here are several work-arounds to voice mail jail:

  • Call the company operator and ask to speak to the A/P Manager.  If they are not available, ask for the Controller or CFO and conduct your collection call as normal
  • Call the operator and ask that your A/P contact be paged
  • Call the operator and ask to speak to anyone in Accounts Payable
  • Tell the operator that you are prepared to remain on hold until someone in A/P will take your call
  • If you cannot reach the A/P department and know the name of the buyer, contact the buyer and ask if she or he can transfer you to “anyone” in accounting that can help you

One final comment:  If you do not have a tracking mechanism or event alert tool that automates the process of identifying and ideally prioritizing collection calls based on the dollar amount past due or the age of the past due balance, then you are at a competitive disadvantage relative to creditor companies that have automated this process.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

New California case affecting lien laws – Joseph Hanna

A recent decision by the California Appellate Court has now changed the rules for contractors and material suppliers.

In the case of California Paving & Grading Co., Inc. vs. Lincoln General Insurance Company, decided on May 21, 2012, the appellate court concluded that any time a public agency enters into a contract where a private developer is contractually obligated at its own expense to make public improvements, the contract is a public works contract as a matter of law.   This decision is retroactive to all cases and projects.

In this case a private developer, 26 Moorpark, LLC, and the City of Los Angeles entered into a Subdivision Improvement Agreement and Contract for Moorpark  “to construct and install all public improvements required in and adjoining and covered by the final map.”

As you know, those public improvements are then handed over to the City.  Moorpark hired Masada Development as it general contractor, who in turn hired California Paving & Grading (“CP&G”) as its subcontractor to perform the street paving and asphalt work.

CP&G finished its work and having not been paid, filed suit against the surety on the subdivision improvement labor and material payment bond.  The surety demurred to the suit and the trial court dismissed the case.

In affirming the dismissal, the appellate court found that CP&G’s failed to serve a public works preliminary notice on the City of Los Angeles and failed to bring suit within the time frame of a public works payment bond.

CP&G argued that it was not a public works project, that it served a private works preliminary notice pursuant to the private works statutory provision for a preliminary notice, §3097 of the Civil Code.  The surety successfully argued that a public works preliminary notice pursuant to §3098 should have been served.  Further, the surety argued that CP&G failed to file suit within the shortened timeline for suits against public works payment bonds (within six months of the deadline to serve a stop notice on the project) as opposed to the general four-year statute of limitation applicable to the subdivision improvement bond.

The appellate court began its analysis with §3100 of the California Civil Code which defines a public work to mean “any work of improvement contracted for by a public entity”.  Relying on this definition, the appellate court concluded the Subdivision Improvement Agreement between the City and Moorpark constituted a public work because it was a contract entered into by a public entity for the construction and installation of public improvements.

Because the CP&G’s subcontract agreement was in furtherance of the underlying Agreement between the City and Moorpark, the subcontract was likewise for a “work of improvement contracted for by a public entity” and therefore governed by the public works statutes governing suit on a payment bond, requiring the service of a preliminary notice on the City pursuant to §3098.  The appellate court concluded that the suit on the bond must be brought within the shortened time under §§3184 and 3249 of six months from the last day a stop notice could have been properly served.

The appellate court rejected CP&G’s argument that the project was not a public work of improvement CP&G argued that the subdivision improvements are not paid for out of public funds and that the improvements were not the subject of competitive bids or prevailing wage requirements.  The appellate court disagreed, relying on its interpretation of §3100 that the City entered into a contract for a “work of improvement contracted for by a public entity”.

What this means is any contract where its nature involves “a work of improvement to be performed under a contract entered into by the public agency” is now subject to the rules and laws governing public works.  This will require that a public works preliminary notice under §3098 must be given to the public agency and that the timeline to bring a suit on any labor and material payment bond or subdivision bond must be filed within the time period applicable to a public works payment bond.

So, if you are a material supplier or subcontractor performing work off site or upon privately held land in furtherance of an agreement by a public entity for public improvements, regardless if public funds are not being used, your job rights will be governed by both the private works statutes for mechanics’ liens and stop notices procedures and timelines as well as the public works procedures and time lines against the labor and material payment bond.  This means sending both private works and public works preliminary notices to protect your job rights against both the property and any public improvement bonds for a subdivision development.

The content of this article is intended to provide a general guide to the subject matter, and is not a substitute for legal advice in specific circumstances. Should further analysis or explanation of the subject matter be required, please contact Joseph M. Hanna at jhanna@lanak-hanna.com

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CMA Poll Results – Credit Applications

Do you offer to send credit applications to all new accounts? 

  • Yes, all new accounts are supplied with credit applications 81%
  • No, just those who will buy enough to need credit 11%
  • Other 8%

F. Scott Wilson

If someone comes in for a small amount of product, then they can pay COD. If they buy any larger amounts, all are required to have an application on file, even if they’re COD. The idea is that if we sell something and they bounce a check or something else goes wrong, we want to know who and where they are, and who we can pursue for payment if needed.

  • Kelly 

    We require an application IF the customer is requesting billing terms. However, our customer service department completes a new customer form with the customer if they are phoning in a new order and it is the first time they have ever purchased from us. Note: The entire application process is currently under review with possible updates in the future.

  • Melissa Kobus 

    We require signed terms & conditions on all accounts. The credit application is only required for those accounts requesting open terms. The app includes the T&C’s. We have seperate T&C’s document for COD, credit card, etc accounts.

  • Jeff Childress 

    Customers who want N30 request applications from us. We do not send them out on every new customer. Some customers like to pay cash and I would prefer not talking them into a N30 account

  • Laurel Matthews 

    We we require a credit application from all new customers. If they chose to fully prepay their first order we sometimes forgo the credit application.

  • Debra Davis 

    Our customers are required to complete our Credit Application or our COD Sheet before we will proceed in opening a customer number for them.

  • Deb 

    The application precedes an account in all instances.

  • Arrel E Tucker 

    I want apps on every new acocunt. Sometimes I get overruled by the owner but not very often.

What Went Wrong? – Michael Dennis, CBF

Learn From Mistakes

It is essential that we learn from our mistakes.  Bad debt losses are a cost of doing business, and every sale on open account terms carries some risk of nonpayment.  That said, when a bad debt loss occurs, you have two options:  (1) Lament your losses or (2) Learn from them.

I believe that there is at least one lesson to be learned from each bad debt loss.  An assessment about what went wrong can reveal any number of mistakes, but in my experience these mistakes generally fall into one of these categories:

  • The credit file was out of date and you were extending credit based incorrect or out-of-date information
  • The debtor was allowed to exceed the credit limit
  • Orders continued to release in spite of the fact the customer was past due
  • The collector’s efforts and follow up were in adequate
  • No financial analysis was done, or the analysis was inadequate, or it was done incorrectly
  • The problem account was not given to the credit department manager soon enough
  • The delinquent account was not placed for collection quickly enough

There are different solutions for each of the problems noted above, but the central theme is that bad debts can be reduced if collectors are give more structure, clearer directions,

Michael Dennis, MBA, CBF, LCM

more specific instructions and written guidance for managing delinquent accounts or for any active account considered to be a high risk.

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Is your Credit Department still sending and receiving faxes?

Poll Results
7 COMMENTS
  • Stella Chavez – Scanned to email most of my correspondence
  • Gay Bramer – If we had a scanner (which we’ve begged for), I would rarely use the fax machine and rely solely on e-mail.
  • Irene  – Most requests for credit references are faxed but other credit issues are emailed and sometimes (rarely) by phone.

  • John Goss – Typically trade reference sending and receiving is all I use the fax machine for. Scanning and e-mailing the same data reduces resources and provides a great electronic copy.

  • Cindy Garcia – We still use fax on releases and credit applications, we have seen an increase in emails but fax is still the main communication choice.

    Ken – Fax usage should cease to exist in 3 more years once email/scaning has fully saturated society. It usually takes 10 years for a product to be used by the masses in their daily routine. Smart phones are the future!

  • Arrel Tucker – I mainly use faxing for getting and giving trade credit references. Most other correspondence is done via email or phone.

The Deductions Merry Go Round – Michael Dennis, CBF

The majority of deductions are the result of errors made by the creditor company.  Some of the more typical errors include mistakes in pricing, picking, packing and shipping.  Many credit pros are on a merry-go-round in which they clear a hundred or more deductions a month only to find a hundred new deductions open the following month.

Do you want to get off this ride?  The best way to do so is to find and fix the mistakes that result in customer deductions being taken.  Of course, the credit department does not directly control things like pricing and packing errors, but there is something you can do.  You can document the number and the dollar value and the types of deductions outstanding.  Doing so is one way to gain support from senior management for fixing the problems that result in customer deductions.

If you have never tried this before consider starting slowly.  For example, you could document the number of pricing deductions taken in a given month and the number open at the end of the month.   Calculate the dollar value of pricing deductions taken, and the dollar value of deductions open at month end.  You might also want information about the number and total dollar value of pricing deductions open for more tha 90 days.  Armed with this information, you should be able to make a more compelling case to senior management that some significant effort is needed to address and resolve the root cause of pricing deductions.  And if you want, report on whether the customer was correct or wrong in taking a pricing deduction, the easiest way to document this is to calculate the number and dollar value of pricing credits issued per month and publishing that information to senior management.

Michael Dennis, MBA, CBF, LCM

Well, that’s my opinion… What is yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

I Keep Holding On – Michael Dennis, CBF

Keep Holding On

One of the questions that I am frequently asked is this:  When should I place an account for collection?  In my opinion, most creditors hang onto delinquent debts far too long before placing a debtor company for collection.  There are a variety of reasons that this is true, including hope that the debtor will pull out of their downward spiral just in time.  The problem with holding on too long is that the older a past due balance becomes, the less collectable it becomes.  The real problem is that the older the debt becomes, the faster the probability of collecting approaches zero.

There is another factor worth considering as it relates to working seriously delinquent accounts and it relates to the fact that the time spent chasing accounts you have held onto for too long is time and energy and focus that is taken away from collecting from debtors that are both able and willing to pay, but require a gentle nudge from you to release payment.

I think holding onto too long is a mistake that can be easily corrected.  How?  By making a commitment to place accounts for collection when you find that you are no longer making reasonable progress in your collection efforts.  Here are a few examples of scenarios suggesting that it is time to use a third party collection agency:

  • Your customer will not take or return your calls;
  • The account is now 90 days or more past due;
  • The debtor has broken two or more commitments to pay the past due balance;
  • The debtor promised to pay one amount, but paid significantly less;
  • The debtor’s phone is disconnected;
  • The debtor has bounced a check to you but cannot or will not try to make it good.
Michael Dennis, MBA, CBF, LCM

That’s my opinion. What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Using Salespeople in the Debt Collection Process

Coffee Is For Sales "Collectors"

In a previous blog post, I suggested using salespeople in the debt collection process. More specifically, I said that salespeople could use their close working relationships with customers to convince them to more quickly retire past due balances.  The feedback that I received was not entirely favorable.

