CMA & NCS Form Strategic Partnership

NCS is CMA's Exclusive Provider to bring additional construction lien services, UCC filings to CMA customers

Partnership to expand CMA’s offerings to include additional construction lien services, UCC filings.

FOR IMMEDIATE RELEASE

LAS VEGAS, NV (Sept. 17, 2018)— Credit Management Association® (CMA), who provides extensive services to companies and corporations that sell goods and services through credit transactions, has formed a strategic partnership with NCS, the leading provider of notice, mechanic’s lien, UCC and secured collection services in the U.S. and Canada. This partnership will allow CMA to offer NCS’ breadth of service to CMA members, while providing additional benefits such as access to a variety of educational opportunities and industry leading resources. This partnership became effective September 4, 2018.

CMA will continue to provide best-in-class service and CMA’s members will benefit from NCS’ nearly 50 years of expertise in the commercial credit services market.

A long-standing relationship between CMA and NCS, coupled with NCS’ impeccable reputation within the credit community, provides a strong foundation for this strategic partnership. This partnership will add tremendous value for CMA’s wide base of construction-related companies. “As we’ve been looking to add to the benefits CMA offers its members, we decided that an alliance with NCS will provide an array of world-class educational offerings, the ability to offer UCC filing services, and improved synergies with the addition of NCS’ Notice & Mechanic’s Lien services,” says Kim Lamberty, CMA CEO.

“This is an incredibly exciting time for NCS and CMA,” states NCS President, Mary B. Cowan. “Together we will create more value for the CMA member. We’re grateful to have the opportunity to serve CMA members and pledge they will continue to receive superior service. NCS is laser focused on securing lien and bond claim rights while also providing educational support. We have built a solid relationship with CMA and this strategic partnership will allow us to strengthen our mission as the leading authority empowering clients in the management of their corporate credit decisions. NCS is dedicated to excellence and we look forward to providing exceptional, personalized service and first-in-class resources to the CMA member.”

CMA serves businesses primarily located in the western U.S., with offices in Las Vegas, NV and Glendale CA. NCS, serving industries throughout the U.S and internationally, is headquartered in Cleveland, OH.

About Credit Management Association

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. For more information about CMA, call 800-541-2622, or visit www.creditmanagementassociation.org.

About NCS

Since 1970, NCS has been the leader in providing credit professionals throughout the U.S. and Canada with proactive solutions to secure receivables, minimize credit risk and improve profitability. With their distinct service groups: Construction, UCC, and Collection – NCS develops customized solutions based on your business model and organizational requirements to Secure Your Tomorrow®.

NCS has educated more than 600,000 credit professionals on securing their receivables and reducing their risk through NCS events, resources, and social media. NCS offers web based solutions such as LienFinder™, The National Lien Digest©, and LienTracker® Online. These resources help manage credit risk, provide time and information requirements, monitor deadlines and generate notices. NCS has been named a winner of The Northeast Ohio Top Workplaces Award for the past 4 years. For more information about NCS, call 800-826-5256, or visit www.ncscredit.com.

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How Changes to Consumer Tax Lien Data Impact Commercial Credit Profiles and Scores

By Gary Stockton, Experian

Last year the three primary credit bureaus; Experian, Equifax, and TransUnion announced and implemented enhanced standards for the collection and timely updating of public record data reported on consumer credit reports. This was done in accordance with the National Consumer Assistance Plan requirements. Part of this work involved the partial removal of consumer tax lien data from Experian’s consumer credit reporting database.

With the complete removal of remaining tax lien data scheduled for April 16th, some of our clients have asked how these changes might impact commercial credit reports. In this business Q&A I ask Brodie Oldham for some clarification.

What is NCAP and how did it impact Experian’s core credit data?

Brodie Oldham: Gary the NCAP is the National Consumer Assistance Plan and it was put in place by the three U.S. credit reporting agencies Experian, Equifax and TransUnion in response to the U.S. attorney general’s request for clarity and transparency in consumer credit data.
The data that was the main focus was data that did not meet completeness or freshness requirements of data furnishers to the credit reporting agencies. The data that had the most impact from the study was public record data; judgments and liens for consumers that weren’t updated or didn’t have all of the personal identifying data necessary to meet the guidelines. This data is planned to be removed in April of 2018.

Was there impact to Experian’s commercial credit data?

Brodie Oldham: No Gary not an impact to our commercial credit data collected at Experian. We continue to collect that public record information for use in evaluating small businesses through our commercial credit scores. The impact with the public record information is really when we’re evaluating a business owner guarantor using the consumer credit information where public record data has been removed.

What was the impact to commercial blended scores?

Brodie Oldham: The impact is when we’re evaluating small business owners or guarantors using their consumer credit information. When we look at segments where commercial-only data is used there is no impact there because we’re not changing the way that we collect public record information on the commercial side of our business?With the blended scores you would expect that if we remove some of the consumer derogatory information in public records that the score would go up. And we saw a mean lift to about .03 percent, so very small. In the performance of the blended generic credit scores in their evaluation and capture of those delinquent accounts. We saw a very insignificant lift, so the scores are very stable and working well even with the change that we’re having with public records.

To view a video of the interview, click here.

CMA offers solutions, such as Experian and other bureau credit reports, Industry Credit Groups and more to help companies determine how much business credit to extend. For more information on how we can help your company, contact Credit Management Association at 818-972-5300 or visit www.CreditManagementAssociation.org.

This article originally appeared here and has been reprinted with permission.

Meet CMA Board of Directors Member Melissa Kobus

CMA Board of Directors Member Melissa Kobus of Walters Wholesale Electric

Melissa Kobus, CCE, the Assistant Director of Credit for Walters Wholesale Electric in Signal Hill, CA, is our favorite type of member. CMA’s 2018 Mentor of the Year, Kobus is a huge supporter of CMA, having been on the CMA Board of Directors since 2008, serving in several roles including Chairman and Advisor. On the Board and in her credit group, she is a great leader, setting an example for others. Her fellow Board members have described her as having a huge heart, always thinking of others first, full of helpful knowledge, as she visibly goes out of her way to help and answer questions or find information. She also participates in nearly all CMA events.

Kobus says that industry credit group membership with CMA is the benefit her company most uses. “The connection with other industry members has saved our company money, we avoid a potential bad credit decision,” she said.

“My first industry credit group meeting in Northern CA was challenging. There were so many people who had been attending that meeting for a long time that it was a little intimidating. Their confidence and experience pushed me to grow and become more involved. I became a group chair and started taking CMA’s education classes. Today, I encourage others to participate fully in the industry group meeting and reach for their goals.”

“To me, the biggest challenge in credit today is finding good credit managers. I’m thankful that I have CMA to help me put together a network of credit managers in my industry who I have created relationships with and that I regularly call on both professionally and personally,” she said.

While her profession causes her to sometimes travel locally doing customer visits, Kobus and her husband enjoy travelling internationally as much as possible. “Some of the best places I’ve been have included Paris, Lucerne, Budapest and Vienna.” She’s also a fan of the TV show Game of Thrones. “I binged watched the first 6 seasons in 2 weeks and became hooked. Not sure that I can wait until next year for the 8th season,” she added.

Kobus has this advice for younger credit professionals: “When in doubt, DO SOMETHING. It’s become a popular phrase, but it is so true.”

We appreciate Kobus’s great and can-do attitude, and we hope you get to meet Kobus at an upcoming CMA event.

Why Financial Institutions Need an Analytics Sandbox

The appetite for businesses incorporating big data is growing significantly as the data universe continues to expand at an astronomical rate. In fact, according to a recent Accenture study, 79% of enterprise executives agree that companies that do not embrace big data will lose their competitive position and could face extinction. Especially for financial institutions who capture and consume an incredible amount of data, the challenge becomes how to make sense of it. How can banks, credit unions, and other lenders use data to innovate? To gain a competitive advantage?

This is where analytics sandboxes come in.

A sandbox is an innovation playground and every data-consuming organizations’ dream come true. More specifically, it’s a platform where you can easily access and manipulate data, and build predictive models for all kinds of micro and macro-level scenarios. This sounds great, right? Unfortunately, even with the amount of data that surrounds financial services organizations, a surprising number of them aren’t playing in the sandbox today, but they need to be. Here’s why:

Infinite actionable insights at your fingertips
One of the main reasons lenders need a sandbox environment is because it allows you to analyze and model many decisioning scenarios simultaneously. Analysts can build multiple predictive models that address different aspects of business operations and conduct research and development projects to find answers that drive informed decisions for each case. It’s not uncommon to see a financial services organization use the sandbox to simultaneously:

  • Analyze borrowing trends by type of business to develop prospecting strategies
  • Perform wallet-share and competitive insight analyses to benchmark their position against the market
  • Validate business credit scores to improve risk mitigation strategies
  • Evaluate the propensity to repay and recover when designing collection strategies

A sandbox eliminates the need to wait on internal prioritization and funding to dictate which projects to focus on and when. It also enables businesses to stay nimble and run ad-hoc analyses on the fly to support immediate decisions.

Speed to decision
Data and the rapid pace of innovation makes it possible for nimble companies to make fast, accurate decisions. For organizations that struggle with slow decision-making and speed to market, an analytics sandbox can be a game changer. With all your data sources integrated and accessible via a single point, you won’t need to spend hours trying to break down the data silos for every project. In fact, when compared to the traditional archive data pull, a sandbox can help you get from business problem identification to strategy implementation up to 30% faster, as seen with Experian’s Analytical Sandbox:

Analytical_sandbox


Cost effective analytics

Building your own internal data archive with effective business intelligence tools can be expensive, time-consuming and resource-intensive. This leaves many smaller financial services at a disadvantage; but sandboxes are not just for big companies with big budgets. An alternative solution that many are starting to explore is remotely hosted sandboxes. Without having to invest in internal infrastructure, this means fast, data-driven decisions with little to no disruption to normal business, fast onboarding, and no overhead to maintain.

For financial institutions capturing and consuming large amounts of data, having an analytical sandbox is a necessity. Not only can you build what you want, when you want to address all types of analyses, you’ll have the insights to support business decisions faster and cheaper too. They prove that effective and efficient problem solving IS possible!

CMA offers solutions, such as Experian and other bureau credit reports, Industry Credit Groups and more to help companies determine how much business credit to extend. For more information on how we can help your company, contact Credit Management Association at 818-972-5300 or visit www.CreditManagementAssociation.org.

This article originally appeared here and has been reprinted with permission.

How to Quantify Your Gut Reactions in Credit

This article originally appeared in Credit Today, the leading publication for the credit professional.
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All of us in credit will, at some time or another, find ourselves in a position where we need to ask probing questions of a potentially problematic customer. And some credit execs we know – when the exposure justifies it – listen in on analyst conference calls hosted by their public company customers.

Much time and effort is devoted to figuring out the right questions to ask, and then to analyzing the answers received. But what about another, perhaps more important question: Is the person telling the truth at all?

Most credit execs we know have amazingly sensitive and accurate internal B.S. detectors (pardon the French, but that’s what this is all about). For some reason, that skill seems to come with the territory. Or maybe it’s learned over the years. Of course, that’s the “gut feeling” that we all know about. And we can also attest that gut feelings are rarely wrong.

That said, thought, we’ve always been of the mind that being able to QUANTIFY your gut feelings is the best way to go.

Which brings us to a study released a couple of years ago by David F. Larcker, professor of accounting at Stanford University, entitled “Detecting Deceptive Discussions in Conference Calls,” which offers up some ways to “quantify your gut feelings.” This study specifically focuses on conference calls for public companies (in part because the data was public and could be analyzed), but the lessons-learned from this study are worth noting for ANY communication you’ll hear from a company executive.

  • Lying Tip 1 – For example, if, when listening to a company official, you hear phrases like “the team” and “the company” over “I” and “we,” that’s a linguistic cue that they could be lying. Larcker’s study found that executives who later revised their firm’s financial statements displayed distinct styles of speech in analyst calls, including language that “disassociates themselves from their subject matter.”
  • Lying Tip 2 – Less than truthful execs also tended to speak in generalities rather than specifics, and replaced common adjectives like “good” and “respectable” with effusive adjectives like “incredible.”

To conduct his study, Larcker’s team loaded 30,000 transcripts of public conference calls from 2003 to 2007 onto an electronic document, which they then analyzed for phrases psychologists and linguists usually associate with deception. Fourteen percent of the executives analyzed said something that raised a red flag.

One such transcript they looked at was a conference call with Erin Callan, the former Lehman Brothers CFO, just months before the firm’s collapse. In it, she used the word “great” 14 times, “strong” 24 times and “incredibly” eight times to describe the bank’s recent performance. She used the word “challenging” six times and “tough” only once.
Such an overly positive tone as Callan’s is a dead giveaway, the report noted, that a person is being less than candid.

 

Like this article from Credit Today?