Several people suggested that it was never a good idea to involve salespeople in the collection process. I disagree.  While I definitely do not believe that salespeople should be allowed to negotiate extended payment plans with delinquent customers, I think salespeople can play a very useful role. How?  By using their personal relationships combined with their knowledge of the internal workings of the debtor company to bring additional pressure to bear on the right person or department.  One technique I have seen work effectively is for the salesperson to bypass A/P and finance entirely and go directly to the Purchasing department.  Even if the salesperson does not get a commitment for an immediate payment, they often get additional information or insights about the problems the debtor is facing that can be used by the credit function to decide on the best course of action.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Square Peg, Round Hole – Michael Dennis, CBF

Square Peg, Round Hole

As a consultant, I often find that clients had assigned their most experienced collectors or their best collectors to their largest customer accounts.  There is a widely-held theory was that the larger the customer account and balance due, the more experienced the collector should be.

In my opinion, regardless of the size of the credit limit or A/R balance, customer accounts should be assigned to a creditor company’s collectors based on their complexity.  In other words, the best or most experienced collectors should be assigned to accounts that require their experience and expertise, irrespective of the size of the credit limit or the balance due.  There are several risks associated with assigning your best collector to your biggest accounts, including these:

  • Your best collectors are not handling the accounts that need their expertise the most
  • Therefore, the effectiveness of your collection efforts are not optimized
  • In a best case scenario, disputes take longer to resolve and payments take longer to collect
  • In a worse case scenario, the debtor uses the collector’s inexperience or ineffectiveness to delay issuing payment
  • In a worst case scenario, money owed to your company that could have been collected relatively easily and fairly quickly by a more experienced collector is either not paid at all or is seriously delinquent before it is ever paid by the debtor

The solution is to assign your best and brightest to the accounts most difficult to collect from, irrespective of the size of the balance due.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Partners with IAB for Deduction Management Services


IAB

CMA is excited to announce our partnership with longstanding deduction management company IAB Solutions. CMA is always on the lookout for services that will assist the Credit Department through the order to cash cycle. IAB Solutions has proven themselves a favorite among our members for quality deduction management services.

“The greater the deduction volume, the greater the profit dilution.  Effective deduction management adds to your bottom line!” Source:  Best Practices Today – Deductions by David Schmidt

  • Have you seen an increase in the amount of incoming deductions your company is receiving?
  • Do you find yourself challenged to find time and/or resources to deal with these tasks?
  • Are you finding yourself dealing with the same issues over and over again?

If you answered yes to any of the above questions, CMA has a solution!  We have partnered with IAB Solutions, the industry’s leading service provider in Deduction and A/R Management to bring you access to this value added service.

BENEFITS

  • Cleaner receivables and reduced Days Deductions Outstanding (DDO)
  • Increased collections and recoveries
  • Root cause analysis provides valuable trending information to prevent future claims
  • Ability to reallocate internal resources for maximum effectiveness
  • Access to a highly developed network of industry information
  • Productivity Based Pricing – PAY ONLY FOR RESULTS!

With over 27 years of experience in a variety of industries, their experienced analysts provide you with a focused, professional, and transparent approach to manage the more time and labor intensive deduction tasks.

Want more information?

Please contact:

Diana Crowe
Manager, Business Development
(800) 742-0014 (toll free)
(630) 537-0840 (direct)
DCrowe@iabllc.com

Risk and Reward – Michael Dennis, CBF

Risk and Reward

I attended a seminar recently.  One attendee suggested that export sales are often more trouble than they are worth.  She expressed frustration about the difficulties evaluating credit risk including the problems getting trade references and bank references, as well as the challenges often associated with collecting past due balances.

In my opinion, the opportunities that sales to foreign customers represent are so significant that most U.S. based creditor companies have no choice but to extend credit to foreign customers.  Why? For all of the following reasons:

  • Export sales can result in higher gross sales and higher net profits
  • Exporting allows companies to diversify their customer base and reduce their risk
  • Companies selling seasonal products may find demand higher in what is normally the low season by exporting
  • Products that have reached the maturity phase or even the decline phase in the domestic market can be introduced into a foreign market and begin the product life cycle all over
  • Companies with excess inventory or excess production capacity may be able to sell goods and maintain full employment and operate at full capacity without having to offer deep discounts to customers to do so

Yes, export open account sales can present significantly higher risk than domestic sales, and yes export credit sales require more specialized skills and expertise to manage but I believe the risk if properly managed by the credit department is more than offset by the rewards.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What is yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

 

The Annual Update Meltdown – Michael Dennis, CBF

Annual Update Meltdown

In a previous Blog, I said that I thought it was essential to require some privately held customers to provide financial statement updates at least once a year.  Since then, I have received several calls suggesting that requesting this information from customers would upset the apple cart.  I disagree.  I believe the bigger risk to the average credit professional involves extending a significant amount of credit to a customer without having current financial statements on file.

One of my consulting clients took a significant bad debt loss.  I was asked to perform an autopsy to determine what went wrong, and what red flags might have been missed.  This was not a witch hunt.  It was an effort to figure out what went wrong and make any necessary changes.  I asked for the credit file.  I found that the most current financial statements on file were: (a) four years old and (b) unaudited internally prepared documents.  One of my key findings / recommendations to company management was to mandate updated financial statements no less frequently than annually on any customer with a credit limit in excess of $200,000.

These days, requests for annual updates from privately held companies are routine.  They may not provide the required reports in response to your first request.  However, I cannot remember the last time a customer had a meltdown when I requested updated financial information.

Michael Dennis, MBA, CBF, LCM

Well, that’s my experience.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

New Business Credit Report Combines Data from Major Providers

anscersX Combined Business Credit Reports offer easy access at a reasonable cost for data from Dun & Bradstreet, Equifax, Ansonia Credit Data and Credit Management Association on one report.

April 18, 2012 – Burbank, CA – In response to requests for easier access to information and a growing preference for transactional reports over credit reporting contracts, Credit Management Association™ (CMA), in partnership with the Trade Information Exchange TM (TIE), has launched the anscersX Combined Business Credit Report.

“CMA’s membership represents many small to medium sized companies,” says Michael Mitchell, President of CMA. “They are requesting comprehensive information on potential and existing customers at prices that fit their budget. anscersX Reports combine data from major providers giving them a more complete picture of their customers on one report.” CMA Members appreciate the ease of access to data from multiple providers without contracts. Diego Jimenez, Credit Analyst, Accuride International, Inc. agrees, “I really like that there is more than one provider on one report.”

Combining data from D&B, Equifax, CMA and Ansonia Credit Data is a unique approach developed by the Trade Information Exchange. “We put a lot of effort into combining the data from multiple data sources in an easily understandable way,“ offers Robert Shultz, Vice President of Marketing and Strategic Partnerships at TIE. “Additionally, on the anscersX Report we have introduced a combined credit score incorporating data from Equifax, Ansonia and CMA.”

The anscersX Report is helping credit departments with limited time and resources gather credit information quickly. “It is worth it to get an answer in minutes as opposed to calling all the trade references on a credit application,” says Mary Donaldson, Office Manager, Worthen Equipment Inc.

The anscersX Combined Business Credit Report is available on a transactional basis online by registering on CMA’s services site anscers.com. Pricing is $51.95 or less depending on the data sources you choose. There are no contracts, no minimums, no hassles and instant access. Judy Bennett, Credit Manager, Brown-Strauss Steel likes the ease of use, “I have pulled several anscersX Reports so far and have been pretty happy with the results. We will continue to order anscersX Reports.”

“CMA Members tell us that maintaining multiple contracts with providers can be time consuming and expensive. We needed to make access to information easier and less expensive by offering a one-click combined report,” shares Michael Mitchell. “anscersX Combined Business Credit Report attempts to solve that issue.”

Terrence A. McCraw, CCE, Greenheart Farms, Inc. reports, “Glad I found the new anscersX Credit Report!  It’s a quick way to pull together independent credit data from multiple data sources. All in a single search. It’s priced right too!”

*******

About Credit Management AssociationTM : Credit Management Association (CMA) is a non-profit association that has served business to-business companies since 1883. CMA helps credit, collection, and financial decision-makers get the information and support they need to make fast, accurate credit decisions. In addition, CMA assists insolvent companies with workouts or liquidation through cost effective alternatives to bankruptcy.
Contact: Michael Mitchell – mmitchell@emailcma.org – 818-972-5340 CreditManagementAssociation.org
anscers.com

About Trade Information ExchangeTM:Trade Information Exchange (TIE) provides trade credit report products and services for the manufacturing, distributing, and construction industries. With TIE, the promise is faster, less expensive, more accurate, industry-specific credit information on companies. We have years of industry-specific experience and a small-company attitude toward customer service. 
Contact: Robert Shultz  – bob@tradeinformationexchange.com – 805-520-7880
www.tradeinformationexchange.com

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CMA Instructor of the Year – 2012

CMA’s “Instructor of the Year” award recognizes an individual who has given generously of his time and expertise in the field of credit management for the benefit of CMA, its members and the business community for over 10 years.  He has been one of our association’s most active volunteer members, having instructed dozens of seminars, webinars, and conference programs on a variety of domestic and international credit and collection topics. More than just an instructor, he has been a valuable coach and advisor to many credit professionals, which earned him CMA’s highest honor, the CMA Credit Executive of the Year Award in 2006.

CMA Instructor of the Year: Eddy Sumar, MBA, CCE, CICE, CEW

Eddy Sumar, MBA, CCE, CICE, CEW

CMA Mentor of The Year – 2012

CMA’s “Mentor of the Year” award recognizes an individual who has been a leader and trusted mentor to many Credit Professionals in our Association.  This year’s recipient has been an NACM member for over 18 years, and during that time he has been instrumental in fostering member participation and growth by inspiring his peers with his knowledge and passion for credit.

CMA Mentor of the Year: Gent Culver – IGT

Gent Culver, IGT

CMA Designation of Excellence Awards

CMA’s “Designation of Excellence” awards recognize those individuals who have not only achieved their NACM designations, but also have shown a commitment to continuing education.

CBA Designation of Excellence:

Michelle York CBA – Foster Farms

CBF Designation of Excellence:

Hector Benitez CBF – Equinix Inc.

Hector Benitez, CBF

CCE Designation of Excellence:

Melissa Kobus CCE – Anixter

Melissa Kobus, CCE

CMA Credit Executive of the Year 2012

Mike Mitchell, Kathy Tomlin, CCE and Mike Puccinelli, CCE

CMA’s Credit Executive of the Year recognizes an individual who demonstrates outstanding performance in the field of business credit management. Nominees for the award are considered on the basis of professional experience, education, leadership ability and participation in CMA committees and activities. The winner is carefully selected by a group of your peers who are former recipients of the award.

The nominees considered for this year’s award are:

  • Darrell Horton
  • Gerry Gilbert , CCE
  • Melissa Kobus, CCE
  • Michael Mino, CCE
  • Robert Simmons, CCE
  • Patrick Spargur, ICCE
  • Kathleen Tomlin,  CCE

We feel that is a great accomplishment just to be nominated for the award, and so each of the nominees will receive a plaque in appreciation for professionalism and dedication to the association.

This year’s recipient has over 26 years of experience in the credit profession, and has volunteered countless hours:

  • Serving on many CMA committees and work groups
  • Mentoring new credit professionals, and is considered a construction industry expert
  • Serving on the CMA Board as Director, Treasurer, Vice Chairman and Chairman and currently holds the position of “Advisor”.
  • This person has been a speaker at Western Region Credit Conference, Credit Professionals groups and a presenter for many CMA sponsored Webinars.
  • This person has been interviewed for NACM Business Credit Magazine and CFO Magazine and is a “Certified Expert Witness”.
  • She has served on the NACM board of directors and most recently served as the NACM Chairman of the Board.

Quote:  As the 2011 Chair of NACM I traveled extensively to conferences and meetings nationally and internationally.  CMA is a premier affiliate and I was proud to have been nurtured and mentored by CMA staff and members.  CMA has made a huge difference in my career; giving back to the credit community is an honor.

Please help me recognize CMA’s Credit Executive of the Year – Kathleen Tomlin CCE

Bad Manners? – Michael Dennis, CBF

Bad Manners?

Many debtors seem to think that creditors should always allow a grace period of at least 7 days before calling for payment status on a past due balance.  On more than one occasion, I have been called impolite, rude and even unprofessional because I called to inquire about the status of past due invoices sooner than the debtor considered polite.  I disagree with the necessity of waiting XX days before calling for payment status.

Why?  A collection grace period benefits only your customers.  In my opinion, it is not inappropriate for you to call any customer any time their account becomes past due.  In fact, I think customers that allow their accounts to go past due are acting inappropriately.  Another very real risk associated with creating a grace period is that customers will build your grace period into their payment cycle.  For example, if you do not call until your customers until invoices are at least 10 days past due on Net 30 day terms, it is not a huge leap of logic to assume that at least some of your customers will schedule payments on or about day 40.  Why?  Because they have learned that 40 days is the tipping point.  If they pay in less than 40 days, they are paying too soon.  If you disagree with me, consider asking your company’s accounts payable manager if they would delay payment to a supplier that did not mind being paid ten days late.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Tug Of War – Michael Dennis, CBF

Tug of War

I believe that the relationship between sales and credit is frequently misunderstood.  There are individuals in sales and in credit who believe that sales and credit are, in a sense, in competition with each other.  The basic premise is that extending credit to customers is a “zero sum game” meaning that if sales “wins,” the credit department loses.  I believe that sales and credit can work together to increase profits while managing risk.

One of the best ways to do so involves working proactively with sales to determine the required credit limit for each customer. For example, you could provide your sales department with the credit limits and the A/R balances for each active account and ask them if the assigned credit limit is adequate.  If not, you could work proactively with sales and with the customer to try to approve a higher credit limit before orders are placed that would place the account over the assigned credit limits. In my experience, everyone is happy when credit limit issues are addressed proactively in this manner.
Another way to increase profits is to inform sales in advance of potential credit holds so that the

Michael Dennis, MBA, CBF, LCM

salesperson can work with their contacts to resolve these problems.

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

It’s All About The Money – Michael Dennis, CBF

All About The Money

There is a theory that an all-out effort will collect almost every delinquent account.  In webinars, I have referred to this as the Ship-and-Pray method of credit risk management.  I believe that the right time and the best time to manage credit risk is before the account is ever opened and certainly before orders are approved and released.  Once a new account has been set up and orders have been released on open account terms, the power equation shifts from the seller/credit to the buyer/debtor.

Most credit professionals can identify their high risk customers.  The real challenge, in my opinion, involves taking appropriate steps to limit credit risk.  The biggest challenge involves taking the necessary steps to monitor and manage active accounts.  As a consultant, I was frequently surprised at how irregularly some companies update their credit files.  And I admit to being mystified about why more creditors do not insist that customers with large credit limits provide updated financial statements on a regular basis.

My suggestion is simply this:  Apply a disciplined approach to your risk management process, and insist that customers demanding large credit lines provide financial statements no less frequently than annually.

Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

A New Look at Equity – Michael Dennis, CBF

New Look at Equity

I have been giving some thought to the use and abuse of customer financial ratios in which Equity is the denominator. One such ratio is the Debt to Equity Ratio calculated using this simple formula: Total Liabilities divided by Equity.

I think that credit professionals need to keep in mind that Equity is a residual number meaning that Equity is nothing more than Assets minus Liabilities… but Assets include Intangible Assets. The best known example of an Intangible Asset is Goodwill. The value of all Intangible Assets in a business failure is uncertain. I think that the most appropriate measurement of equity involves the use of Tangible Net Worth. Tangible Net Worth (TNW) where TNW = Equity minus Intangible Assets.

Tangible Net Worth is obviously a far more conservative calculation of Equity than using the Equity figure presented on the customer’s Balance Sheet. In my opinion, TNW is a more reliable measure of credit risk. I prefer TNW because it is a more conservative calculation of Equity rather than the more commonly used Asset – Liabilities = Equity.

Michael Dennis, MBA, CBF, LCM

That’s my opinion. What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Fraudulent Financials – What’s Your Advice? – Michael Dennis, CBF

Fraudulent Financials

From time to time, subscribers to my newsletter call me for advice. Often, I can help. Occasionally, I am at a loss. Last week, I was stumped.

The caller had a story and a question. The story was that she was asked to evaluate an applicant for a 7 figure credit limit. She requested and received 12/31/11 financial statements. They were not audited. The applicant explained that the auditors had not completed their work but that the audited statements would be available in late March. She then asked for and received the prior-year end financial statements. She found they were not audited. Instead, they were compiled and reviewed by a small CPA firm. She requested confirmation that the 2011 statements would be audited but never received a response. She compared the 2010 statements to the 2011 statements and found the following anomalies:

  • The income statement showed sales more than tripled from 2010 to 2011.
  • Net income after tax increased 20 times year over year.
  • Net worth tripled year over year.
  • Each ratio she calculated year over year improved dramatically including ratios for profitability, financial leverage, efficiency, and liquidity, and
  • The internally prepared Balance Sheet for 2011 didn’t balance. Assets were greater than Liabilities + Equity by 2%.

Another piece of information she shared was that the applicant company said the corporation had been operating for more than 10 years, but the Secretary of State’s office website reported it was incorporated in 2009.

The caller told me she believed she had been supplied with fraudulent financial statements for 2011, and asked she could report to. I responded that I agreed that the 2011 statements were suspicious if for no other reason than the fact that the corporation in business for more than a decade was unlikely to triple its sales revenue in a single year. I said that suspicion of fraud is not proof of fraud.

Michael Dennis, MBA, CBF, LCM

The caller said she was ready to proceed. I could not recommend any agency or entity to report this to, and I asked her to reconsider. That was my advice. What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Refer a New Member to CMA – Win a FREE WRCC Registration

CMA Members

CMA has an exciting offer for our members. To complement NACM Nationals current “Take Your Pick” new member promotion, CMA has created a promotion for our current members. If a current member refers a new member to CMA by June 1, 2012 they will be eligible for a FREE registration to the NACM Western Region Credit Conference (WRCC).

Budgets are tighter than ever for many members. Taking the time to refer the company on your next trade reference request or a company you feel would fit into your Credit Group – could secure your attendance at the WRCC even in a tight budget year.

Click here to Refer a Member to CMA and read the rules of the program.

You can refer multiple companies to increase your chances. We have the most success with referrals that you talk to about CMA. Tell them that CMA supports business credit, tell them about the value of the Take Your Pick promotion they will receive and share with them why you are a member.

FREE NACM Credit Congress Registration When You Join CMA Today

Expires June 1, 2012

Join Now and Take Your Pick

Become a CMA Member by June 1, 2012 and you can Take Your Pick from the following offers:

  • Two years of membership for the price of one. ($465 value) – or –
  • A FREE 2012 NACM Credit Congress Registration June 10-13 in Dallas. ($949 value)*
Need to think about it for a bit? Download and Print the Take Your Pick offer. (332)

* This offer is valid for new, full members who join a participating NACM Affiliate by June 1, 2012. To qualify, your company may not have held an NACM membership in the past two years. The Credit Congress offer covers the cost of the registration fee only; hotel, travel and meeting extras are not included.

Click here to Join CMA!

 

Onshore or Offshore? – Michael Dennis, CBF

Onshore or Offshore?

A friend of mine is an experienced credit analyst.  He lost his job recently as a result of outsourcing.  He learned that his employer initially hired four people in China to do his job and asked me how this could be cost-effective.  I suggested the following:  Assume that your salary and benefits total $50,000 a year.  If your four replacements earn $12,500 a year or less and receive no benefits, your employer saved money by outsourcing your job.

While my friend wondered why he lost his job, I thought about how to prevent this from happening to others, and came to these conclusions:

  1. Nothing will prevent companies from exporting credit jobs meaning that nothing I suggest will guarantee your job will not be outsourced
  2. Many companies in America have been successful in outsourcing various credit related functions
  3. Corporations have an obligation to reduce costs when it is practical to do so.  Therefore, it is essential that your work is done effectively and efficiently, and that you find ways to do your work faster and better
  4. One clear advantage you have over outsourcing is your ability to communicate easily, directly and quickly with your customers, with your sales department and senior management.  Make sure you are doing exactly that

Knowing why companies decide to outsource is the first step in helping safeguard your job. The main reason companies outsource is to control costs by saving on salary and benefits. Performing your job in the most effective manner and communicating this effectiveness to management is one way to make them aware that potential cost savings associated with offshoring may not be attainable or ever preferable to the status quo.

Michael Dennis, MBA, CBF, LCM

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

DNBi Users Win a Trip to Credit Congress

I Love DNBi Contest

How would you like the chance to win an all-expense paid trip to the National Credit Congress in June?