Why Data Models Matter More Than Ever

By Brodie Oldham, Experian

Are the credit models you are using to make lending decisions more than 2 or 3 years old? If so, you are likely making less than optimal credit decisions. You may be turning down a customer who is a good risk — while taking on customers who are more apt to default on their obligations.

Every year a model isn’t updated, its accuracy decreases. The economy changes. The consumer’s or business’s financial situation changes. Updating your models, using the most current data and attributes available, you can have confidence that you are making good credit decisions.

To make the most accurate credit decisions possible, many businesses are now turning to data-driven decisioning models that are powered by artificial intelligence (AI) within machine learning engines. While the standard regression model works well in some industries, the lift in predictive value from using AI data models can be very important in other industries, such as retail, fraud and marketing. These models use sophisticated algorithms to predict the customer’s future ability to repay their obligation, which means a much more accurate decision than traditional models.

Starting with High Quality Data

Primary-Experian-Violet-data-iconWhile data has always been at the core of credit decisions, models using machine learning are even more dependent on data. These models can be very accurate, but their accuracy depends on having the necessary data to understand what happened in the past and present behavior to make a prediction for what will happen in the future. The more data provided, the higher the accuracy of the decision. Here are three things to consider when building your data-driven decisioning model:

 

Clean Data – As innovation spurs business and technology to run faster and more efficient, the quality of the data underneath all of that innovation becomes even more important. Machine learning becomes smarter the more data it consumes. This means the accuracy of the credit decisions made by the model is largely dependent on the quality of the data provided. Data from third-party sources often contains mistakes, missing fields, and duplicate information, which results in less accurate credit decisions.

Correct Data Points – The accuracy of the results depends on considering the right criteria in the form of data points in the model. When you use machine learning and AI algorithms, they can predict which specific data points will help increase the performance of the model for the specific customer and the specific type of credit decision. Often, data points that you may not consider are the ones that can make a big impact on the accuracy of the decision.

Real-Time Data – In the past, there was often significant lag time between collecting and being able to use the data. By using real-time data with machine learning models, you can get a clear picture of the most current view possible and see changes in the different data points as they occur. This lets you make a much more accurate prediction of what will happen, with the consumer or business, than was previously possible with a traditional credit decisioning process.

Using Alternative Data to Get the Full Picture

Primary-Experian-Violet-profile-iconOften, additional data — typically referred to as alternative data — that is not readily available from traditional data providers is used to enhance the accuracy and predictive ability of a model. While the model can seem complete without this information, the model may provide suboptimal results without it. Machine learning models can predict the situations and exact type of alternative data a model needs to produce an accurate decision. Experian offers a wide variety of alternative data that clients can use to improve decision models.

For example, a business owner may be taking out short-term loans to increase her cash flow, which makes her a much higher credit risk than she appears to be without this data. Weather information is also a common type of alternative data; a business located in Tornado Alley may need higher cash reserves to be a good credit risk. On the other hand, businesses located in an area impacted by a recent weather event, such as a hurricane, may be a good credit risk even with a lower score because both their business and local economy is recovering.

Regularly Evaluating Your Data Model

Primary-Experian-Violet-calendar-icon
You must build in governance and make sure you are evaluating how the model is working on a regular basis, like having an annual checkup with your healthcare providers. Once you begin using a data model, you can’t simply set it and forget it. Ask the following questions to periodically evaluate your models:

  • Are there changes in the outcome of the models? You need to verify that your attributes are still predicting the same outcomes as intended, as well as capturing the same data. For example, say you have an attribute in your model that counts the number of credit lines open for a small business. If the attribute changes and those types of credit lines are no longer reported by the data provider, that number can go from three or four to zero, without there being a change in the number of credit lines open by the business. Because the data that goes into your model has changed, your model is not accurate unless you update the attribute.
  • Is your model stable? You need to make sure that degradation hasn’t reached a point where the predictive value is no longer accurate. For example, scores before the 2008 recession have a different meaning than afterwards, due to the changes in the financial system.

The future of your business depends on making accurate credit decisions. Instead of using outdated models, use the latest technology and methods available by using machine learning data-driven models. It’s simple. It’s quick. And most importantly, data-driven models are accurate.

CMA offers solutions, such as Experian and other bureau credit reports, Industry Credit Groups and more to help companies determine how much business credit to extend. For more information on how we can help your company, contact Credit Management Association at 818-972-5300 or visit www.CreditManagementAssociation.org.

This article originally appeared here and has been reprinted with permission.

Meet CMA Board of Directors Member Janet King of Joseph T. Ryerson & Co.

Janet King is the Credit Supervisor, North/West Region for Joseph T. Ryerson and Sons, and is a member of the CMA Board of Directors. A 25+ year credit veteran (and a 25+ year member of CMA), King knows the value of her CMA membership: priceless. “For me, I use CMA for the anscers.com website, industry credit groups and support. anscers is a beneficial tool that our group uses on a daily basis. It is the best source out there to get information regarding customers.”

In addition to actively participating in CMA’s groups, King encourages her team to attend CreditScape and the Credit Executive Symposium, and attends herself. “Attending CreditScape each year is beneficial, providing a great opportunity to get together with likeminded professionals to discuss issues that we all have in common, regardless of industry.”

“As a credit professional, I know that CMA has our best interest at heart, and I try to support CMA in every way I can. For those who are not taking advantage of all of its benefits, I recommend that you call your CMA representative and get involved in the Groups or its wide offering of education events. I promise you won’t be disappointed.”

Outside of credit, King enjoys playing in a band with her family, and is an avid concert goer and music fan.

Next Supplier Risk Group Meeting to Provide Strategies to Manage Your Suppliers

If your responsibilities include vetting your vendors to ensure the steady supply of raw materials or services to your company, you need to join the next teleconference meeting of CMA’s Supplier Risk Credit group to provide strategies to assist you in managing your suppliers.

On August 29 at 10am, we will have two guest speakers. First up is Gary Mendell of Meridian Finance, who will be providing an international supplier risk update on topics including international supply-chain issues updates, assessing the reliability of vendors in other countries, and protecting advance payments against non-delivery from abroad.

The second speaker will be Nick Vyas, an expert in supply chain management, who will address establishing a vendor risk framework. Mr. Vyas is the Executive Director for the Center for Global Supply Chain Management, the Academic Director for the MS in Global Supply Chain Management, and an assistant professor of clinical and data science and operations for the Marshall School of Business at the University of Southern California.

Whether your essential suppliers are in California, the U.S. or worldwide, any interruption in the Supply Chain can have a devastating effect on your company.

For more information on how you can join this Group discussion, contact Larry Convoy at lconvoy@emailcma.org.

How Small Business Owners Can Avoid Post-Disaster Recovery Scams

By Gary Stockton, Experian

Avoiding Construction Scams During Disaster Recovery

When a small business is damaged by a natural disaster — be it a hurricane, flood, earthquake, tornado, or fires like the ones in California recently — recovery presents its own set of hazards. There is, of course, the immediate cost of lost business. There are both short- and long-term physical dangers posed by weakened walls and ceilings, exposed power cables and mold. And then there are the threats posed by skilled disaster recovery scam artists who see small business owners as easy prey.

Kenneth Citarella, CFE, knows all about these post-disaster scams. A former New York state prosecutor, Citarella now works for Guidepost Solutions LLC, which provides investigations, compliance, monitoring, and security and technology consulting solutions for clients in a wide range of industries. In the wake of Super Storm Sandy, which devastated large sections of coastal New Jersey, Brooklyn and Staten Island in 2012, Citarella served as a Guidepost Solutions “Integrity Monitor,” making sure contractors were in fact performing the work for which they were being paid.

“The days and weeks following a natural disaster are times of great stress and confusion,” Citarella said. “This is the perfect breeding ground for scams of all kinds. Small business owners need to be aware of how they may be targeted and how to avoid being a victim.”

How Fraudsters Find Their Marks

While natural disasters are horrific events, they’re great for contractors and restoration companies for whom such events are their bread and butter. As soon as a disaster occurs, it’s not unusual for construction companies to descend on the affected site, blanketing the area with pamphlets and brochures, and stuffing mailboxes with business cards. While many contractors are legitimate, there can be a good number of storm chasers who are just out to make a fast buck. At a time when construction labor is at historic lows, small business owners may find themselves working with a firm with less than stellar credentials

“The more enterprising scam artists will take the time to go door-to-door, offering low-ball prices or even offering to cut the business owner in on the fraud,” Citarella said. “For example, they’ll offer to do the $75,000 worth of restoration work that is actually required, bill the business owner’s insurance company for $100,000, and then split the difference. This is an obvious solicitation of fraud and should be reported immediately to the local police.”

Common Types of Post-Recovery Fraud

In addition to the insurance scam described above, Citarella discussed other forms of fraud a small business owner might encounter following a major disaster.

“The most common type of recovery fraud involves a contractor who shows up to do the first two or three days’ worth of work, and then just disappears. Another type involves the use of lower-grade or otherwise substandard materials,” Citarella said.

Citarella also noted that otherwise well-meaning contractors may buckle under the pressure a natural disaster creates, leaving the business owner out thousands of dollars and still unable to operate.

“A small contractor can easily get in over his head,” Citarella stated. “He may not be able to get enough workers, have problems with his supply line, or be managing too many projects at once. There may be no criminal intent here, but the outcome is the same.”

How to Avoid Contractor Fraud

Find reliable, licensed contractors and validate their businesses before hiring them to help you rebuild. Experian’s ContractorCheck.com/Hurricane is being offered as a free resource to those affected during this time of recovery. This website enables you to find contractors and easily check the critical components of a contractor’s business background, including license, bond and insurance data (if an when available from state licensing boards). Click here to see a sample report.

Also, the Better Business Bureau (BBB) offers a list of recommendations to business owners and anyone else looking to hire a construction contractor, among their recommendations:

1. Ask for Recommendations. Ask friends, relatives and fellow business owners to recommend contractors they have previously hired.

2. Check Their Track Record. Use bbb.org or other business review websites to get customer reviews, complaints and any notices of criminal violations.

3. Verify the Business License. Make sure the contractor under review has a valid license to do business in your state.

4. Get Multiple Quotes. Always get at least three quotes for any particular job. Any quote that is unusually low is probably one to avoid. Remember the old adage, “If something seems too good to be true, it probably is.”

5. Look for Signs of “Professionalism.” A reputable contractor will arrive in a vehicle that is clearly marked and branded, and may wear a uniform bearing his/her company name.

6. Request References. Ask the contractor for a list of previous customers you can contact and discuss their satisfaction with the contractor’s service.

7. Check Professional Affiliations. Ask if the contractor belongs to any trade organizations. Such companies are usually bound to operate according to a strict code of ethics.

8. Avoid Large Up-Front Payments. Pay by check or credit card for added protection. Avoid paying in cash.

9. Get Everything in Writing. Demand a written contract, and make sure to read it carefully, especially the fine print. Make sure the contract includes the contractor’s name, street address, telephone number, email address and state license number. Fill in any blank spaces. Don’t sign anything you don’t understand.

“Document every step of the reconstruction progress,” Citarella added. “Take pictures every day to record the contractor’s progress. Smartphone pictures can be invaluable in the event of contractor misbehavior or if there is a challenge by your insurance carrier.”

Citarella described four “gears” that run any reconstruction machine. “There’s the business owner, the adjuster, the carrier and the contractor. All four need to work together to get a job done right. However, the only one who has a stake in effective cooperation is the business owner. So if you have a business that needs post-disaster repair, take the time to make sure it’s done right.”

If you are in the process of rebuilding following Hurricane Harvey or Irma and need to check the contractor you are working with, go to www.contractorcheck.com/hurricane to receive up to 15 free reports.

Also, Sam Fensterstock of Credit Management Association published an excellent article titled “How To Assist Your Customers To Stay In Business After Natural Disaster“, it contains lots of great information about disaster preparedness and working with your customers if they are impacted by a natural disaster.

CMA offers solutions, such as Experian and other bureau credit reports, Industry Credit Groups and more to help companies determine how much business credit to extend. For more information on how we can help your company, contact Credit Management Association at 818-972-5300 or visit www.CreditManagementAssociation.org.

This article originally appeared here and has been reprinted with permission.

Are Your Trade Credit Emails Ending Up in Your Spam Folders?

Many of CMA’s members have reported that a growing problem in their companies seems to be their ability to receive trade credit related emails through their email spam filters. It seems that an increasing number of wanted emails from customers, creditors, trade groups such as Credit Management Association and others aren’t being received because IT departments filter out emails from bulk servers, or ones with words like “debt,” “collections,” “credit” and “past due” in the subject line or the body of the email itself. Such filters can automatically send wanted emails to your spam folder, or even worse, automatically deleted—unseen, unknown and unread by you.