We are excited to announce a new “I Love DNBi” Contest sponsored by our partner Dun & Bradstreet. Check out all the details below. If you use D&B solutions such as DNBi and are willing to share how it improves your business, you could be on your way to Dallas – or win one of the other great prizes! Check it out below.
Tell D&B why you love DNBi and you’ll have the chance to win an ALL-EXPENSE PAID TRIP to the 2012 Credit Congress Expo!

To enter the contest visit: www.whyilovednbi.com.

For more information please contact Bob O’Brien at 973-605-6344 or obrien@dnb.com.

Contest deadline is April 1st, 2012.

Contest is sponsored by D&B in conjunction with the NACM and is open to NACM members.

The Right Tool For The Job – Michael Dennis, CBF

The Right Tool?

During a recent seminar, I was asked if customer financial statements are the right tool for establishing credit limits for new accounts and for monitoring or changing the credit limits for active customers.  It was a great question and one that I have thought a lot about.  In my opinion, financial statements are a useful tool in evaluating a customer or applicant’s creditworthiness, but financial analysis is not the only tool that can and should be used to make these decisions.

It is essential to differentiate between audited and unaudited financial statements.  In most creditor companies, 20% of customers account for 80% of total sales.  Ideally, these larger customers can provide audited financial statements.  Basing credit decisions on unaudited financial data is fraught with risk, including the risk that the unaudited data includes either (a) subtle manipulations intended to make the customer or applicant appear more creditworthy or (b) outright inaccurate and fraudulent financial information intended to convince creditors to extend credit to a company that would otherwise not qualify for open account terms.  The problem for creditors is that it is almost impossible to determine the accuracy of unaudited statements… but many creditor companies have only a handful of customers that have audited financial statements.

So, going back to the original question about the use of financial statements, I believe each of the following statements is true:

  • Unaudited statements may not be worth the paper they are printed on
  • Audited statements are not always completely accurate, but they are the best that creditors can get from customers and applicants
  • No credit review is complete without evaluating financial statements
  • Creditors should routinely request financial statements from customers and applicants
  • Out of date financial information can be more dangerous than having no statements at all.  Why?  Since customers’ financial conditions always change over time, relying on outdated financial information may result in a decision to extend more credit than the customer deserves
Michael Dennis, MBA, CBF, LCM

What are your thoughts? Are customer financial statements the right tool for the job?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

What I think I do. What I really do.

At our last Board Meeting those attending were gracious enough to help me out with ideas for a “What I Think I Do/What I really Do” meme for Commercial Credit Managers.

Commercial Credit Manager
Click to enlarge

Here is a link to the origin of this internet meme: http://knowyourmeme.com/memes/what-people-think-i-do-what-i-really-do

Please feel free to post it to Facebook, Twitter, Linked In, email it around. The best way to save it to your computer would be to click it and see the largest version. The right click on the image and choose “Save As” to save to your computer.

A Balancing Act – Michael Dennis, CBF

Balancing Act

A few years ago, a good friend of mine who worked in the automotive aftermarket industry lost his job as a credit manager as a direct result of his management of bad debt losses and DSO.  More specifically, he was fired because, under his guidance, the credit department had not written off any bad debts for three years.  Sales had complained that the credit decisions being made were far too conservative and way too risk averse.  The company’s senior management eventually looked at the information about losses and concluded that sales management was correct.

Credit decision-making is a balancing act with unexpected and unbudgeted losses on one side and lost sales and lost profits from overly conservative credit risk management decisions on the other side.

Is it common that a credit manager loses their job because they are too risk averse?  I think it is more likely that the opposite is true meaning that credit professionals lose their jobs because they accept too much risk resulting in higher DSO or higher bad debt write offs.

Michael Dennis, MBA, CBF, LCM

However, the fact that my friend was fired is a good reminder that credit professionals are expected to manage credit risk according to their employer’s expectations.  They are not expected or required to eliminate the risk of slow payment or nonpayment.  What do you think?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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Now Accepting Honors & Awards Nominations

The Honors and Awards Committee of Credit Management Association is now accepting nominations for the following Member Awards:

  • CMA Credit Executive of the Year
  • CMA Instructor of the Year
  • CMA Mentor of the Year
  • CBA Designation of Excellence
  • CBF Designation of Excellence
  • CCE Designation of Excellence

This is an opportunity for you to recognize those Credit Professionals who have demonstrated outstanding leadership, exemplary commitment to the Credit Profession, and who have inspired or have worked to promote the advancement of the Profession.  Any nominations received by March 1, 2012 will be considered.  The recipients will be awarded at CMA’s Annual Meeting on April 12, 2012 held at the Disneyland Hotel in Anaheim, California. 

Nominees will be judged on the basis of professional experience, education, leadership ability and participation in CMA groups, committees and activities.

Download the nomination forms (311) Submit your nominations by March 1, 2012 to:

Kim Lamberty CAE
Credit Management Association
Fax: (818) 972-5301
E-mail: klamberty@emailcma.org

Just as Confident As Last Year Q1 2012 7.11 Score

CMA’s Credit Confidence Score is experiencing a bit of deja vu. The Q1 2012 score of 7.11 out of 10 is the exact same as Q1 2011.

Survey Results Questions 1 and 2

CMA Members report orders and payment increasing, and they predict that payment will be on time for the coming quarter.

Survey Results Questions 3-5

While some are continuing to tighten their credit policy, most predict no change for this coming quarter. The use of credit hold has increased and there has been a stabilization in the amount of accounts sent to collections and NSF checks received.

Some members are extremely confident about payment in Q1 2012 with 49% reporting a confidence score of 8 or more.

Survey Results Question 6

 

No FREE Lunch – Michael Dennis, CBF

No FREE Lunch

Years ago, I worked for a division of a Fortune 500 company with sales in excess of $1 billion a year.  One day, the CFO told me that she wanted DSO reduced by 15% within three months.   I responded that I would begin work immediately and report back within 24 hours.  I returned to my office and outlined the plan for achieving the 15% reduction in DSO.  It involved, among other things:

  1. Rejecting new credit applicants I considered to be high risk
  2. Lowering or withdrawing open account terms on all accounts that could be classified as marginal risks
  3. Holding orders as soon as a customer became more than 15 days past due (without justification)
  4. Withdrawing open account terms to customers that became more than 30 days past due (without a valid reason for doing so such as we acknowledged that we owed them more than they owed us)
  5. Placing customers on hold immediately if they took deductions without providing supporting documentation
  6. Requiring the CFO to give me the authority to veto any request for extended terms proposed by sales
  7. Requiring updated quarterly financial statements from all active customers as a condition for continuing to extend credit
  8. Requiring all active customers to provide audited financial statements at least annually

The CFO review the email containing this list and scheduled a meeting.  In that meeting, I said that reducing DSO was easy but when the ‘costs’ associated with reducing DSO were examined, many companies were unwilling to accept the trade offs.  If my goal remained a 15% DSO reduction, “all” the CFO needed to do was to support these 7 proposals and deal with the inevitable collateral damage.  She declined to accept this list and I suggested a less rapid and less radical approach to DSO reduction.
The lesson here is that there is no Free Lunch.  A company can have whatever DSO it wants as long as it is willing to accept the trade offs.

Michael Dennis, MBA, CBF, LCM

What strategies do you use to reduce DSO?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

To Place or Not to Place for Collection – Michael Dennis, CBF

Hamlet - To Be or Not To Be

I recently received a call asking what I thought of this proposal to a creditor from a third party collection agency.  The agency would collect on a contingent fee structure debts at between 15% and 20% of the amount collected depending on the age of the debt when placed.

If the standard collection process did not produce results, the account would be transferred to an attorney for lawsuit.  At this time, the contingent fee would more than double to a minimum of 45% of the amount collected plus court filing fees.

I responded that this was a win-win situation — for the agency.  If the agency was able to collect with minimum effort, it picked up 15% to 20%.  If it went to an attorney, the collection agency probably still received a portion of whatever the attorney was able to collect.  My concerns were:

  1. If the attorney works directly for the collection agency, the agency has little incentive to address the collection process aggressively, and
  2. I always want to be the decision-maker relating to if or when an account is placed with an attorney.  Why?  If placing an account for collection seriously damages the business relationship between supplier and customer, suing the debtor usually destroys the relationship and any possibility of future business
Michael Dennis, MBA, CBF, LCM

That’s my opinion.  What’s yours?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Neither Rain Nor Snow Nor Dark of Night – Michael Dennis, CBF

USPS service delivery truck in a residential a...
Postal Service

For those of you who may have forgotten, this phrase is part of the creed of the United States Postal Service.  Someone asked me recently if I thought that the proposal by the USPS to reduce services such as Saturday delivery could have a negative impact on credit and collection and on DSO.  It was a great question, and is one that I have given a lot of thought to and the answer is —- It Depends.

If the majority of your customers pay you by check and those checks represent more than 50% of the amount collected, then reduced service [such as the elimination of Saturday deliveries] could have a negative impact on DSO.   If the majority of customer payments are made by check but those payments represent, let’s say 20% of the total amount collected each month [based on the now well known 80/20 rule] then any reduction in services provided by the USPS would have a far less dramatic impact on DSO and collections.

If the majority of your customers pay the majority of the money collected each month by wire transfer or ACH payment, then clearly a reduction in USPS services would have a limited impact on your collections and your collection effectiveness as measured by changes in DSO.

I recommend migrating as many customers as possible, as quickly as possible, away from checks and to electronic payments (Fed wire and ACH).  Customers, including many midsized customers, have the ability to generate electronic payments.  Some do not do so because they recognize that issuing checks results in mail and process float.   However, the efficiencies associated with electronic payments for both the seller and the buyer are so significant that it is something that vendors need to recommend to their midsized customers and should expect to receive as the preferred payment mechanism from their larger customers.

Michael Dennis, MBA, CBF, LCM

What are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

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Not Another Worthless New Years Resolution – Larry Convoy

New Year's Resolutions

A new year, time to once again resolve to fit into that suit I bought in 2007 or follow through on changing my car’s oil at least once this year.  Not exactly reaching for the sky but if history is any indication chances are good that neither of these things will happen in 2012.

What I will resolve to do this year is make sure that each of the 750+ CMA members that belong to an Industry group are aware of the responsibilities that are attached to being a member of a group and how beneficial this service is.

With the use of some of your own words, please commit to including these in your 2012 Resolutions.

REPORTING – In the words of one Las Vegas group member,

“I have saved my company thousand of dollars and have made very wise credit decisions because of the information I have gotten from the alerts, RFI’s and monthly group report. That is why I believe it is my responsibility to report every month.”

As members submit information, it builds history in the anscers data bank which benefits all members today, tomorrow or 6 months from now. Also, submitting your complete A/R to CMA can save you a great deal of time reporting.