At CMA, we filter incoming messages for malware and viruses, which can be embedded in commonly traded files via email such as Microsoft documents (Word, Excel), PDFs, and especially ZIP files. Similarly, as we communicate RFIs, meeting requests and information with our members, we routinely ask members to check their junk email if they should have received emails from our servers that they say they didn’t. On occasion, we make use of cloud storage transfer sites such as DropBox, Mega or WeTransfer to avoid emailing files to get through tough firewalls (even our own!).

Here are several things I recommend you do to ensure that you’re receiving emails from your customers and trade association.

  • Add your customers, associations and others to a safe “white list” to allow all emails from them to come to your main email inbox.
  • Check your Junk/Spam email box regularly to make sure that your important messages aren’t going there.
  • Talk to your IT department about how to “white list” or add your customers to an “approved list” to ensure you receive their emails.

How do you make sure that you’re getting important emails at your company? We welcome your feedback.

Meet CMA Board of Directors Member Tracy Rosenbach of Silgan Containers

Tracy Rosenbach, Financial Services Manager for Silgan Containers LLC, has been a CMA member since 1995. In her more than 20 years in credit, Rosenbach said that the networking opportunities she’s had with CMA members has been invaluable to her experience as a credit manager. “To have the opportunity to speak with other credit professionals about credit situations and how they handled them has been a great help. I believe that being able to network strengthens the profession.”

In addition to networking, Rosenbach said that using CMA as a resource for services has been great for Silgan. “We purchase our credit reports through CMA which has helped to save my company money,” she said. Rosenbach also attends many of the education sessions that CMA offers, including CreditScape. “Attending these events has been beneficial on multiple levels. Receiving the educational updates and networking with other credit professionals has been a tremendous boost professionally. I believe our biggest challenges in credit are keeping up with changes in laws that directly impact how we handle our customers and being aware of the latest changes in technology. As credit managers, we are impacted by so many areas, sometimes all at once. Attending conferences and webinars helps us to keep up with the changes in our profession.”

Rosenbach has served on the CMA Board of Directors for a number of years, including a run as Chair of the Board of Directors from 2016-2017.

As a veteran credit professional, Rosenbach said this for new credit managers: “My recommendation for people joining the profession is to become a member of Credit Management Association and join an appropriate trade credit group. Take in as much education as you can and get out and meet the people that can help you the most.”

In her personal life, she enjoys traveling as well as photography. For example, last year she flew to Guatemala with a customer-lead group to work with local children. “I feel so strongly that travel also provides an opportunity for education. The understanding of and compassion towards another culture is so important in the world today.”

Rosenbach resides in the greater Los Angeles area with her family.

Credit Today Legal Case Study: The ‘Business Exception’ to the Fair Credit Reporting Act

 

This article originally appeared in Credit Today, the leading publication for the credit professional.
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By Ann Morales Olazábal

Landers Lighting Co. is a large manufacturer and retailer of lighting products. In addition to its retail business, Landers does fairly sizable sales to local contractors, some of whom are on open credit terms. One of its longstanding business customers is Del Amo Electric, Inc. (DAE), a contractor in the business of installing and servicing lighting and other electrical fixtures. Frank Del Amo is DEA’s president, and he and his wife are the company’s sole shareholders.

DEA’s account with Landers has gotten in arrears recently, and the parties have informally discussed the possibility of Mr. and Mrs. Del Amo personally guarantying a note representing the $26,000 outstanding balance owed by DEA. Consequently, Landers’s credit manager is considering pulling a consumer credit report on the Del Amos “to ascertain their personal creditworthiness. Landers routinely obtains such credit reports on its retail customers by way of a contractual agreement with one of the three largest nationally recognized consumer credit information providers.

Under these circumstances, and given the business-oriented purpose of the credit report, may Landers legally obtain Mr. and Mrs. Del Amo’s consumer credit report?

Make your decision and read below for the answer!

 

 

 

The ‘Business Exception’ to the Fair Credit Reporting Act

By Ann Morales Olazábal

No. The Fair Credit Reporting Act is a consumer protection statute that requires credit reporting agencies to “adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.” 15 U.S.C. Section 1681(b).

Most of the provisions of the FCRA regulate the behavior of credit reporting agencies. But, because consumer credit reporting agencies cannot prohibit illegal use of consumer credit information if credit report users are not bound by law to obtain consumer credit reports only for permissible purposes, the FCRA also extends to the conduct of parties who request credit information.
Generally speaking, credit reports can legally be requested by those considering (1) the extension or collection of consumer credit accounts, (2) employment of a consumer, (3) underwriting of insurance for a consumer, (4) a consumer’s entitlement to government benefits, or (5) any another “legitimate business need” in connection with a consumer business transaction.

This latter purpose for obtaining credit reports has long been referred to as the “business exception” to the FCRA. Six years ago, the FCRA was substantially amended as part of the Consumer Credit Reporting Reform Act of 1996. Since then, the precise language of the “business exception” provision of the FCRA has read as follows: . . . any consumer reporting agency may furnish a consumer report under the following circumstances . . . (3) To a person which it has reason to believe . . . (F) otherwise has a legitimate business need for the information — (i) in connection with a business transaction that is initiated by the consumer.

Exception in Question

While courts had previously held that businesses extending trade credit may have had a legitimate need for consumer credit information on sole shareholders, the 1996 amendment to the statute’s language threw the continuing validity of the FCRA business exception, as we once knew it, into question.

Subsequent Federal Trade Commission Staff Opinion letters interpreting the FCRA make it clear that where a credit application is made by a business entity, the statute does not provide a permissible purpose for a creditor to obtain a consumer report on a guarantor or co-signer for–or a principal, owner, or officer of–the commercial credit applicant. Thus, no consumer credit report should be obtained in circumstances similar to this case without the individual subject’s consent.

Both the entities and individuals who are involved in obtaining and using consumer credit information in circumstances other than those specifically outlined in and permitted by the FCRA can be held liable in private lawsuits brought by the subject(s) of the credit report. Therefore, both Landers and its credit manager, individually, could be sued and held legally liable for any resulting damage award, if a consumer credit report is obtained on the Del Amos, in connection with their offer to guaranty their business’s outstanding debt.

The best practice is always to obtain the consumer’s written consent before requesting a consumer report from a credit reporting agency. Another alternative may be to investigate the Del Amos’ business history and status by way of a commercial credit information agency, which would not be subject to the strictures of the FCRA.

Ann M. Olazábal, MBA, JD, formerly Credit Today’s Legal Editor, is Vice Dean, Undergraduate Business Education, Chair and Professor, Business Law at the University of Miami School of Business Administration.

Thanks to Credit Today’s library of Legal Case Studies

 

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You May Not Know, CMA Has a Solution For That

CMA Has Solutions

Recently, a friend of mine told me that he joined a well-known national association. When I asked him why he joined, he told me he was really only interested in one of the benefits they offered, and that he would probably never explore the other benefits because that one thing was valuable enough to him to justify membership.

After having this discussion with him, I realized that some CMA members may think the same about its programs and services: they join for the Industry Credit Groups but are unaware about (and don’t explore) the other benefits that can help manage risk. Here is a quick look at some additional benefits that you may not know about that are included with your membership:

Credit Reporting: CMA is a reseller of reports from the major credit bureaus (Equifax, DNB, Experian), Ansonia, plus the hybrid anscersX multibureau report. Let CMA be your first call when you’re looking for customer information; report rates through CMA are often less expensive. Plus, members receive several free CMA Credit Reports, which is included with their annual membership.

RFIs: CMA offers the ability to submit an RFI (Request For Information) on specific accounts from other members who may have experience with those accounts. The system is fully automated and available online in an as-needed basis.

Professional Development Programs: CMA offers dozens of webinars, seminars, in-person networking opportunities and more to help you stay current in the quick-evolving credit management profession.

Construction Forms Filing: If your company has the need to file preliminary notices and mechanics liens in the United States and Guam, our staff offers everything you need, including a free lien provisions guide.

Business Insolvency Services: What options do you have if one of your customers threatens to file for bankruptcy? What if your company suddenly faces financial distress? CMA’s Adjustment Bureau is the largest entity in the United States specializing in neutral administration of out-of-court workouts and liquidations of insolvent businesses.

– Collections Services: CMA has partnered with AG Adjustments to handle all of your collections needs. All placements can be viewed on CMA’s interactive web site, www.anscers.com.

– Transactions processing: If your company offers Electronic Funds Transfer, Online Bill Pay, Credit Card Services, Fifth-Third Check Guarantee Services can probably help you get a better rate than you’re already receiving.

– And more!

With many benefits that you may not have already been aware of, if you’re in the credit management profession (or if you may need help with determining the riskiness of a potential customer), CMA should be your first call at 800-541-2622. CMA is known for its top-notch industry credit groups, but the association offers many more benefits besides them. CMA probably already has a program or service that can provide information to help answer your credit questions.

What is your biggest need in credit management today? I welcome your feedback.

Benefit of the Month: anscersX Multibureau Trade Credit Report

Have you checked out CMA’s exclusive anscersX multi-bureau trade credit report that contains the key factors about your customers payment habits from the top three credit reporting bureaus?

The anscersX multi-bureau commercial credit report combines key elements of the data from the largest trade credit reporting agencies (D&B, Experian, Equifax, Ansonia plus CreditSafe International), giving credit managers the most complete payment story available. The report is affordably priced, which is based on the number of reporting agencies you request. Better yet, anscersX Reports are available on a transactional basis – no contracts, no minimums, no hassles!

For more information on the report, click here.

How PACA Can Protect Your Produce Customers

PACA (Perishable Agricultural Commodities Act) is the federal law which applies to interstate and international trade in fresh and frozen produce. If you sell fresh or frozen fruits, vegetables, herbs or roots into the U.S. or between states in the U.S., then the PACA law almost certainly applies to your dealings with your receiver, consignee, broker or buyer.

On Wednesday, September 5 at the Produce Market in Los Angeles, we invite you as a guest to our upcoming Produce Dealers Industry Trade Group meeting to hear Don Blake from the U.S. Department of Agriculture discuss PACA. Mr. Blake will cover:

  • How PACA can protect your business from problems receiving payments from your customers
  • How PACA can help protect your business from payment disputes such as refusal to pay
  • …and much more!

At the end of the presentation, Mr. Blake will allow time to answer your questions about PACA.
You won’t want to miss this free informational seminar.

TO RSVP, contact Larry Convoy at 818-972-5323 or lconvoy@emailcma.org

Are Electronic Signatures valid on credit applications?

By Phyllis Saavedra, Order to Cash Executive and SME at Emagia Corporation

Most credit departments still use paper or faxed versions for their credit applications. The pace of business continues to accelerate and Sales is expected to close deals faster. In order to stay competitive, many credit departments are prompted to revisit their credit application process and consider credit approval process automation. This brings up the very pertinent topic of electronic credit applications and the validity of electronic signatures.

They are the most secure, convenient and easy way of transacting documents, contracts and letters, so why are people so hesitant to use electronic signatures? The most common fears are associated with legality, forgery and someone inappropriately signing on your behalf. All of these are nearly impossible if you use a trusted solution.

Understanding electronic and digital signatures

Before you embark on using e-signatures first and foremost you need to understand the difference between an electronic signature and a digital signature. This is often the problem when questions of legality with a document arise. A simple electronic signature is any electronic means by which you submit consent or acceptance of documentation. It may simply be a box where you are asked to input your initials. Not all of these will hold up in court. By comparison a digital signature on the other hand is an advanced electronic signature and takes the form of a script that is associated with a person. Typically, and I am by no means an attorney, a signature on the documents signifies intention to accept the terms of the text. For a digital signature you must have a certificate-based digital ID. Since digital signatures are far more secure they are being widely used for regulatory filing in many countries such as the United States, the European Union, India and Brazil.

Enforceability of electronic signatures

In the United States most states have adopted the Uniform Electronic Transactions Act (UETA). At its most basic level the Act provides rules for those that MUTUALLY agree to transact electronically. A federal regulation, the Electronic Signatures in Global and National Commerce Act (ESIGN) was passed in 2000. The objective of these two Acts is to establish that electronic records and signatures are viewed on the same legal level as traditional paper documents and handwritten signatures.

Security risks associated with electronic signatures

So they are legal, can I really trust the security of an e-signature? Again, this is where the important distinction between electronic and digital signatures comes into play. Electronic signatures are not as secure. Digital signatures are by design embedded in the document and cannot be forged. Without the encryption you may risk (and that risk it is still a very low) the desired levels of authentication and confidentiality you desired. For added peace of mind make certain you are using a respected e-sign provider with an industry standard authentication function.

Many of us have signed a document on behalf of a spouse, a boss or a co-worker upon their request. It is fairly universally understood that signing on behalf of another, at their request and with their permission is okay. Digitally or on paper without consent it is considered forgery and you may be committing fraud. Forgery is illegal.