ATTENDANCE – To quote a Northern CA Member:

“My efficiency rate has doubled and delinquencies have been reduced significantly since I started attending regularly. There is a great deal of knowledge and experience sitting at that table that I was missing.”

Sharing your industry and account knowledge, credit expertise on topics ranging from small claims court to Chapter 11 or just networking make attending your group meeting or conference call time well spent. Prior to the meeting, prepare by gathering any accounts requiring clearance or credit issues needing assistance.

PROMOTING – An out-of-state member said:

“No faxed credit request or call received gets responded to without a pitch for our credit group. If we are sharing this account, there are probably many more we can assist each other with.”

More members in a group mean more trade information, less need for costly third party credit reports or losing 20%-50% to a collection agency.

More members in a group mean more sharing of knowledge and Best Practices, less expenditure for attorneys or other professionals.

More members=less losses=more profits and hopefully more $$$ in your pocket.

If you promise to follow through on these three resolutions, I will resolve to change the oil in my car regularly. I think fitting in the suit is not an attainable goal in 2012.

Have a great year.

Sincerely,

Larry Convoy, Supervisor-Industry Credit Groups

818-972-5323 lconvoy@emailcma.org

Honey or Vinegar – Which Results in Faster Payments? – Michael Dennis, CBF

Honey or Vinegar

There is an old expression that you can attract more bees with honey than with vinegar.

Does this relate to business to business debt collection?  Will a friendly approach to debt collection result in a faster payment than a more direct approach in which the collector is “all business.”  Honestly, I don’t have any statistics about this.  However, long ago I managed an accounts payable department.  One way that we dealt with suppliers was to prioritize payments based on our interactions with the creditor company.  For example, if a creditor company sent an email or fax with a friendly inquiry about the status of payment, it was usually ignored — unless the creditor was one of the ten or so key vendors identified by management to A/P.

In addition, if the collector simply asked for the status of payment, our standard response was that payment of the past due balance would be made in 14 days.  If the collector pushed harder by stating that payment proposal was unacceptable and that our account could or would go onto shipment hold, we would then negotiate in good faith.

An interesting aside:  We did a study of how many creditors did not complain when we told them they would have to wait an additional 14 days before their past due balance was scheduled for payment, and found that on average about 70% of suppliers accepted this offer without protest.

The lesson here is to become one of the 30% that pushes back when debtors try to delay payment.

This brings us full circle to the original question:  Honey or vinegar?   In my opinion and based only on my opinions and personal experience, the creditors that are more assertive and less accommodating will get paid sooner.  So, nice guys don’t always finish last, but they might get paid last in B2B collections.

Michael Dennis, MBA, CBF, LCM

What are your thoughts?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

 

That’s Not Funny – Michael Dennis, CBF

That's Not Funny

As a consultant, I have occasionally seen dunning notices and other correspondence being sent by my clients to delinquent customers with stickers, stamps or other messages considered to be or intended to be humorous reminders to pay the past due balance.  In my opinion, when you use humor in collection correspondence you are trivializing the problem.

As a former Accounts Payable Manager, I believe that humorous collection messages undermine creditors’ efforts to collect past due balances quickly.  Proponents of the use of humor believe that a humorous request for payment is more likely to be noticed by the A/P department, and I agree.  When my A/P department received a humorous message, they shared it with their co-workers.  However, the question is not whether the message is noticed; the question is whether the message is taken seriously and acted upon quickly.

I admit that I have never used humor in collections, but I have used irony.  As a collector, I sent birthday cards to debtor companies’ CFOs when an invoice aged out to one year.  The message I wrote in the card read:  “Happy Birthday to invoice #123456 for $xxxx which is now a year old.  Please take immediate action to prevent this invoice from getting any older.”

Michael Dennis, MBA, CBF, LCM

Delinquent debtors often (usually?) ignore written collection correspondence.  They are even more likely to do so when humor is used.  Collecting past due invoices is serious business, and the use of humor sends the wrong message.  Trivializing the fact that an account is past due makes immediate payment far less likely.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Some People Say They Would Rather Die – Michael Dennis, CBF

Public Speaking

Many years ago, I feared public speaking.

I had all the classic symptoms of anxiety related to making a speech:  I froze up.  I felt sick.  I wanted to be anywhere but in front of an audience.  I tried to convince others that they were a better choice to make the speech.

One day I realized that my inability to make professional presentations had already limited or would limit my professional growth — even if the only presentations I ever made were to co-workers and to senior management so I decided to do something about it.  I joined the Toastmasters organization and the change was rapid and dramatic.  I quickly gained confidence speaking in front of a group of strangers.  I learned that audiences don’t gloat over every mistake a presenter makes.  I learned that it is OK when necessary to pause to find your place and collect your thoughts.  I quickly went from dreading public speaking to enjoying it.  Since then, I have done more than 100 seminars, webinars and teleseminars for CMA and numerous other Associations and organizations.

Even if you have no interest in public speaking, anxiety about making presentations for co-workers or to senior management can adversely affect your chances for recognition and promotion.  For this reason, the time to challenge your fear is now.  I think you will be pleasantly surprised at how easy fear of public speaking is overcome and how many opportunities there are to make presentations as part of your normal job duties.

In my opinion, a well-rounded credit professional looks at his or her strengths and weaknesses, and then makes the most of their strengths while addressing their weaknesses.  What do you think?

Michael Dennis, MBA, CBF, LCM

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Credit Group – End of Year Report – Larry Convoy

Thank You!

“We must always change, renew, rejuvenate ourselves; otherwise we harden. Each New Year gives us the opportunity to start again.”

One could argue that for the Credit Manager, each new month is an opportunity to start again. The previous months problems resolved and a new batch requiring your attention. Last month’s unresolved issues are now being worked again this time residing one column to the right on your aging report.  You keep a glimmer of hope that last months new account becomes this month’s discount customer.

You are employed in a stressful occupation that requires the skills of an accountant, negotiator, lawyer, salesmen, customer service rep, psychiatrist and juggler. It is profession that demands excellence and allows little room for error. Successes are rarely attributed to you but loses always are.

Yet each month you show up at a group meeting or conference call willing to share your knowledge and experiences, both good and bad, with your peers. You take the time each month to enter alerts, respond to RFI’s or fill out a report knowing that this information is of value to someone else in your industry.

On behalf of all of CMA’s Group Secretaries, we thank you for the professionalism exhibited and friendship you have shown us throughout the year or as in the case of some, throughout the decades.  We look forward to 2012 with optimism that an improved economy will make all of our jobs a bit less stressful.

Wishing you Happy Holidays and a Healthy New Year

Sincerely,

Larry Convoy
ICG Supervisor
818-972-5323- lconvoy@emailcma.org

The Truth Hurts – Michael Dennis, CBF

The Truth Hurts

Several years ago, a very good friend of mine – let’s call him Roy – accepted an early retirement package.  He decided that he was too young to retire so he started a commercial collection agency in Florida.   Naturally, he called his friends to tell them about this new chapter in his life and to solicit business from them.   Once he agreed to meet the contingent collection rates offered by the collection agency we used, I agreed to submit a couple of accounts to him.  Flash forward a month.  I was on the phone with Roy.   I asked about the status of the accounts I had placed for collection.  He provided a very candid response along these lines:  

“Michael, both the accounts you sent me were Dead on Arrival.  They were dogs with fleas.  Both of the companies were out of business with phones disconnected.  One debtor has disappeared completely. The other tossed the keys to their bank and walked away, so there is no meat left on that bone for anyone.”

Roy told me that the biggest problem he had with account placements was that most trade creditors, including me, waited too long to place accounts for collection.  As a result, there was little chance for the collection agency to be successful.  I did not take offense because:  (1) Roy was and is a good friend, and (2) what he said made sense.  Unlike fine wine, bad debts don’t get better with age.  Therefore, the challenge is to make certain that we assign problem accounts sooner rather than later.

When do you place your at-risk debtors with a third party for collection?  In my opinion, you should seriously consider doing so when the following conditions exist alone, or in combination:

  • A customer has bounced checks to you or other vendors;
  • The customer refuses to replace the bounced check;
  • The creditor is no longer making progress toward clearing the unpaid balance;
  • If the customer will not take your calls;
  • The customer will not return your calls;

The rest of the checklist can be found at this URL:   http://encyclopediaofcredit.com/When-to-Place-an-Account-for-Collection

Michael Dennis, MBA, CBF, LCM

Comments anyone?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Learn more about CMA’s Collection Division, click here.

When To Wear Velvet Gloves – Michael Dennis, CBF

Iron Fist or Velvet Gloves

Years ago, my manager and long-time mentor talked to me about delivering bad news to customers.  His comments were:  There is no good way to deliver bad news.  However, if you have to tell an applicant they have been rejected for open account terms or tell a customer that they don’t qualify for a higher credit limit, do whatever you can to soften the blow.

His advice was sound… Deliver the bad news as gently as possible.  He was fond of telling me to “put on velvet gloves” before making the phone call.   His reasoning was also sound:  Just because they don’t qualify today doesn’t mean we want to alienate them.  Find a way to leave the door open, even if all you can tell them is that you will re-evaluate the decision from time to time, and will flag the file for review in six months.

He was less concerned about telling customers with past due balances that orders were going on production or shipment hold.  His rationale was that the customer created the problem for themselves.  I think he enjoyed it when a delinquent customer, placed on credit hold, demanded to speak with him.   I know he enjoyed it when his manager, the Treasurer, refused to discuss credit holds with customers and immediately transferred calls of this type back to my manager.

The bottom line is this:  If managers do not support credit hold decisions, customers quickly learn that the fastest way to get  orders released is to demand to speak to the manager. If the credit manager is a soft touch, he or she can quickly find themselves overwhelmed with requests for reconsideration from customers.  With this in mind, I think it is important for the manager not to override decisions.  This is possible when there is a policy in place that requires collectors to discuss credit holds with the credit manager before implementing them.

Michael Dennis, MBA, CBF, LCM

There are bound to be differences of opinion about the ideas outlined above.  What different policies relating to credit holds work best for your company?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Credit Groups – Stay Vigilant Through The Holidays

For many of us, the month of December means parties, both at home and at work, shopping for family and friends and generally happy memories. For others it means the last chance to sell product, satisfy vendors, attempt to make payroll and decide whether or not to continue the business.

For many Industry Trade Groups, it’s time to ignore the reports and pick up a glass of wine or simply cancel the meeting altogether. We have spent the previous 11 months sharing information, submitting alerts, RFI’s and reports that have made the granting and administration of credit easier and hopefully has saved your company money.