Digital signatures are designed with two different kinds of translation keys that are essential for your security. The public key creates a digital signature by transforming the data into an indecipherable code. The second key, the private key verifies that signature and returns the message in its original form. A person should only give out their public key to those with whom they wish to do business. You can put it on your corporate website or attach it to the document. Your private however is only known to you and perhaps a limited number of other authorized signers. The private key creates the digital signature. When you send a document the recipient must have your corresponding public key in order to verify the digital signature. Simply put the two keys must talk and verify the validity of each other. Your signature is completely secure a long as you keep your private key PRIVATE. Your signature is attached to the document itself. Change the document and a different signature will be produced.

Growing usage of digital signatures

The old ways of doing business are quickly changing. E-signatures are now becoming prevalent in all aspects of our lives. We use them for contracts, tax and banking documents and a whole host of other areas. At my company Emagia we educate our customers on the automation of the corporate credit process. One of the biggest time-saving efficiencies we promote is online credit applications with digital signatures. The digital signature legitimizes the credit application, speeds up the customer onboarding process and keeps our customers from having to print paper applications.

If the above arguments don’t alleviate most of your doubts I will appeal to your environmental nature. Each year in America it is estimated that the average US office worker uses approximately 10,000 sheets of copy paper each year. Not only is this wasted paper, but ends up costing somewhere around $195 billion.

The time is now to set your reservations aside and take one of the easiest steps to automating and expediting your business processes. Cut operational costs, improve efficiency and collaboration, address legal compliance issues and possibly most importantly Go Green! Talk to a trusted legal advisor and get onboard quickly so you can help your organization make faster credit decisions and improve customer satisfaction.

Phyllis Miller Saavedra is currently the Director of Order to Cash Solutions at Emagia Corporation. She has been working in the field of credit and collections for more than 20 years. Over the years she has held senior management roles in companies such as Cisco, Aspect, Novellus, SanDisk and Saba Software. Additionally she has extensive experience as a consultant in all areas of the order to cash lifecycle. She can be reached at 408.386.8462 or by Email at phyllis.saavedra@emagia.com.

Metrics For Job Security in Credit

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

In his book “Accounts Receivable Management Best Practices,” author John Salek, VP, Order to Cash for outsourcing giant Genpact, offers two important principles for what metrics you track and report to management.

  1. Report monthly and minimize the number of metrics routinely reported.
  2. Report on the basic dimensions of the receivable asset:
    – Risk. Age profile, risk profile by credit score, and bad debt expense.
    – Turnover. DSO actual versus best possible and cash collected.
    – Quality. Billing quality index, level of clutter.
    – Cost. Cost of accounts receivable management group as percent of revenue.
    – Service. Cycle time of disputes and credit application turnaround.

These are at once both complete and concise as a way to measure how both your receivables and your department are doing.

The first one of the five “basic dimensions of the receivable asset” above is something we see most credit managers report and often in great depth. The last four, not as much, but they are every bit as critical as the first one.

As we ponder these, we think the last two, in particular, are not just important for you and top management to track and work on. We are also certain they’re great metrics to track to ensure job security!

How do you stack up in all five of these?

 

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Meet CMA Board of Directors Member Pam Craik

Pam Craik, the Regional Director of Credit for McKesson Corporation, knows the value of being a CMA member, as she demonstrates by actively participating in CMA Industry Credit Groups and educational and networking events. A 20-year CMA member, Craik says that her experience with CMA’s Industry Credit Groups is the main reason her company is a CMA member. “The professional development and networking has helped my company by allowing team members to learn more about credit, how we approach credit, and how others do as well. It has allowed us to be rounded and considerate about how we go to market. It allows us to grow while also measuring and understanding risk. We have learned about new tools to help us advance. This includes technology and generally all types of enhancements,” she said.

Craik, who has been in credit for 30 years with McKesson, said that her time volunteering with CMA and participating in Group meetings and other events have helped her both professionally and personally. “Taking the time to serve as a volunteer board member has helped me to grow my own leadership skills and make sure my company stays relevant. Being on the CMA Board, I have met so many people I may not have otherwise known. I have learned about other industries and challenges in business. It has been one the most rewarding professional experiences I have ever had. I encourage others to get involved and make a difference.”

Craik holds a Bachelor’s Degree from the University of Phoenix and an MBA from the University of Sacramento.

A self-described “practical joker,” Craik said that she is the quiet one that you need to watch out for, or you might become the subject of her pranks.

Craik lives in the Placerville, CA area with her husband.

Delinquent Accounts Remain A Problem For All Credit Professionals

By Scott Blakeley, Esq.

Credit professionals face delinquent accounts on a regular basis. But before a company begins to take action in order to remedy the delinquent account, it’s important to know when to consider an account delinquent.

Technically, a delinquent account is one that fails to pay by the agreed-on date. However, these terms may be flexible depending on the type of customer and the type of vendor you are.

Should a customer pay beyond terms, it’s important to remember that they have still paid. Look to their payment history to determine if their lateness is business-as-usual or if it’s some sign of a major malfunction. If so, then it might be time to call it a delinquent account and work to get your money. It’s also important to consider your own business; if an account represents an important amount of business for a credit extending company, it might make sense to relax the standards a bit.

While there isn’t an industry rule on what constitutes a delinquent account, there are vendor-by-vendor guidelines on what should be considered delinquent. In certain industries, it might be acceptable to delay payment for certain reasons that wouldn’t be acceptable in other industries. Credit professionals should be well aware of these things before pursuing a delinquent buyer.

Once you’ve established that you have a delinquent account on your hands, it’s important to take action. If a company fails to do so, it could face serious losses. For some companies, accounts receivable may be their most valuable asset. If they’re not able to collect, then their revenues may be off and any consequences could be dire.

In addition to the obvious financial pitfalls, a company who fails to address its delinquent accounts could wind up raising an eyebrow or two at governmental agencies. A publicly traded company that fails to collect a large sum of money will have to change its reported numbers. It could require them to give notice that they may not be making their earnings targets.

There are a number of ways to collect on a delinquent accounts, one of which is filing suit and using litigation to your advantage. CMA offers many educational webinars on the topic, and much of the conversation at CMA-sponsored Industry Credit Group meetings focus on this topic.

For more information about Industry Credit Groups, click here.

For more information about upcoming educational events, click here.

Adding Value Through Good Customer Visits

“As credit people we don’t ever look at our roles at making the customer experience a little better,” said Susan Delloiacono, CCE, director of credit for Brother International Corp. “We kind of just stay in our own silo and
we forget about the touch point we have with the customers.” However, as Delloiacono discussed in a past CMA webinar, “Effective Customer Visits,” a credit professional’s ability to pull off a productive customer visit
and successfully maintain a healthy customer relationship can add real ongoing value to a company.

Preparation is required for any successful customer visit and, throughout her presentation, Delloiacono offered tips on what to know and what to take care of before a customer visit, such as creating an agenda, confirming
with the customers what issues are going to be discussed and setting the travel logistics so both parties are clear on when the meeting will take place.

Delloiacono also noted that, prior to the visit, credit professionals should know as much as possible about the customer. “Understanding the cash flow and looking at their operations cycle is so critical to a credit professional,” she said, adding that potential visitors should check the customer’s website for any recent press releases, even if they don’t necessarily pertain to business. “Customers really like that, because then you’re really taking an interest in
them.

But just as important as it is for visiting creditors to know their customers, it’s also important for visitors to know everything about their own companies, including any ongoing sales and marketing initiatives. “We want to understand our companies,” before visiting a customer, she said. “You really need to understand what is going on with your sales person and it’s very important for you to understand your upcoming promotional activities.”

Supply Chain Bankruptcy Preference Releases: Good News for the Credit Team, But Watch for the Claim Offset, By: Scott E. Blakeley, Esq.

As originally published in the Credit Research Foundation 2Q 2018 Credit & Financial Management Review

Abstract

In managing credit risk with an insolvent customer, the seasoned credit team also appreciates not just the A/R risk, but the preference risk should the customer file bankruptcy, or an out of court liquidation such as an Assignment for Benefit of Creditors. In some settings, suppliers may have larger exposure with preferences than with A/R. The welcome news for suppliers is that a number of large Chapter 11 filings have included supplier preference releases as part of their negotiated exit from Chapter 11. But with a provision in a Chapter 11 that provides for a preference release, suppliers holding priority claims should be mindful that the debtor may take back the supplier chain preference release through a reserved claim objection.

The Bankruptcy Preference

The Bankruptcy Code vests the trustee with far-reaching powers to avoid payments to suppliers within 90 days prior to a bankruptcy filing, and is one of a debtor’s most potent weapons to discourage a supplier’s collection strategy of racing to the courthouse to seek a judgement against the insolvent customer.

Supply Chain and One-Off Preference Release

Several high-profile companies have exited Chapter 11 with a plan of reorganization that provides for release of preference actions against the supply chain. Recent case examples include Rue 21, Haggens Supermarkets, Gordmans and Central Grocers. These cases highlight the Chapter 11 exit strategy in two settings: (1) a sale of assets, with an asset purchase agreement negotiated between the debtor, the buyer and creditors’·committee, that includes a preference release; or (2) an operating plan negotiated by the debtor, secured creditor and creditors’ committee that includes in the Disclosure Statement and Plan, a preference release. In both settings, title supplier qualifies for the preference release by offering credit terms for their product or service to the buyer or reorganized debtor upon exit from the Chapter 11.

If the debtor does not propose a supply chain preference release, the supplier may seek to negotiate a preference release only for its own potential liability. The one-off preference release is commonly through a negotiation of supplier trade terms in exchange for early payment of the supplier’s 503(b)(9) claim.

With the sale of asset cases, a Trust is created for purpose of retaining the estate’s preference actions and sale proceeds. The party responsible for the Trust’s assets is often referred to as a plan administrator. The responsibilities of the plan administrator are to maximize the Trust’s assets and limit its liabilities. One way to limit liabilities against the Trust is through plan administrator objections to claims submitted by suppliers.

A claim objection can be such things as books and records-the debtor’s reconciliation of the supplier’s claim does not match, or a late filed claim. Another strategy for the plan administrator to reduce claims is object to a supplier’s claim based on the supplier having received a preference. But does such an objection have merit where the Plru1 provides for a supply chain preference waiver? Is such an objection, selective enforcement of the preference powers as these types of claim offsets are commonly asserted against suppliers, asserting 503(bX9) claims?

Claim Objection Based on Preference

A plan administrator may object to a supplier’s claim, most likely a 503(b)(9) claim, under section 502(d) of tl1e Bankruptcy Code. Section 502(d) provides, in pertinent part, that “the court shall disallow any claim of any entity from which property is recoverable “under the preference statute, unless the preference is repaid.

How might a plan administrator support a section 502(d) claim objection where a debtor under a confirmed Plan releases suppliers from preferences?

For example in In re Gordmans, the confirmed Plan (at Article VII. paragraph F) provides:

Any Claims…recoverable under section …547 of the Bankruptcy Code, shall be deemed disallowed pursuant to section 502(d) of the Bankruptcy Code…

However, Article VIII, paragraph C of the Plan provides an unconditional preference release to suppliers from preferences. Thus, the question for a supplier holding a 503(bX9) claim is whether a plan administrator may disallow the supplier’s claim under section 502(d) on the grounds of an alleged preferential payment, even though a preference action cannot be filed as a result of the preference release.

Does the Legal Authority Support the Supplier Dealing with a 502(d) Claim Objection?

In most Chapter 11 cases, suppliers holding non-priority claims generally do not receive a distribution. Rather, only those suppliers holding priority claims. Generally 503(b)(9), receive a distribution. Therefore, in most Chapter 11s, the plan administrator’s focus with claims·objections, including 502(d) objections, is against priority claimants.

Fortunately, the majority of courts hold that section 502(d) does not apply to 503(b)(9) claims. In re Lids Corp., 260 B.R. 680, 683 (Bankr. D. Del. 2001) (“administrative expense claims are accorded special treatment under the Bankruptcy Code and are not subject to section 502(d)”); In re Durango Georgia Paper Co., 297 B.R. 326, 331 (Bankr. S.D. Ga. 2003) (“Section 502(d) does not apply to administrative expenses that are allowable under § 503”); In re Plastech Engineered Prod. Inc., 394 B.R. 147, 161 (Bankr. E.D. Mich. 2008) (“the allowance of claims
under § 502 is entirely separate from the allowance of administrative expenses under § 503”); In re Ames Dep’t Stores. inc., 582 F.3d 422,427-432 (2d Cir. 2009) (“[w]e hold that section 502(d) does not apply to admin istrative expenses under section 503(b)”); In re Tl Acquisition, LLC, 410 8.R. 742, 750-51 (Bankr. .D. Ga. 2009) (“Section 502(d) does not contain any language or reference which would make it applicable to administrative expenses of any kind”‘); In re Momenta. inc., 455 8.R. 353. 364 (Bankr. D. .H. 20 1 1) (“Because § 502(d) is inapplicable to administrative expense claims, including an expense requested under § 503(bX9). the claim shall be allowed”); Jn re Energy Conversion Devices, Inc., 486 B.R. 872, 878 (Bankr. E.D. Mich. 2013) (“1l1e Court is persuaded that the correct reasoning and views are those taken by the Second Circuit in the Ames Dep ‘t Stores case, regarding § 503(b) administrative expenses in general, and by the courts in the Plastech and Momenta cases, regarding § 503(bX9) administrative expenses in particular”); In re Quantum Foods. UC,554 B.R. 729, 735 (Bankr. D. Del. 20 16) (“Section 502(d), by its terms, does not include administrative expense claims. Conversely, § 503, which addresses administrative expense claims, has no provision similar to 502(d) disallowing administrative claims if the administrative claimant fails to satisfy a preference liability”).