However, the past few years of economic decline has dictated that we put down the wine and make December a real working month. Many of your customers, especially those in retail, may not be back in January of 2012.  A common alert posted every January is “phone disconnected” or “mail being returned.”  Not the greatest way to start out a new year, with large balances on your aging and a customer who has disappeared.

One way to reduce the risk of this happening is for all members to increase their group participation for the next 30-60 days. Enter an alert at the first sign of trouble; submit an RFI if a customers orders or payments dramatically change. If geographically possible, drive by the business and confirm any suspicions for yourself.  If your group is meeting this month, attend and share. December may be just 1 month out of 12 on the calendar but to many businesses, it will determine survival or not.

A great gift we could all receive this year is to be gainfully employed in 2012.  Staying active in your group will go along way to putting that present under your tree.

On behalf of the entire ICG Department, we thank you for your support this year and wish you the happiest of Holiday Seasons and a Healthy New Year.

Sincerely,

Larry Convoy, ICG Supervisor

818-972-5323 lconvoy@emailcma.org

Are You Hearing What You Want To Hear? – Michael Dennis, CBF

Listen For Clues

Debtor’s Plan Pledges up To 10% Recovery for Unsecured Creditors. I read this recent headline a couple of times. Then I stopped to think about what it actually means to unsecured creditors. What it really says is that unsecured creditors could receive as much as ten cents on the dollar… but are guaranteed absolutely nothing. Payment will be somewhere between 0% and 10% of the approved unsecured claim amount in this bankruptcy.

Have you been fooled by hearing what you wanted to hear instead of what the debtor actually said. I have. One example involved a multi-million dollar payment I needed by the end of the calendar year. The A/P rep told me the check would be issued without fail on the 23rd of December. What he failed to mention was that the company was on furlough from December 21 to January 2nd so there was no one to mail out the check. Ouch.

Some debtors find ways around unwary collectors. Consider this simple statement: “We will issue a check for the past due amount on Friday of this week.” What the debtor actually said was that a check would be generated on Friday. They did not say the check would be signed on Friday, and they certainly never promised it would be mailed on Friday. There are plenty of debtors that cut checks and then hold them until they decide which creditors must be paid, and which can be delayed even longer.

Here is another deceptively simple statement: “I expect the check to be signed and the payment to be mailed to you by Friday of this week at the absolute latest.” This is not a commitment for payment. I would describe it as more like a weather forecast than a payment promise. Why? Because the two words “I expect” were included. What happens if the payment is not made as agreed? You learn that what the A/P contact expected to happen did not occur.

The solution is to require specificity from your customers. This requires attention to detail on the part of collectors. For example, when on a collection call, you should know the full name, title and phone number/extension of the person with whom you are negotiating. Collectors need to listen carefully to determine whether debtor has made an unqualified commitment for payment. Collectors should always take the time to verify a commitment by repeating back the commitment and asking the debtor to confirm it. Also, if a collector has any concerns about a commitment being broken, they should: (1) ask the debtor’s representative to agree to call you if their commitment changes for any reason, and (2) call the day payment is scheduled to get the check number and confirm the payment is in the mail.

Michael Dennis, MBA, CBF, LCM

Please reply with other solutions and experiences to the “hearing what you want to hear” phenomenon.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Poll: Your thoughts on internal credit scoring systems

CMA Member Poll: Your thoughts on internal credit scoring systems. (148 responses)

  • • We use one and it is essential  15%
  • • We use one and it is helpful  18%
  • • We use one and it is inconsistent  4%
  • • We do NOT use one but would like to 14%
  • We do NOT use one and have no plans to 44% 
  • • Other:  5%

Jeffrey McLellan – We have developed our own credit worksheet that has become invaluable in approving credit and establishing credit limits for our new accounts. It is also a tool that is easy to understand for our sales staff as they analyze why/how we come up with credit decisions.

F. Scott Wilson – We use Equifax credit scoring and reports. With the size of our company and the number of different regions and businesses we sell into, creating a credit scoring system internally isn’t going to be as effective, and would chew up a lot of time and other scarce resources. I have set up credit scoring systems at other companies to good result, but it just isn’t a fit here.

You can participate in CMA’s monthly polls on CreditManagementAssociation.org.

Now Accepting Nominations and Applications for CMA Board of Directors

The CMA Nominating Committee is now accepting nominations and applications for service on the 2012-2013 Board of Directors. If you would like to nominate a candidate for service, or you are interested in applying for a Director position directly, please complete a Candidate Nomination or Application form and return it to CMA by January 13, 2012.

Board of Directors Qualifications and Responsibilities

As provided by the Bylaws of CMA, the Board of Directors oversees the general operation and sets policy for the Association. It is, therefore, essential that members of the Board understand their responsibilities and be willing to commit the time and effort necessary to do justice to this great organization.The responsibilities and qualifications of a member of the Board are as follows:

  • Read and be familiar with the Bylaws of the Corporation.
  • A Board member is required to be the authorized representative of his/her company to CMA.
  • Attend the Annual Meeting and Installation of Officers and Directors (or a similar – Chapter Annual Meeting)
  • Attend Board meetings, five times per year, typically held on the fourth Tuesday of the month.
  • Attend the Annual Board Retreat (two days usually in May or June).
  • Review and accept financial and operating statements of the Association.
  • Review and approve reports of committees, project teams and boards of governors.
  • Serve on various committees of the Association as assigned by the Chairman of the Board.
  • Show support for the Association and its programs by participating in CMA’s member services and by attending educational and social functions, and promote CMA’s services to other members and prospective members at every opportunity.
  • When possible, attend the annual NACM Credit Congress held each May or June, and/or the Western Region Credit Conference in September or October, sponsored by the NACM affiliated associations of the Western Region.

Giving Thanks For Credit Groups – Larry Convoy

Stop me if you have heard this before but “I can’t believe it is already Thanksgiving and that 2011 is almost over”.  I think I can finally throw out all the information I gathered on the effects Y2K is going to have on the business community.

Having just finished welcoming to CMA, 9 new companies and the groups they signed for, it occurred to me how thankful I am that I not only have a job in this economy but work for a company that provides a needed and beneficial service to so many others.

Hearing comments that information picked up at a meeting or through an alert saved a company thousands of dollars actually improves my day. Seeing 100% contributions every month on the past due report from the members of Central Valley Feed and Grain and Wholesale Roofing Groups shows the commitment these members have to their group. Witnessing the dedication of Kathy from Onesource who drives every month from San Diego to the Electric group or Tim Rabbit of Kensington Electronics who actually flies his own plane from Dallas to attend the Electronic Parts meeting every quarter means there is real value in this service. Having Dan Sproat of Wholesale Fuels show up to a meeting during his vacation tells me that Industry Trade Groups(ICG) are more then just a gathering to eat lunch on the company.

We are thankful that your management has made the business decision that membership in a credit group is a valuable resource that they support. We appreciate the effort you make to share your information and knowledge with your peers and the friendships that develop from this service

On behalf of the ICG team, Ana, Morena, Paul and myself, we wish you and your family a Happy Thanksgiving

Happy Holidays!

Larry Convoy
ICG Supervisor
818-972-5323
lconvoy@emailcma.org

P.S.  I will not ruin this message by reminding you to enter alerts, respond to all RFI’s and make sure you contribute to your monthly report during the upcoming holiday season.

Collection Calls, Work Smart Not Hard – Michael Dennis, CBF

Work Smarter

On my first day following training as a collector, I was assigned a relatively small group of accounts by my manager.   After about two hours, my manager called me into his office.  He asked if I remembered calling a customer about a $57 past due invoice that was less than a week past due.  I said yes.  He asked why.  I said I called because the invoice was past due.  After he finished laughing, he explained the idea of prioritizing collection calls this way:

Rather than simply working your way through the accounts assigned to you, start by calling customers with past due balances of let’s say $57,000 or more.  After that, focus on accounts with $5,700 or more past due… and after that you call customers with $57 past due.

In hindsight, this meeting provided me with valuable lessons that I have used ever since.  The most important involved the need to prioritize every collection call every day.  This implies and necessitates getting and staying organized; keeping good notes about each call you make; finding a way to follow up systematically to ensure payment commitments are kept.

I cannot tell you how many times I have told this story, or how many times this basic idea about how to collect more efficiently is overlooked.  My bet is this:  If your department has three or more collectors, at least one of them does not systematically prioritize their outbound collection calls.

Michael Dennis, MBA, CBF, LCM

I would be very interested to hear whether I am right or wrong.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Get Serious About Antitrust Violations – Michael Dennis, CBF

Be Willing to Walk

Some time ago, I attended an industry credit group meeting as a prospective member.  The group was run by an NACM affiliate, but it was not run by Credit Management Association.  Like every other industry credit group meeting, the President of the group read the antitrust statement, which was followed by introductions.

The group meeting proceeded normally for about half an hour.  At that point, the discussion turned to a customer that everyone knew could be trouble for unsecured creditors.  As you know, discussions must involve factual, historical information — and it is not permissible to discuss or even joke about creditors agreeing to take any joint action.

To my surprise, that was exactly where the discussion went.  After about 30 seconds, I felt I had to make a comment.  I said I thought the discussion had moved into an area that was out of bounds.  I asked the Association representative for his input.  He said the discussion was within the antitrust guidelines.  I disagreed and when the discussion continued, I left. Was that too dramatic?  I don’t think so.

After I left, I documented what had been discussed.  I shared the information with my manager and our company’s attorney knowing that both civil and criminal penalties can be imposed for violation of federal or state antitrust laws!     If I did not participate in the discussion or in the collusion, does that mean I get a free

Michael Dennis, MBA, CBF, LCM

pass? So what would you do in the same situation?   Did I overreact?  Does anyone have a similar experience?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

October’s Credit Managers’ Index – No Big Gains

CMI

The bad news is the October Credit Managers’ Index (CMI) did not see September’s big gains. The good news is that there was no retreat from September’s numbers. The overall index hit 53.8 in September after tumbling to 52.7 in the previous month, but in October the index essentially held steady at 53.7. There was a slight reduction in the index of favorable factors, but the index of unfavorable factors came just a little bit closer to expansion territory. The majority of economic indicators has been reasonably positive over the past few weeks and seems to be pointing to better months to come and the CMI index did not dispel this assumption, although the slower pace of progress reminds those paying attention that this is unlikely to be a rapid recovery for any but a handful of sectors.

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Try Not to Throw Your Boss Under a Bus – Michael Dennis, CBF

Back Up The Boss

A friend of mine, let’s call him Tom, called to ask for my advice.  His company had a customer with a $1 million credit limit.  That customer had experienced some financial setbacks over the last year.  As credit manager, Tom believed that the customer still warranted the $1 million open account.  His manager disagreed.  She instructed him to reduce the credit line to $250,000.  Tom asked why.  The only answer he got was that his boss considered the credit risk to be unacceptable.  Tom notified the sales department.  The V.P. of Sales and the salesperson were surprised, but nevertheless notified the customer.

Tom called me because the customer’s C.F.O. had just requested a call to discuss issues and options.  As far as Tom knew, there were no options or alternatives he could offer, and no suggestions or proposals he could accept.  He asked me how I would handle this situation.  I told Tom that the most important thing he could do was to own the credit decision even if he disagreed with it.  I told him that the worst thing he could do would be to suggest that there was any internal disagreement about whether the customer was creditworthy.  I warned Tom that if he hinted in any way that he was concerned about the decision, the sales department or the customer would immediately seize on this information.  Worse, if Tom told either the customer or the sales department that he disagreed with the decision, he would be throwing his boss under a bus.

I think the best way to handle this is to accept complete responsibility for the credit decision.  To do otherwise makes you appear indecisive.  If you say you disagree with the credit decision, you appear disloyal.  If you feel strongly about a credit decision, ask for an opportunity to discuss it with your manager before the decision is finalized.  Frame the discussion as an opportunity for you to learn more about the way your manager evaluates credit risks, rather than a meeting in which you try to persuade your boss that their decision was wrong because doing that makes you appear insubordinate.

Michael Dennis, MBA, CBF, LCM

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Setting Credit Limits: The Dart Board or the Ouija Board – Michael Dennis, CBF

Ouija Board

A good friend of mine recently called to discuss a credit limit for a new account.  The scenario involved a partnership that had been dissolved.  One partner bought out the other, and the now unemployed partner decided to start a competitor company, and he applied to most of his prior company’s creditors for open account terms.  He offered to provide an opening Balance Sheet on his new company as well as a personal guarantee.

My friend told me the Balance Sheet showed that the owner had invested enough to pay operating expenses for a couple of months.  She told me that a $1 million credit limit had been requested, and that she was trying to decide how much to rely on the personal guarantee being offered.

I responded that personal guarantees have numerous weaknesses.  One is that this guarantee relies on the financial strength of the guarantor.  Without a personal financial statement, it is impossible to know whether that guarantee is worth the paper it is printed on.  Another significant risk is that there is no way of knowing how many guarantees have been signed or will be signed, and every personal guarantee signed reduces the chances that the guarantee my friend was offered would be an effective collection tool. I added that I thought it was exceptionally unlikely that this guarantee was the first and only personal guarantee that would be signed. I encouraged her to:

  1. Ask her attorney about the enforceability of a personal guarantee in a Community Property state, and
  2. Arrange for her attorney to draft the guarantee and review any proposed modifications to that guarantee made by the applicant

Personal guarantees are nice to have because they can sometimes be used as leverage to encourage debtors to retire past due balances, but I would be extremely reluctant to base a $1 million decision primarily on any personal guarantee.

Michael Dennis, MBA, CBF, LCM

What do you think?  Does anyone out there feel strongly that PGs are the way to go when dealing with a sub-standard credit risk?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Kim Lamberty & Darrell Horton On The Radio October 29

Steve Sanson (left) Radio Host

Saturday October 29th on the Veterans In Politics Talk Show we are proud to introduce the following guests Kim Lamberty a Blue Star Mother and Vice President of Operations and Business Development for Credit Management Association. Also Ann Westpy, wife of a US Airman serving his country proudly in Afghanistan.

Hold on to your seat folks we also have Darrell Horton. He is the Revenue Manager for Shuffle Master and an officer on the Credit Management Association Board of Directors.

This internet talk show will be aired LIVE in studio on www.vegasallnetradio.com from 2PM-3PM Pacific Time; just click onto the LIVE link and listen to the show on your blackberry, home PC, lap-top, or any cell phone with internet access. If anyone would like to call in to the show with a question or comment dial 702-998-7532 or 702-998-7533.

New anscers web pages for Construction Services 11/01/11

On November 1, 2011 CMA’s Construction Services Department will offer new anscers® web pages for our service users.

Our goal is to make the pages easier to read, easier to use and provide additional features.

You will still access the pages by clicking on the Liens tab in anscers®.

Liens tab on anscers

FORMS FILING REQUESTS

Your main Forms Filing Requests page will display all requests with the most recent request at the top of the page.

Sort, Filter & Search:
You will be able to sort the display of your requests using the column headings, filter the display of your requests using the status filters at the top of the screen or search for specific requests using the search to the right. (see screenshot below)

Click to enlarge - Main Liens Page

New – Usage Details:
A new feature on this page – Usage Details – will not be made available until the end of November. Once the November 2011 link displays clicking this link will show you the entire usage and billing for the month of November. This is the billing breakdown for the statement sent to you from CMA. Usage Details will be populated at the end of every monthly billing cycle and 12 months of billing data will eventually be available – starting with November 2011.

To see the project details and notices on any project, click on the Project Name.

PROJECT DETAILS PAGE

On the Project Details page you will see all the details of the project, starting with what you supplied and adding what CMA has verified.

Status and History:
If your project has an active notice request in process, the first item you will see on the page is the status of that current request.

Status of a notice

This status will be updated as things change. Once the notice is completed it will move to the History section of the page. All completed notices will be linked to a PDF version of the final notice for your records. This is a new feature, and a popular request among our current customers.

Click to enlarge - Project Details Page

Comments:
As CMA staff enter comments on your project (verification updates, problems, re-mails etc.) they will be visible at the top of the project details page – including the date and who is commenting.

Request Action:
Throughout the payment cycle of a project you may need to request more than one type of notice. Once your project is in anscers requesting a new notice is as simple as clicking the requested action and supplying any further information required. Your new notice request will be trackable on the project page in the Status and History area.

Print Progress Release Forms (FREE):
As payments are remitted on your project, use one of the four Progress Release forms provided to update your customer. Each time you create a progress release a PDF version of the final form will be available in the History section.

NEW FORMS FILING REQUEST

CMA has added several new features to the entry screens for notice requests. Now that we can file Mechanics Liens in all 50 states you have the ability to choose any available notice when submitting your request.

Types of forms filings - click to enlarge

On the customer and contractor fields an automatic search starts once you enter the name.

Auto search in action - click to enlarge

On all address fields we ask the zip code first, then the city and state, because anscers will automatically add the city and state with data provided by the US Postal Service. This is for your convenience, but you can easily overwrite this data if you do not believe it is correct.

The new entry screen also gives you the ability to add multiple contractors, owners and bonding companies to a project.

Very important: The new anscers® web pages have undergone significant testing before being made available to our customers, however, we acknowledge that you may temporarily encounter usability issues that were unanticipated. If you have any difficulty using the new anscers®  CFFS web pages, or you just have some suggestions, please call CMA’s Construction Services Department at 800-841-5793 and we will be happy to assist you.

We appreciate your business and your support of our efforts to continually improve your experience with CMA.

Standing Up To Bullies – Michael Dennis, CBF

No Bullies

There is a widely held belief that if you stand up to a bully, they will back down.  In reality, bullies sometimes back down and other times they knock you flat.  This is my story about being knocked flat.

I was working with a large retail customer that took unearned cash discounts and other unauthorized deductions. These deductions eventually totaled more than $200,000.  My team fully documented why the $200,000+ in deductions were taken in error.  After sending this supporting documentation, I scheduled a visit with the customer and met with accounts payable.

The A/P rep told me that she was authorized to settle the matter for 40 cents on the dollar.  I responded that I did not have the authority to accept this proposal, since it would involve my company writing off over $100,000 in deductions I proved was owed.

When I returned to the office, I met with my CFO, and he instructed me to send a letter to the customer’s Controller stating their offer was rejected, and indicating that if payment in full was not received within 30 days that we would consider placing the account on credit hold.  At that time, my division sold $15 million a month to this customer.  The debtor company’s Controller responded:  If you place orders on hold, we will end our relationship with your company – meaning your division and the other divisions of your corporation.   This would have meant a loss of about $40 million a month in sales to the corporation that I worked for.

In response, our division President sent a letter of apology. In it, he assured the debtor that orders would not go on credit hold.  His letter added that if the offer of 40 cents on the dollar was still available, we would be pleased settle the dispute for that amount.  His letter also said the account was being re-assigned to another member of the credit and collection team.

Michael Dennis, MBA, CBF, LCM

Sometimes you get the bear, and sometimes the bear gets you. Does anyone have a similar experience?  If so, did you have a better outcome?  What made the difference?

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Credit Confidence Drops Sharply to 6.93 from 7.15

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 202 members gave us a great insight into credit trends for Q4 2011 and the realities of Q3 2011.

Our overall Credit Confidence Score for Q4 2011 is 6.93 out of 10. Click here for Confidence trends. This is the sharpest decline reported in Credit Confidence since we started the survey back in Q2 2009.

CMA Credit Confidence Scores - Click to enlarge

One of the major factors in the drop in confidence is the slowing of payment in Q3 and the anticipation of continued slowing payments in Q4. Orders and applications were up in Q3 showing an increase in sales activity – while payments remained tight.

Survey Results - click to enlarge

Overall, the respondents reported no change to their credit policy in Q3/Q4. There was a slight increase in the amount of NSF checks and credit holds for Q3 2011.

Survey Results - click to enlarge

Breaking the scores down by Industry (manufacturing, wholesale trade and construction) shows the greatest confidence gain for Construction since Q2 2010. Those in construction also report an increase in applications and orders in Q3 – with a expectation of delayed payments in Q4.

Confidence by Industry - Click to enlarge

Thanks for your participation in the CMA Credit Confidence Survey. The Q3 2011 – Q4 2011 survey is now closed. Watch for the Q4 2011-Q1 2012 Survey at the end of December 2011.

DSO 7 – WRCC Intro Video

DSO 7 - WRCC Intro Video

This James Bond-style opener to the 2011 NACM Western Region Credit Conference features real credit managers tracking down fictitious debtors in a warm tribute to the credit profession. The video also features the original song, “The Credit You Deserve.” For more info about the conference program and the 2012 NACM Western Region Credit Congress, visit www.nacmwrcc.com.

Shocked and Appalled – Michael Dennis, CBF

Shocked and Appalled

If you recall the weakest credit application you have seen this year, you will have an idea about the problems with an application I rejected. I assumed the applicant company would not be surprised by the decision. I also assumed they hoped for the best, but expected the worst when the application was submitted.

To my surprise, I immediately received a call from the applicant’s CFO. He told me he was “utterly shocked and amazed” by my decision. He asked if I had contacted the three referenced listed on the application. I told him I did not. At this point, the CFO informed me that: “I failed to conduct basic due diligence” and “My lack of attention and professionalism caused me to make an incorrect decision.”