The minority position is that § 502(d) applies to all claims, including administrative expenses. In re MicroAge, Inc., 29 1 B.R. 503, 508 (B.A.P. 9th Cir. 2002)(“[W]e believe that the better analysis is that §502(d) may be raised in response to the allowance of an administrative claim”); In re Circuit City Stores, Inc.,426 B.R. 560, 571 (Bankr. E.D. Va. 20 10) (“(T)he Court concludes that § 502(d) may be used to temporarily disallow § 503(bX9) claims”).

Supplier·Strategy to Ensure Priority Claim is Free from 502(d) Objection

If the supplier has a provision in a confirmed Plan that provides for a supply chain preference release, the next step is to confirm that a 502(d) claim objection is not preserved by the plan administrator. If so, consider objecting to that provision of the Plan.

If an objection to the Plan is not lodged, the supplier still has an alternative to preserve the priority claim. The court in In re Energy Conversion ruled that a provision in a confirmed plan does not override Congressional intent. In In re Energy Conversion, the Trustee requested the court delay payment of a supplier’s 503(b)(9) administrative expense until after the preference claim against it had been determined. The Court explained that, whatever discretion a court may have to allow a Chapter 11 debtor to defer paying allowed administrative expenses before a plan is confirmed, such discretion no longer exists once a plan has been confirmed; the confirmed plan controls when allowed administrative expenses must be paid.

Supplier Takeaway

As more large Chapter 11 debtors are considering supply chain preference releases, the supplier, especially one holding a 503(b)(9) claim, should be vigilant as to whether the plan administrator seeks to retain 502(d) claim objections. lf a supplier preference release is obtained, but 502(d) claim objections are retained, consider objecting to that provision. Otherwise, case authority supports the 502(d) claim objection be overruled.

Scott Blakeley, of Blakeley LLP, advises companies regarding creditors’ rights and bankruptcy law. His email: seb@blakeleyllp.com

Wanda Borges Explains Anti-Trust Issues and Why CMA Industry Credit Groups Exist

Those who attended a past CMA webinar learned some valuable information on how to steer clear of possible violations of anti-trust laws. The session, entitled “Navigating the Antitrust Rules: Myths To Dispel And Realities To Understand,” was presented by Wanda Borges, Esq., of Borges and Associates, LLC, who is an advisor to CMA on a range of legal issues relevant to business credit.

Borges discussed the three main federal statutes that pertain to antitrust and restraint of trade practices. They are the Sherman Antitrust Act of 1890, the Clayton Act of 1914, and the Robinson-Patman Act of 1936. She said the Sherman Antitrust Act prohibits contracts, combinations and conspiracies in restraint of trade in interstate commerce or with foreign nations. The act makes it a felony to conspire to restrain trade; or to monopolize (or attempt to monopolize). The Clayton Act was passed, she noted, to correct defects in the Sherman statute and further makes it unlawful to enter into any of several specified types of prohibited transactions whose purpose or
effect would be to restrain trade or injure a competitor. Robinson-Patman was partially an amendment to The Clayton Act, making it unlawful to “discriminate in price between different purchasers of commodities of like grade and quality” or knowingly to induce or receive a prohibited discrimination in price. She added that violations of this act could result in civil or criminal penalties.

Credit terms are tantamount to price, Borges noted, according to a 1980 Supreme Court decision. “Anytime you fix or adjust credit terms you are fixing a price,” Borges said. She pointed out that allowing a customer to pay in 30 days gives that customer the use of that money for that period and is of monetary value. “There is a big difference between C.O.D. and credit terms.”

In determining if an action constituted a conspiracy to commit an action that resulted in a restraint of trade, Borges pointed to four elements that must exist. There must be knowledge of all the parities, a common purpose, an actual restraint of trade and intent to restrain trade. She presented an actual example—where a movie distributor, in a written communication to 7 movie theaters, required a $2 increase in movie ticket prices in order to continue
getting first-run movies. She noted that six of the theaters complied by raising their prices while the seventh resisted and sued the other theaters and distributor for restraint of trade. The argument presented to the court by that
theater was that the economic status of the neighborhood in which the plaintiff’s theater was located could not sustain a ticket price increase. Therefore, the ticket price increase would render the theater incapable of
presenting first-run movies. The court ruled that the arrangement was a restraint in trade by the defendants. “You have to watch very carefully you don’t get roped into a conspiracy…,” Borges advised.

“You always have to keep in mind what price fixing is all about,” she said. “You have to charge the same prices to same quality customers.” She noted that different terms could be set for customers of differing qualities, however: “If one customer has a superior credit history you can give them a discount.”

The exchange of credit information is perfectly legal, she added. “You may exchange information—and today you are exchanging more information electronically. I heartedly recommend that when you exchange information you do not do so on the telephone, because that information can be misinterpreted.” Another way that credit information can be shared is through credit (industry) group meetings. However, she noted that these meetings must be run under strict guidelines that prevent the exchanging of information or comments that could be a violation of antitrust laws. “CMA runs credit group meetings exactly by the book,” she noted.

One of the critical things participants must observe during such a meeting is that any remarks relating to a customer be confined only to completed transactions. Any comments relating to intended future actions are not allowed under antitrust laws, she noted, such as saying, “I will never sell to that customer again.”

“You can’t say that,” Borges said. All you can say is “I’ve cut them off’. I’ve placed them on a credit hold.'”

Credit group meetings should have a written agenda that is followed, she said, and noted that the agenda and the minutes of the meeting should be kept on file. She also cautioned against holding any meetings outside
the scheduled credit group meetings: it would even be illegal to discuss future price or credit terms with other competitors regarding a customer in Chapter 11 bankruptcy.

A new rule in federal court requires complete disclosure of all electronic data pertaining to cases. Borges noted that even if an e-mail or other electronic document has been deleted on a computer it may still be retrieved. “What we think is gone, a forensic computer examiner can find,” she advised. “Be extremely careful what you transmit electronically.”

How a Credit Professional Can Have More Conversations that Count

What type of impression are you leaving? How effective are your communication skills? As you either thumb through your daily planner or scan through your smart phone, review your recent interactions. Did any of the following issues arise?

  • You were asked to speak up or repeat yourself
  • Your message was misunderstood
  • You couldn’t get the full attention of your audience
  • You didn’t get the results or reactions you had anticipated
  • You didn’t make the sale or close the transaction

These phenomena are quite common in the course of the typical business day. What causes these missed opportunities? Usually the missed opportunity stems from one of the following communications flaws:

  • Speaking too rapidly
  • Speaking with too low of a volume level
  • Slurring your words or mumbling
  • Speaking in a tone that lacks confidence, interest, or authority
  • Failing to organize your thoughts before speaking
  • Lacking eye contact or other non-verbal body language to support your message
  • Speaking too much and listening too little

Whether it’s nervous energy or just bad habits, the results are the same. Your message is not understood as you intended. Improving your communication skills takes time and practice. Even the best speakers benefit from rehearsal and preparation!

  • If you are preparing for an important call or conversation, take a few minutes to jot notes and
    organize your thoughts. Locate a mirror and smile as you speak on the phone.
  • If you find yourself speaking rapidly, try emphasizing the pronunciation of important words. Give the listener something to remember.
  • Ask questions! Check to see if your message is being understood by the audience.
  • Practice presentations in front of a mirror. Make sure your gestures and body language match your intentions.

Great communication skills set you apart from the rest of the pack. If it is worth saying, it is worth being understood.

About the Author

Accent On Business founder and CEO Ellen Dunnigan is a nationally-recognized voice and speech coach for business professionals. She is specially trained in voice, speech, and English improvement. For more information
or to schedule an interview or assessment with Dunnigan, call (317)843-2983 or visit her website at http://www.AccentOnBusiness.net

Meet CMA Board of Directors Member Robert Shultz

If you’ve ever attended a CreditScape event or Credit Executive Symposium, you probably already know Robert (Bob) S. Shultz, a partner at Quote to Cash Solutions (Q2C) LLC, Trade Information Exchange LLC and Cutting Edge Business Resources & Solutions. Shultz has been consulting at these companies since 2002, and has been working in credit since 1980. A CMA member since 1984, Shultz said his favorite CMA benefit is the great networking opportunities and sharing of best state-of-the-art practices and resources.

“The professionals I have met in my years of membership have helped me repeatedly with ideas on how to streamline processes and how the credit department can add value to any company,” he said.

“By regularly meeting with peers, a credit manager will quickly realize that they are not alone. No one in your company truly understands your role or challenges like the people you connect with through your industry groups, or events like CreditScape, and other valuable CMA events.”

Shultz said that he believes the biggest challenge in credit is that trade credit management is quickly evolving into a multi-faceted responsibility with a critical role in a company’s overall working capital management. To gain a seat at the upper management table, it is essential to grasp credit’s role in the bigger picture. “The key for any credit professional today is to keep up with all the technological changes and evolving business priorities. The best way to do this is through networking, access to information and education, education, education!”

Outside of credit, Shultz loves the outdoors, especially camping, hiking, and fishing. He says he is also fortunate to have had many animals; horses, chickens, rabbits, ducks and goats. “They keep me landed and add to the life balance we all need with busy careers.” Bob and his wife, Cathie, enjoy their family, particularly their six grandchildren.

Credit’s Mission Statement

This article originally appeared in Credit Today, the leading publication for the credit professional.

Click here for Special CMA Member $10 Trial!

A truly effective credit department should operate with a central, driving mission statement, surrounded by the four specialized activities of credit approval, billing, collections, and monitoring. Before being able to set goals for these four activities, though, you need to create your mission statement–your “vision” of what you want the credit department to be and do. While most credit departments have forms, job descriptions, copies of letters, and memos, very few have formal written mission statements (visions) or the subsequent activities, policies and procedures that outline and reinforce these mission statements.

Before creating your mission statement, you first must define what credit is. Ask some credit managers, and you may get answers such as:

  • “The ability to pay”
  • “The willingness to pay”
  • “Faith and trust”

These are indeed factors in the credit approval process, but they do not define what credit is. Credit is “the selling of a product or service based on payment at a later date.”

Why even have a credit department? After all, it’s a cost center, isn’t it? It consumes resources in

  • Administration. These include the costs of credit checks, sending invoices, etc.
  • Accounts receivable. Sure, you can borrow from the banks based on the strength of your A/R to a point, but this only drives up your debt service cost.
  • The potential for bad debt loss.

In view of these costs, why even extend credit in the first place? Why not just demand full payment? Most credit managers respond to these questions with answers such as:

  • “My customers require it. They’re unable to pay all at one time.”
  • “I sell to customers who extend credit to their customers and therefore can’t pay us until they get paid.”
  • “Our competitors extend credit, so, in order to remain competitive, we must also extend credit.”

In one sense, these are slightly different answers, but in another sense, they are all saying the same thing. That is: The only reason to extend credit is to make a sale that would otherwise be lost. And, getting back to our earlier definition, credit is “the selling of a product or service based on payment at a later date.” The key word in this definition is “selling.”

So the true mission statement and vision of the successful credit department must be to use credit tools and activities to make sales that would otherwise be lost. This takes credit out of the “cost center” arena and places it squarely where it belongs–as a profit center.

Thanks to Credit Today’s Tip of the Week.

 

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The Most Valuable Tool in Your Credit Toolbox

Not too long ago at an Industry Credit Group meeting I attended, the Group chair was reading the “Question of the Month” that asked members what they felt the best tool in the credit manager’s toolbox is.

I’ve been dealing with credit and credit professionals for a long time, and the number of tools out there to help you make an informed credit decision are overwhelming. There are a growing number of bureau reports by the likes of D&B, Experian, Equifax, Ansonia, CreditSafe International or the combined multibureau anscersX report. There’s the new CMA report. You can check the references provided on the credit application. You can do a Google search for the company. You can check public record information. But the group members who answered the question all had the same answer: the best tool in the credit manager’s toolbox is participating and attending their credit group meetings.

One member at the credit group meeting clarified that statement by telling the group, “My Industry Credit Group and anscers.com are the only two places where I can get real-time information about my customers.” Another said, “I can benchmark the things my department is doing against what others in my industry are doing, helping me gain approval on projects that I otherwise wouldn’t have.” A third told mentioned a specific example where they learned that their contact person was no longer the best person to send their invoices to, allowing them to get paid by that customer. As you can tell by these statements, it’s as valuable now as it’s ever been to attend and participate in the Group meetings.

For CMA staff, it was great hearing the ACTUAL value that the members are receiving from attending their Industry Credit Group meetings, straight from the members’ mouths. At CMA, we go through great lengths to prepare for the meetings to make the time spent with other credit professionals in your industry as valuable as possible for you. We’re glad you’re benefitting from this preparation.

For those who haven’t attended a Group meeting in awhile, hopefully these testimonials will be the motivation you needed to come back to attending the meetings. And for those already attending the meetings every month, we thank you for your continued support, as we strive to make sure that your monthly 90 minute (or so) time investment is time well spent.

How to Find Credit Information About Your Customers by Using the CMA Credit Report, by Kim Lamberty, CAE

It’s hard to believe that 2018 is nearly half over. Time passes way too quickly!
At CMA, this has been one of the busiest years I’ve seen, as we are continuing to work on exciting new initiatives that will help your company’s credit and finance teams.

I love the opportunity to talk with members and customers; lately during these conversations we discuss cost savings and doing more with less. These issues are affecting every business. Utilizing cost-effective tools is one way to adhere to budget restrictions and bring efficiencies to the Credit Department. We’ve been looking at different solutions to help solve these issues and to that end I’m happy to tell you about the brand new CMA CREDIT REPORT. This report is a cost-efficient way to access data for small- to medium-sized companies that are not usually reported to the larger credit bureaus.

The CMA Credit Report, which is the result of a partnership with data provider Ansonia Credit Data, offers payment trends and experience on your customers so that you can make informed credit decisions. The report includes payment history, bankruptcies, risk score, balance, days beyond terms and more. Better yet, the report is available at an affordable price point: CMA members get 5 free reports to try during their membership calendar year, and then pay $12.95 per additional report. Members who contribute their data to CMA get an additional 5 free reports, and pay $10.95 per additional report.

The report is also integrated with anscersX, our multi-bureau reporting solution that allows users to get the most-used data elements from the major bureau reports with one click.

We are excited to hear from our members on your thoughts on the new report. We hope you enjoy this new benefit, and that it’s useful in your credit decision making process.

Five Things You Need to Know About Your Customer Before you Extend Business Credit

All business customers are not created equal. Even companies that look solid at first glance can hide festering problems that eventually can impact your bottom line. Successful credit management requires you to carefully evaluate the financial health of every business that asks for credit terms. According to Experian, here are 5 questions you should be able to answer before extending business credit:

1. Is the business what it claims to be?
Sometimes, companies needing credit will provide inaccurate information to win approval. Before opening an account, you need to confirm the applicant‘s bona fides, including its location, size, number of employees, annual revenue, years of operation and similar financial indicators.

2. What is its payment history?
Although past performance does not guarantee future results, a company’s payment history is often a strong indicator of how it is likely to behave in the future. Pulling a business’ credit report can easily provide you a snapshot of an company’s payment history as well as other risk measures.

3. Are there hidden factors that could affect its ability to pay?
Are there pending judgments, lawsuits, bankruptcies, regulatory citations or other “red flags” that could make it difficult for the applicant to meet its obligations in the future? This is another area where a business’ credit report will be a key factor in helping you uncover a potentially risky business.

4. How much credit should you extend?
All credit contains an element of risk, but you can mitigate that risk by limiting the amount of credit you extend based on factors such as the customer’s sales volume, debt to-asset ratio and similar aspects.

5. Under what terms should you extend credit to this customer?
You can mitigate risk further by carefully calibrating the combination of interest rates, minimum payments and other contract terms based on each customer’s individual financial metrics.

CMA offers solutions, such as Experian and other bureau credit reports, Industry Credit Groups and more to help companies determine how much business credit to extend. For more information on how we can help your company, contact Credit Management Association at 818-972-5300 or visit www.CreditManagementAssociation.org.

This article originally appeared here and has been reprinted with permission. 

Unsigned Check? Don’t Return It!

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

 

“Whether a mistake is intentional or unintentional, we do not allow incorrect checks to tie up our cash flow,” says a Texas credit manager we know, who never returns a check to a customer. Instead she sends the following letter:

ATTN: ACCOUNTS PAYABLE

Gentlemen:

Thank you for your check #3410 dated January 28, 2018, in the amount of $585.38.

While processing this check through our accounts receivable department, we noticed that it was not signed.

However, since we are entitled to the proceeds of this item, we continued to process it with the notation, “Signature guaranteed by ____________c.” Would you please instruct your bank to process this check when it is received?

Thank you for your cooperation in this matter and past good business. Please let us serve you again soon.

Sincerely,

“Everyone involved in the transaction–the customer, the customer’s bank, and our own bank–is informed of the error and how and why we corrected it,” she says. “The letter, along with a copy of the corrected check, is sent to the customer and to the paying bank. A copy of the letter is also attached to the corrected, endorsed check, which is then placed for deposit.

“For unsigned checks, our guarantee is typed on the signature line. For checks with varying amounts entered in the numerical and written sections, we correct the wrong amount with the notation Correct amount guaranteed to be (amount). Of course, I adapt the customer’s letter to fit each error,” she says.

“I’ve never had a customer or a bank question or return a check that is handled in this manner,” she concludes. “After all, we are only correcting and guaranteeing that to which we are entitled.”

Thanks to Credit Today’s Tip of the Week.

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Meet the CMA Board of Directors: Rosa Moody, Ahern Rentals

Meet Rosa Moody, director of credit for Ahern Rentals and a member of CMA’s Board of Directors. Rosa has been with Ahern since 2008 and has been in the credit profession for 25 years. A self-professed “credit nerd,” Rosa has been a CMA member for 10 years and says her favorite CMA member benefit is being able to access the incredible knowledge of CMA’s members and credit tools that are available to her credit team. “CMA does an amazing job of offering training on new reports and all other tools that can help a credit professional manage risk,” she said. “Attending the annual CMA meetings such as CreditScape reminds me that I’m not alone on this Credit Island.”

“The toughest part in credit for me is to educate our sales team on what it is that we do, and that we are here to help them. I’ve learned some practical ways to demonstrate our department’s function to our sales team through CMA events such as CreditScape and Group meetings. My CMA membership is one of my best tools as a credit manager.”

Aside from Credit, Rosa has one guilty pleasure that she says that many people don’t know about her: her favorite artist is Snoop Dogg.

Rosa and her company Ahern Rentals were recently named CMA Member of the Year for 2017-2018 for their support of CMA, and we are lucky to have her on our Board of Directors.

For more information about CMA and its services, visit www.CreditManagementAssociation.org or call 818-972-5300.

Credit Today Collection Agency Survey: Collection Profession Leaders Weigh In on the Credit Profession, By David Schmidt

This article originally appeared in Credit Today, the leading publication for the credit professional.
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How Capable is the Typical Credit Executive?

In our recent survey of collection agency leaders, we asked for their take on how their clients – credit professionals – are doing. Now, our readers might wonder “why ask this question at all?” And the answer to that is easy. Collection agencies – while certainly dealing with “after-the-fact” results – are in a unique position to judge the quality of the work of their clients. They see the “leftovers” from all kinds of accounts receivable operations – the good and the bad; the tightly run operations and the sloppily run. They see it all. They see the files and what went into the decisions to extend credit. Overall, they see as much as anyone which gives them a unique perspective enabling them to assess both the quality of credit decisions as well as the collection capabilities. In addition, the respondents we reached out to are all experienced and have been through many ups and downs.

Overall, collection agencies view the credit executives that they work with as generally doing a good job. Fewer than 1 in 5 were viewed as being in a critical situation either due to overwhelming challenges (13 percent) or lack of skills and ineffective processes (5 percent). Even so, a similar number of credit pros were seen as competent, but having difficulty keeping up with the rate of change (18 percent). On the top end of the scale, just 1 in 10 credit execs were seen as on the top of their game, with over half doing a good job, but still facing room for improvement.

This differs a from the views expressed by other vendors (software and service companies) in the trade credit marketplace. In a survey completed last summer survey completed last summer (see “Vendors Speak Out on Credit Profession Today”), the vendors felt that slightly more than 1 in 4 credit pros were in a critical situation compared to the 1 in 5 ratio observed by the agencies. Also, 6 percent of the vendors felt that credit execs are at a disadvantage in comparison to AP automation, an observation none of the collection agencies made, and which might be an indication of the technological bias of the vendors. Otherwise, over two-thirds of the vendors felt credit pros were competent or doing a good job, but facing significant challenges — just slightly less than the agencies.

Despite these moderate differences of opinion, both collection agencies and other trade credit vendors see a lot of room for improvement in credit and collection management. The good news is, both the agencies and other vendors are a ready source of expertise for you to tap into to lift your own skills along with the efficiency of your organization to a higher level.

What Will Impact Credit Execs the Most?

We also asked the collection agencies to “Please tell us about the two or three issues or trends that you expect to have a significant impact on your clients’ collection practices. What advice do you have for business credit execs as they seek to respond or adjust to these issues or trends?”

Read on to learn about the unique perspectives of these collection agency leaders:

Peter Roth

Risks are Evolving
“Debtors are more savvy than ever, and they are looking for ways to cloud the process. Credit executives must be very thorough in their vetting of the collection agencies they use. Proper licensing, bonding and insurance is vital. As businesses look for ways to increase productivity and lower overhead, they sometimes see the credit and collection department as merely a minor player in their business process. When a business begins limiting resources and manpower in the credit and collection process, the credit executive must have a relationship with an agency that can provide the “full measure” of service. The collection agency must have the flexibility to assist the credit executive throughout the credit and collection process.”
– Peter Roth, President, CST Company

John Student

“Credit and credit card fraud — do your due diligence. Increase new customers — follow for payments sooner than usual. Slow pay getting slower — slow pay becomes no pay when not addressed.”
– John Student, CEO, Jonathan Neil and Associates

Jennifer Tirra-Daniels

“Geopolitical risks remain elevated around the world, underlining certain vulnerabilities that could negatively impact businesses. It is important to do your due diligence, work with reputable sources and federal agencies to help screen customers and mitigate risk. Credit applications are good. Some businesses sell on open terms. With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before the ownership of the goods is transferred. Wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters for international sales.”

– Jennifer Tirra-Daniels, Director of Global Business Services, ABC-Amega, Incorporated

Bankruptcy and other Corporate Risks

“Bankruptcies will likely increase for the small and medium marginal businesses and my best advice would be to stick to credit limits as companies will try to obtain higher credit limits in the run up (90 -120 days) prior to filing bankruptcy. Companies that are turned down for credit will attempt to buy product COD/CIA but could write bad checks, so you should be aware of the bad check laws in any state that you do business in. I would suggest requiring payment by wire or cashier’s checks. Even with cashier’s checks, they can sometimes be fake or have payment stopped, so you should allow enough time for the banks to make a return of the item before shipping the product.”

– Bruce A. Jamrozy, President, Scott and Goldman

Mary Cowan

“Two issues involve large bankruptcies that affect all industries such as Westinghouse and large mergers by foreign entities. Credit professionals should have a clear understanding with their corporate office of what they can and cannot do on their own, and what has to have corporate approval. Do not get comfortable or lackadaisical in your collection practices.”

– Mary Cowan, President, NCS

Octávio Aronis

Stay Close to Your Customer
“1) Pay close attention to your clients’ financial situation as well as the country where your clients are located. 2) Get secured by using firm, enforceable terms with your customers. 3) Build contacts with good collection professionals in order to benefit from the relationships when needed.”

Octavio Aronis, Attorney, Aronis Advogados

“Get those personal guarantees signed in the beginning! Our clients sales departments rule the roost! Be wary of marginal credits in the beginning!”

– Bruce Seligman, President, Financial Recovery, Incorporated

Ed Burton

“The potential increase in domestic manufacturing and tax incentives will generate activity for this year and possibly into next year. With that in mind, gearing up for credit file review is imperative for keeping your customer base intact and reducing risk. Be sure your staff is retrained and ready for the continued growth. Too many companies are relying on too few truly experienced credit professionals. We are seeing many firms hire folks with no credit experience and relying on AI.”

– Edward Burton, President, CST Worldwide

Elliott Portman

“Clients aren’t prepared to chase their money and need to support the collection efforts by supplying documents and/or information when needed.”

– Elliot Portman, Attorney, Portman Law Group, P.C.