In the credit file was a credit report as well as an industry group trade payment experience report showing the applicant paid vendors an average of 90 days slow. In addition, multiple vendors had placed the company for collection. At some point, the debtor’s CFO said something like this: “So what do you have to say for yourself?” I explained that even if the three references provided reported his company paid right on time, there was more than enough adverse information on file to reject the applicant for open account terms.

I refer to this particular negotiating tactic by a customer or applicant as: “Shocked and Appalled.” The CFO was shocked and appalled by the decision. My experience suggests that companies use the Shocked and Appalled technique: (a) when they have little or nothing to lose and/or (b) because this tactic sometimes prompts creditors to second-guess their original decision. My recommendation is not to change your decision in the absence of a compelling reason to do so…. Otherwise it is like betting against yourself; no matter what happens you lose. Once you recognize the “shocked and appalled” negotiating tactic, you will know how to react to it.

Comments and constructive criticism are welcomed.

Michael Dennis, CBF

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Thrown Under a Bus — and Learned from the Experience – Michael Dennis, CBF

Watch Out!

Years ago, my manager and I attended the national sales meeting. On the second day, the VP of Sales made a surprise announcement. “All of you know that our Credit Manager is here. I am going invite him up to explain why our credit policies are so restrictive that we lost business last year to our competitors. As you know, some of you did not reach your sales targets, and I am sure you have lots of questions for him”

The next 45 minutes were stressful, but this experience taught me a great deal about how to interact with the sales group. I learned in 45 minutes the importance of taking time to explain the rationale behind negative credit decisions. I learned that it was best to give advanced notice about possible negative decisions. I learned to encourage salespeople as well as sales management to challenge any credit decision they consider incorrect.

My advice is to think carefully about your present relationship with the sales department and to remember that there is room for improvement in any relationship. I found that more open and more detailed discussions helped change the perception of the credit risk management function for most sales personnel. My challenge to you today is to look for ways to build bridges and mend fences between sales and your department. If not, one day you may be invited to a sales meeting just like me.

Tips on building bridges include:

  • 1. Return calls the same day. Chances are good that sales is calling you because the customer is calling them.
  • 2. Whenever possible, give advanced notice of credit holds. Rather than announcing an account is past due and on hold, try this instead: Let the customer and the sales department know that if payment is not received by a specific date that you will have no choice but to consider a credit hold.
  • 3. Always be open to new information or suggestions made by the sales department. Valuable information and valid options can come from anywhere including sales.
  • 4. Take as much time as necessary to explain your decisions to the salesperson, but remember that this is not a debate or a negotiation. It is an opportunity to share information.
Michael Dennis, CBF

What are your thoughts on this subject? All comments and constructive criticism are welcomed.

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

CMA Poll Results – Last Update to Your Credit Application

When was your company’s Credit Application Form last updated?
(218 responses)

  • • Within the last year  30.73%
  • • Over 1 year less than 3 years ago  33.03%
  • • Over 3 years less than 5 years ago  13.3%
  • • Over 5 years ago  11.01%
  • • To my knowledge it has not been updated  5.05%
  • • We review and update our credit application every year  2.75%
  • • We review and update our credit application when laws change  2.29%
  • • Other: View  1.83%

The Telephone; 100 Years Old but Still Relevant – Michael Dennis, CBF

100 Years and Counting

When it comes to credit and collections, technology has changed a great deal.  Customers that once submitted purchase orders by mail or phone or fax now do so via EDI. Creditors that used to mail out thousands of invoices a day now send invoices electronically that are then uploaded into their customers’ accounts payable systems without human involvement.

Some creditors are using deduction management software to better manage this common problem.  Credit managers use decision support software to make faster, more consistent and better credit decisions. Creditor companies have numerous options for communicating with their past due customers including instant messages, letters and faxes, e-mail, and automated dunning notices…. and the old standby the telephone collection call.

This is a situation where the more things change, the more they remain the same.
How so?   If you want to be more effective in your collection efforts, you need to reach out to past due accounts by telephone.  You cannot rely on any form of written correspondence to get the job done. Why?  Because in spite of the advances in technology, the most effective way to collect involves a two way dialogue with the debtor.  Any form of one- way communication such as an email, a FAX, an IM or a dunning notice is more likely to be deleted or ignored than acted upon.

As a former Accounts Payable Manager, if you want your collection efforts to be taken seriously, you need to call your past due accounts for payment status.  A call from a collector is harder for A/P to ignore or disregard. One way communication will never be as effective as a discussion with the customer in which collection issues are discussed and consensus is reached.  Don’t get me wrong!  Collection correspondence works, but it is more likely to work with financially sound customers that inadvertently overlooked paying an invoice.  Correspondence is unlikely to work with customers intent on holding on to your money for as long as possible, and is even less likely to be an effective collection tool when debtors are experiencing serious financial problems.

Michael Dennis, CBF

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

A Failure To Communicate – Larry Convoy

Cool Hand Luke

One of my greatest frustrations as an Industry Group Secretary is getting an email or phone call from a member about 10AM saying they will not be able to attend that days meeting because they are shorthanded or the boss wants them to stay and cover the phones.  When I remind them that an industry group meeting is not a social function but a fact finding investment of time that can save their company money, they agree but the boss is the boss.

To quote a line from a great movie, Cool Hand Luke, “what we have here is a failure to communicate”. Have you conveyed to management the value and benefits derived from that minimal investment of time.

To prove my point, valuable information was exchanged at each of my first four meetings this month. Information that you will NOT find on a report, NOT find on anscers but will save companies thousands of dollars because they took the time to attend.

  1. Collection Account Information-during roundtable discussion, a group member was informed of a secondary address for a $70K account that their collection agency reported as a SKIP and uncollectable.
  2. Software Difficulties-a member complained about not being able to get desired reports from their new software. 2 members explained the method for extracting information and scheduled a follow up call to walk her through the process.
  3. Construction Law-a novice in the construction industry got educated on the procedure for going after a bond simply by explaining a situation she is currently going through with one of her customers.
  4. Sales Tax Audit-group discussion supplied several members with tips for dealing with audits, what auditors were most and least concerned with and potential problems.
When you consider that you work 40 hours/week, 160 hours./month and the group meeting takes up 2 hours or 1.25% of your month, the Return on Investment, (ROI) for those 2 hours is extraordinary.

Not writing off $70K, not losing your Lien rights, not paying a tax penalty, maximizing your software investment, your boss and you should agree that this is worth 2 hours of your time.

Larry Convoy, Industry Credit Group Supervisor

WRCC – A Peek Behind The Curtain – Michael Dennis, CBF

Behind The Curtain

For the first time in a long time, I will not be attending the upcoming Western Regional Credit Conference (WRCC) due to a prior business commitment that I could not miss and could not delegate to anyone else.  As a presenter at more than ten WRCC meetings, my perspective on credit Conferences is a bit different from most attendees because I have had the opportunity look behind the curtains into the planning process.

What most attendees do not see is the months of work that go into the Conference.  Instructors are selected for their subject matter expertise as well as their presentation and interpersonal skills.  Educational programs are carefully selected to ensure that there are opportunities for participants that are fairly new to the credit profession, as well as programs for seasoned professionals.

 

Attending the WRCC is an investment in your future.  Attendees should listen for ideas, tools, tips and techniques that can be implemented as soon as they return to work.  The goal in planning the WRCC is to offer programs that will make participants more effective and more efficient.

 

I like to explain it this way:   If you attend a Conference and learn something that makes you only 5% more efficient and you work 50 hours a week, you’ll save 10 hours a month!   Not good enough?  OK, if you have a staff of 3 people and share this idea with them, the department will save 40 hours a month!!

 

The same concept applies to the risk management, collection management and deduction management educational programs.  Applying what you learn will improve your effectiveness and efficiency, reducing risk and lowering delinquencies.  Any credit professional that accomplishes this makes themselves more valuable and less disposable to their employer.
Michael Dennis, CBF

To find out more about this years WRCC click through to nacmwrcc.com.  

Michael Dennis’ Covering Credit Commentary. Michael’s website is  www.coveringcredit.com

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

Stop Venue Shopping in Bankruptcies

The dome of the US Capitol building.
Image via Wikipedia

NACM is urging all of its members to support a bill in Congress that would require corporations to file Chapter 11 cases in the judicial district where they have their principal place of business or principal assets. H.R. 2533—the Chapter 11 Bankruptcy Venue Reform Act—would strongly curb the practice of venue shopping, whereby debtors choose to file in a jurisdiction that’s sympathetic to their needs, much to the detriment of their smaller creditors, who often have trouble participating in a case filed far away from their headquarters. NACM has already officially offered its support to H.R. 2533, but now we’re calling on you, the members, to write a letter to your representatives, asking them to support this bill.

To participate, first find your representative’s contact information  (be sure to use your company’s address, rather than your personal address, when determining which congressperson to write to).

Download this letter template. (419). You can edit with your representative’s contact information, as well as any personal experience you might’ve had with venue shopping. Be sure to edit the letter before mailing, or emailing it, since these letters hit hardest when they’ve been written by actual constituents, rather than just a generic form letter.

The more letters sent, the more likely the bill is to pass! Act now, and strike a blow for the nation’s trade creditors. If you have any questions, please contact Jacob Barron, NACM staff writer and government affairs liaison at jakeb@nacm.org.

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It’s Not Too Late To Register For WRCC!

Tardy Birds - Get Moving!

Tardy Birds, it’s not too late to get a great conference offer  for the NACM Western Regional Credit Conference on October 5-7 at the Monte Carlo Hotel in Las Vegas. Register online and pay through Google Checkout and you can save $149 on the Full Conference and a Pre-Conference Session. Our Tardy Bird Offer is $545 for the full conference and one pre-conference session (regularly priced at $649). The Monte Carlo room block has sold out, but you can still contact them direct for a great room rate. The Tardy Bird Offer is the last conference discount that will be available, register today!

At the WRCC, we are offering more than 23 educational sessions, and 2 Pre-Conference full-day sessions. This broad range of educational opportunities ensures that everyone will find programs that are directly applicable to the work they perform.  The presenters have been selected for their knowledge as well as their ability to make information readily accessible to attendees. There are also plenty of opportunities to meet with other credit professionals and share or compare ideas, and learn new ones.
Our focus at the WRCC is on providing attendees with information and tools they can use as soon as they return to work. The goal of the WRCC is to help attendees to become more effective and more efficient credit professionals. We know that even small improvements can result in big benefits to your employer in terms of lower bad debt losses and fewer delinquent accounts.  Every educational event is an opportunity to get practical tips, tools and techniques about how to better manage customers and credit risks.
We hope to see you there!