Budgets and Automation

“Budget constraints seem to reduce attendance in credit groups and limit ability to develop relationships with peers from competing companies. Often I hear new software programs are introduced without any contribution or input from the credit department or from the credit professionals in the frontline.”

– Lou Figueroa, Vice President Global Services, BARR Credit Services

Bob Gerstel

“Two key trends include budget cuts and the use of robotics. We believe that credit executives, if able, should be networking with their peers and customers to stay up on trends in the industry as well learn new tools that aid the profession.”

– Bob Gerstel, CEO, AG Adjustments

 

“1) FDCPA and TCPA add risk in commercial collections. It’s important to partner with vendors who have demonstrated compliance with both. 2) Business credit executives doing business internationally run the risk of corporate brand issues by using agencies not licensed nor bonded in the debtor’s country. Ask for documented compliance to avoid reputational risk. 3) Cost of recovery – review statistics of retaining “self-paying” customers who pay slightly outside terms and outsource all others to a white-label provider before sending to third-party. Manage your top 20% of revenue customers with white gloves and outsource the 80% of customers responsible for 20% of revenues.”

– Brad Lohner, Director, Priority Credit Recovery Incorporated

John Chotkowski

Staffing Issues

“Risks include:
1) Increased workload and not enough people to handle it. Utilize the tools available – collection agencies are one example.
2) In-house staff recently hired – untrained and unqualified. Develop and institute a concrete training process; and
3) Demand for easy credit. The growth spurt will make one forget the errors of the pre-2007 period. This is a huge mistake. There are no shortcuts to sustainable and healthy growth.”

– John Chotkowski, Vice President – General Collection Manager, Commercial Collection Corporation of New York

“Running with a lean staff may be among the biggest challenges credit and collection departments will face. With the possibility of a smaller, less experienced staff, the expertise of your collection agency may have a strong impact on the department’s performance.”

– Pete Roth, President, CST Co.

Terry Taylor

“Don’t overreact to anything, don’t rely exclusively on technology, keep away from the CFPB.”

– Jon Lunn, COO, Sko Brenner American

“Remain flexible.”

– David Ward, Delta Recovery Systems

“More education.”

– Terry Taylor, CEO, Dynamic Legal Recovery

In Conclusion

While this survey covered a lot of ground, we believe it provides credit execs with a unique framework for evaluating how your credit department stacks up with the recommendations of the collection agencies. If nothing else, we’ve listed 63 primary recommendations (and 41 second level recommendations) for improving collections and preparing for the next economic downturn. However, on top of this you get a peek at the shared perspectives of these 45 collection agencies.

If you don’t do a good job, they will end up cleaning up your mess. That can be good for an agency in the short term, but chances are you are not going to last long in your position and they will end up competing against other agencies for business with your replacement. The best collection agencies, therefore, take a longer view of their relationship with you and your company. They want to build a relationship that sees you and your companies succeed in terms of receivables performance. Moreover, they have both the expertise and capabilities to help you become a better credit manager. Good agencies offer much more than just third party collections, as this survey reveals.

Thanks to Credit Today’s Benchmarking.

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The Value of Advanced Collection Agency Reporting, by Sam Fensterstock

Does your current collection partner provide you, at your fingertips, online reporting that provides you access to every piece of information that you need to manage and review their recovery performance, and track how they are working your company’s placements?

  1. Are you able to review recovery analytics in a split second?
  2. Can you look at individual file performance, review legible collector notes with the click of a mouse?
  3. Can you easily communicate, online, with the collectors handling your files?
  4. Can you easily track account payments and agency remittances?
  5. Can you build any type of custom report that you need?
  6. Are you able to query your data by account, by date, or range of dates, etc., and are you able to export the information into Excel or other formats such as PDF, Word and CSV?

In general, if your collection partner provides you with all of the above, it will be very easy for you to get objective and current information about their collection performance and the status of your placements, online, 24/7.

Recovery Analytics – Why Is This Important?

The only way to judge your collection partners performance is to have access to the data that will help you analyze their results. You need an overall picture of how successful the agency has been in handling your accounts. To do this, you are going to need a report that gives you this information, and you need it to be current and accurate. And, as mentioned above, you’ll want the ability to export this data into Excel so that you can look at the data in multiple ways.

Additionally, for this information to be truly useful it must be comparative, over time. Are things improving or going downhill? For the total time you have been doing business with the agency, by year, by month, and by account, you’ll want to know what their gross and net recovery rates are (net is after adjustment for bankruptcies and defunct and withdrawn accounts, etc.). You need this number as it allows you to review their results as well as compare their performance to other agencies that you may be using.

Access to File Summary Data – The Importance Of Having A Snap Shot Of Your Placement Portfolio

You want to know what the total picture looks like. Where do they stand with your accounts today? This requires a status report that lets you know how they are doing right now. What does your current portfolio look like? You need to know what percentage of the monies turned over has been collected to date, in total, and by account. And, if the information is not in the collector’s notes, what future action is planned for each account in your portfolio.

Access to Collector Notes and The Ability to Connect Directly with Collectors – Why Is This Valuable?

You need to know, in detail, how each individual account is being handled. This means the collector’s notes must be available for your review. The notes will tell you about every contact the agency has had with your account, what its status is, and what future action is planned. Additionally, the account level detail should provide you with the ability to contact the collector either by email or phone so that you can discuss the status of specific accounts, if you desire.

Tracking Payments and Remittances – Knowing Where Your Money Is Bringing You Peace of Mind

Does your collection partner provide you with online access to all payments and remittances, or do you have to call them to find out if a payment on a file has been received, or if a remittance check has been sent? All this information should be available online whenever you need it, and it should be current and accurate. If the reporting is accurate, you will be able to easily determine after a payment has been received when you are going to get your remittance check, based on the agency’s remittance / escrow policy.

Customized Reporting

An ad-hoc customized report building function is a bonus. If the agency has this capability then you will be able to have them build for you any type of report that you want, based on requesting information for a specific subset of your accounts that meet a given criteria, such as by period the agency has had a claim, by collector, or by age past due at the time of turnover. Additionally, the agency should be able to reproduce, on their reporting platform, any type of internal reporting that you currently receive from your in-house system.

Conclusion

How long from the time I turnover an account will it take the agency to collect my money and send me a check? This is a great question and we would love to be able to answer it, but it’s unlikely anyone is going to be able to. This is an almost impossible question to answer as every account is not collectible and the age of an account at turnover is a major factor in determining how much, if anything, you will collect. However, if your collection partner has advanced web-based reporting that provides you the information we discuss in this blog, you will at least be able to get an overall view of their performance with the stroke of a mouse.

For information about AG Adjustments and our commercial collection services visit www.agaltd.com or email us at info@agaltd.com.

How Your A/R Data Completes the Picture, by Larry Convoy

Larry Convoy, lead group facilitator

I recently sent a letter out to CMA’s group leaders and volunteers for the upcoming year talking about the biggest challenges we’ll face over that time period.

I told them that this year holds many of the same challenges that commercial credit grantors faced previously with the added pressures to industries affected by the California fires and the so-called “retail apocalypse.”

Our belief at CMA is that the major component of a successful Industry Credit group is “member participation,” both online and by attending the meetings/conference calls.

For the 3rd consecutive year, we have been able to revitalize several Industry Groups by getting more members to contribute their A/R to the CMA data bank. This industry-specific data has increased the information on the anscers report which resulted in providing a more complete picture of the vertical markets that they participated in.

Did you know that companies that contribute their A/R:

  • NEVER have to respond to RFI’s, as the system will automatically look for your trade information
  • NEVER have to fill out their Past Due Report or Meeting Review Report, as CMA will automatically extract your information
  • Receive an additional 5 FREE CMA credit reports, bringing your total to 10/year
  • Create an industry-specific data bank that can be accessed 24/7

We encourage all group members to contribute. It will save them time and can result in a reduction in any third-party credit reporting contract they have.

An increased data bank, timely alerts, comprehensive RFI’s, packed meetings, engaged members and interesting best practices discussions make for successful groups.  A successful group will have the most complete information and will save everyone $$$$.

Feel free to call upon me throughout the year to assist in any way I can. I want the groups to be as successful, and as complete, as possible.

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

The Six Characteristics of the Perfect Business

By Rob Lawson, Editor, Credit Today

This article originally appeared in Credit Today, the leading publication for the credit professional.
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In most of my conversations with CreditRiskMonitor CEO Jerry Flum, we talk about markets and stocks. Jerry is an unabashed bear. He thinks the debt levels (measured as a percent of GDP, at all levels of government world-wide, as well as on individual levels) are at totally unsustainable levels. No living human has ever experienced what’s going on now, so no one has any idea what’s about to happen (hint: “watch out below!”).

At heart, Flum is a securities analyst and was something of a “boy wonder” of hedge funds long before they were common on Wall Street. He lectures at MIT and has close relationships with many of the top analysts on Wall Street. So we pay attention to his views.

In a recent conversation, the idea of “perfect company” came up.

He noted that in CreditRiskMonitor’s annual report, he cites 6 characteristics of the perfect business (which, we’ll forgive him for thinking he’s managing something fitting those characteristics). After checking out their list (which he says he wrote himself), we concur with his assessment and think it’s a list worth sharing:

  • Low price – Is the price of their product service low relative to its value? Is the price of the product or service low relative to its competitors?
  • Non-cyclical – Is the business immune to business cycle changes? (Think of an electric utility on one extreme vs. housing-related businesses on the other end of the spectrum).
  • Recurring revenue stream – Is the product or service something needed just one time (a TV for example), or do customers need to continue to purchase the product (razors or food, as examples)?
  • Profit multiplier – Does the business benefit from economies of scale as it gets larger (most software, cable TV or a railroad as examples)? Or do variable costs rise along with volume (anything labor-intensive, such as hospitals or hair salons, as examples)? Obviously, the latter is not as good as the former.
  • Self-financing – Does the business require outside financing (even if only occasionally) to stay afloat? (some auto dealerships and mortgage companies fit this description) If so, it’s dependent on the “kindness of others” and, from a long-term perspective, that always raises risks.
  • Management – as any credit pro will tell you, integrity is the first and most important thing to focus on here. But of course, competence is critical. You really do need both.

As a credit pro, you won’t go wrong if you keep these principles in mind when thinking about and analyzing your customers and your portfolio as a whole.

Did you like this article from Credit Today?

How CMA Continues to Help Its Members, by Kim Lamberty, CAE

Change is never easy. In this volatile business environment, more than ever before, change is the only constant. In the past few months, there have been many changes in credit, which is why we decided to use the concept of “managing change” as the overall theme at CreditScape. Due to outside factors such as budget cuts in credit, automation and technology, the credit manager’s role is ever changing, and it is imperative that you stay up-to-date on the latest changes in the industry.

CMA has been changing as well. In the past few months since I became President of CMA, we have been evaluating every facet of our business. Our top priority in every conversation has been, and will always be, taking care of our members’ needs in credit.

We are the oldest and most experienced organization that continues to be your best source for information to make credit decisions about California and Nevada based companies, as we have been since we were founded in 1883.

Here are some of the changes that we have been working on behind the scenes.

  • We have enhanced the quality of the conversations at our Industry Credit Group meetings. If you have not attended a meeting lately, I strongly suggest you take the time to hear about the valuable account discussions that take place in those meetings and the best practices from companies that operate in your same vertical market.
  • We have created new strategic partnerships that provide members with the best information that they can use to make credit decisions. Here are several examples of these partnerships:
    • The new CMA Credit Report, which represents your best chance in finding data about California and Nevada based companies, with a nearly 20 percent increase in the number of relevant searches over the report it replaced.
    • An enhanced anscersX multibureau credit report that includes data from a number of sources such as D&B, Experian, Equifax, and others, to make it easier (and less expensive) to find credit information in one click.
    • A partnership with Credit Today to provide useful and relevant articles that affect the credit profession.
    • Low-cost webinars on topics that members have told us they want and need, increasing overall participation in our education program.

Here are some things about CMA that will never change:

  • We are loyal to our members and continue to strive to make your experience with CMA the best that it can be. Many of our staff members have been with CMA for more than 10 years serving your needs in credit with accumulated experience and knowledge.
  • We are committed to the credit profession.
  • We are headquartered in the areas we service.
  • We are dedicated to providing you, our customer, with the best value in credit services that you need to make informed credit decisions.
  • Our credit reporting and construction forms filing services is one are among of the best in the industry.

I encourage you to join me in continuing to support programs and services that make CMA great, as we truly are your partners in credit.

If you have suggestions on how we can make your association better or questions about our programs, I encourage you to reach out to me at 702-259-2622 or by email at klamberty@emailcma.org.

We thank you for your continued loyalty and patronage.

General Contractors are Enforcing Statutory Right to Inspect Subcontractor Payroll Records

Christopher Ng, esq.By Christopher Ng, Esq.
Yes, California’s Assembly Bill 1701 was a doozy. For those of you not yet familiar with the new law, to make a long story short, AB 1701 makes a direct contractor (California speak for “general contractor”) jointly liable for the unpaid wages, fringe benefits, or other benefit payments or contributions of a subcontractor — at any tier! The new law governs private projects only and applies even if the direct contractor has paid its subcontractor.

Labor Code section 218.7(f) does give the direct contractor the right to inspect each of its subcontractor’s employees’ wage statements and payroll records maintained under Labor Code section 1174. Significantly, such “records must contain information sufficient to apprise the requesting party of the subcontractor’s payment status in making fringe or other benefit payments or contributions to a third party on the employee’s behalf.” Importantly, the direct contractor may withhold as “disputed” all sums owed if a subcontractor fails to timely provide the payroll or project information referenced below, until that information is provided. Without a doubt, judges, arbitrators, and juries will be soon called upon to determine factual disputes as to whether a subcontractor timely, properly and/or sufficiently complied with AB 1701 and the subcontract agreement’s requirement to provide such payroll or project information.

Subcontractors are reporting that direct contractors have updated their standard subcontract agreements to address AB 1701’s impacts — and in some cases, complain that direct contractors are now overreacting and overreaching.

Here are some of the common (and uncommon) newly created subcontract provisions proposed by direct contractors for California private projects going forward:

  • Subcontractor’s strict compliance with all wage and hour regulations, including specific defense, indemnity and hold harmless provisions to protect the direct contractor against claims for unpaid wages or benefits brought on behalf of the subcontractor’s employees;
  • Requirement for subcontractors to include a similar contractual provision in their own subcontracts that would require lower-tier subcontractors to also defend and indemnify the direct contractor for claims arising from their respective employees’ work;
  • Direct Contractor’s right to inspect payroll records (at a minimum, information set forth in Labor Code section 226) and project award information (that includes the project name, name and address of the subcontractor, contractor with whom the subcontractor is under contract, anticipated start date, duration, and estimated journeymen and apprentice hours, and contact information for its subcontractors on the project); specifically, subcontractors are being contractually compelled to provide payroll records and project award information at specific periodic intervals to ensure compliance with the law, and sometimes within 24 hours upon the Direct Contractor’s request (the records requested are similar to certified payroll reports required on prevailing wage projects);
  • A backcharge/withholding provision that confirms the Direct Contractor’s right to backcharge or withhold payments from the subcontractor pursuant to Labor Code section 218.7;
  • A provision giving the Direct Contractor the power to approve or reject the hiring of subcontractors of all tiers;
  • Requirement for subcontractors at every tier to provide security in the form of a properly worded payment bond or letter of credit to satisfy claims that are made against the Direct Contractor under the new law;
  • Personal guarantees from owners, officers, and other key subcontractor personnel.

In addition, many Direct Contractors have already implemented a cumbersome “belts and suspenders” type system to confirm evidence of proper payments to downstream employees and other third parties (e.g., securing signed payment acknowledgments by each subcontractor and sub-subcontractor employee and by those third parties entitled to recover fringe benefits or other contributions), as well as a system to prevent fraudulent claims (e.g., identification check-in software or other registration and security methods to confirm the presence and identification of all employees on a job site.

Of course, subcontractors should, at a minimum, flow down all appropriate subcontract provisions to their sub-tier subcontractors. Subcontractors will also want to limit and clearly define the documentation it must provide to the Direct Contractor to comply with AB 1701 and their contractual responsibilities.

 

The content contained herein is published online by Gibbs Giden Locher Turner Senet & Wittbrodt LLP for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel.

Copyright 2018 Gibbs Giden Locher Turner Senet & Wittbrodt LLP

Euler Hermes Says Global DSO Up +2 Days in 2017. Where Does Your Industry Rank?

According to a recent article published by Trade Credit Insurance provider Euler Hermes, there’s good news on global business growth, with a significant deterioration in payment terms. Days Sales Outstanding (DSO) across all industries increased by +2 days in 2017 to 66 days on average worldwide, its highest level since 2007. It had previously been stable for five years, around 64 days. Euler Hermes said that it expects DSO to increase by +1 day in 2018.

Globally, Electronics, Machinery and Construction have the highest DSO (all above 85 days). They are also the sectors where the number of companies with DSO exceeding 90 days is the highest: almost half of the companies in Electronics, two out of five companies in Capital goods and Construction. On the other end of the spectrum, Agrifood, Transportation and Leisure goods companies are paid a lot faster than the global average.

Where does your local industry measure in the equation? Ask your peers at your next Industry Credit Group meeting.

Read Euler Hermes’ full article here.

Missed the Webinar on Credit Card Acceptance? We Have Your Playback Recording Here

Credit card acceptance and surcharging continue to be two of the hottest topics among credit professionals. With more and more companies opting to pay by credit card, the surcharges can definitely eat into your company’s bottom line. At our recent webinar, Michael Williams from UTA and Ronald Clifford, Esq., addressed some of the most frequently asked questions they hear regarding credit card acceptance and surcharging from a practical and legal standpoint. Additionally, the question-and-answer session at the end of the webinar from fellow credit practitioners is worth your time to listen to.

The playback recording of the webinar is available free to CMA members, while non-members can get the recording for $79. Click here to request a recording of the webinar.

Characteristics Needed For Success

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

By Peggy Morrow

Do you have what it takes to succeed in the ever-changing business environment? Here are a few behaviors and characteristics I have noticed in successful people. How do you rate?

1. You have the ability to juggle multiple assignments. It seems as if everyone has too much to do today. It is important to prioritize duties and negotiate with the people who assign you projects. Spend some time brushing up on your time management skills.

2. You keep learning and growing in your knowledge of new technologies. The better you are at using new technologies, the more successful you will be.

3. You demonstrate an ability to adapt to change. I feel we are experiencing a cataclysmic time of change and it is not going to go away or slow down. Develop more flexibility by exposing yourself to new interests and taking more risks. Organizations want people who can quickly adapt to the whirlwind of change going on in the world.

4. You push yourself out of your comfort zone by deliberately changing your routines. Make it a point to reach out to people who are different than you. Go to lunch with different people than the usual gang. Even something as simple as changing your normal route home can make you more adaptable to change. Learn something new. Get out of your rut.

5. You are an exceptional communicator. Polish your presentation skills, writing ability, and personal appearance. Remember these channels of communication–your words, tone of voice, body language, and image. Are they all sending the same message that you are a competent professional?

6. You get along with your co-workers. Surprise! Not everyone is easy to work with. Compliment your co-workers on their work, let your work habits be a model to others, and stop criticizing others.

How did you do? Pick one you think you could improve and start working on it.

Peggy Morrow, CSP, is a professional speaker, seminar leader and author of the recently-released book, “Customer Service: How To Do It Right!” To have her work with your group call (281) 280-8190 or email peggy@peggymorrow.com

Like this article from Credit Today?

What Are You Bringing to the Table at Your Credit Group Meeting?

Recently, CMA hosted an Industry Credit Group meeting where there were only a handful of accounts listed in the past-due report, but the members who attended that meeting told us afterwards that it was one of the best meetings they’d attended. I suppose you’re probably asking yourself why, when the account discussion only lasted 15 minutes, would they say that? Quite easily. Everyone in the meeting brought something to the table.

Here’s a quick synopsis of the meeting. The Group read the antitrust statements and the handful of accounts from the report were discussed. A couple of members chimed in with payment experience about some of those accounts. Then the Group had a round-robin discussion about other accounts they either were having trouble with, or were so new that they didn’t yet enter them into anscers. During that part of the discussion, most accounts that were brought up were common accounts with someone in attendance, and everyone who attended was able to bring valuable information back to their department.

Arguably the most valuable part of the discussion followed, with the discussion topic of the month which segued into a 30-minute best-practices discussion on credit card acceptance in that industry. Everyone in the meeting discussed their company’s experience in accepting credit cards, from beginner to expert, and it was easy to see the value of attending this meeting, judging by the “a-ha!” moments I could see on attendees faces when key discussion points were brought up.

I know that every credit professional is very busy, and in rare occasions you may not have any accounts to bring up for the month’s meeting. Remember, a great Industry Credit Group meeting is more than just an accounts discussion; it’s the opportunity to speak firsthand with those in the same industry as you to see what processes they’re using, to understand their credit policies and procedures and walk away with processes that you can implement in your own business. In this particular example (and I’ve heard countless others like it), this type of information is not available anywhere else except for the Group meeting.

I remind you that even if you don’t have accounts to bring up this month, bring a best-practices question to the meeting or a solution that the others may not have thought of that’s helped your credit department. Your attendance at the meetings is valuable in that you could learn something from your competitor, or present something that could spark another important half-hour discussion.

What will you bring to the table at your next meeting?

CMA Board of Directors Installed for 2018-2019

Congratulations to the following Board of Directors members, who were installed as of May 1, 2018.

  • Gent Culver, ICCE (Chair), IGT
  • Pam Craik, CCE (Vice Chair), McKesson Drug
  • Nannette Bringard (Treasurer), Breakthru Beverage
  • Tracy Rosenbach, CCE (Counselor), Silgan Containers
  • TJ Nance, Walters Wholesale Electric Co.
  • Alvin Moreno, Nestle USA Inc.
  • Tim Cratty, Jackson Family Wines
  • Mark Speiser, SuperValu
  • Janet King, Joseph T. Ryerson & Sons, Inc.
  • Rosa Moody, Ahern Rentals Inc.
  • Brian Atteberry, BSH Home Appliances Corp.
  • Rob Meza, Brenntag Pacific, Inc.
  • Melissa Kobus, CCE (Advisor), Walters Wholesale Electric Co.
  • Robert Shultz, Special Advisor, Quote to Cash Solutions LLC (Q2C)

Each Board member will serve a term varying from one to three years.

The CMA Board of Directors for 2018-2019 includes (left to right): TJ Nance, Gent Culver, Pamela Craik, Rob Meza, Tracy Rosenbach, Tim Cratty, Janet King, Mark Speiser, Melissa Kobus, Nannette Bringard, Robert Shultz and Rosa Moody. Not pictured: Alvin Moreno, Brian Atteberry.

We appreciate your service and dedication for the future of the association and the credit industry!

Senior Credit Exec Forum: Boss wants to change terms on a customer slated for bankruptcy– any suggestions?

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

Question: My boss wants to change terms on a customer that is slated for bankruptcy in the next few months. Other than stopping shipment, any suggestions?

Thanks,

Credit Manager, Game Manufacturer

=====

Credit card, C.O.D or prepayment are just few of the terms you can change the customer to.

Regards,

Credit Manager; Industrial manufacturer

=====
Put them on 100% pre-pay. There’s no guarantee that the courts won’t consider it preferential payment, meaning you’d eventually have to pay a small amount back, but that only happened to us once.

Credit & Collections Associate; Industrial manufacturer

=====

Prepay should never be considered a “preference payment” since by definition, preference has to be a payment on antecedent debt. Prepay is your safest option.

If you don’t choose prepay/COD and instead you change terms to something shorter, you will set yourself up for a preference suit and you will lose your ordinary course defense. You would still have New Value defense if your boss insists on offering shorter terms.

Director-North America Credit Operations; Consumer products manufacturer

=====

If you’re sure that bankruptcy is imminent, our policy is to change the account terms to prepay and only accept credit card or certified funds/wire transfers for new orders. This is not considered preference. Once the bankruptcy is received; as long as its not a Chapter 7, we suspend the current account. We will open a new account again on a prepay basis once we receive notification from the court that the bankruptcy workout is accepted. It remains prepay terms until we’re able to assess the performance of the company. DIP checks are accepted and we continue to sell as long as the comfort zone isn’t ruffled. If suspicion of a change to Chapter 7 is in the horizon we do take precautions on sizeable orders.

Credit Manager, Household products manufacturer

=====

Further to the below point, if you offer Net 20 day terms (or less) and they file, you may be protected by the administrative claim provision 503(b)9 of the bankruptcy code (assuming it’s a Chapter 11 reorganization).
Each case is different, but Admin Claims receive a higher priority and are often paid 100% for any shipments made within 20 days of the bankruptcy filing.

Regards,
– Manager, Credit & Receivables; Industrial manufacturer

=====

You can also work out percentage payment at the time of the order and full payment before shipment.

Credit Manager; Manufacturer

=====

Prepayment is the safest option as it wouldn’t be considered a preference payment.

Credit & Collections; Medical equipment maker

 

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Do You Think (and Act) Like a Salesman When Visiting Customers?

A Rather Unusual Approach When Visiting Customers

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

On his visits to customer organizations, experienced international credit exec and now consultant Eddy Sumar (ERS Consulting Services) makes it a point to meet as many people as he can — everyone from the receptionist to the president.

“The receptionist, for example, will be my first contact anytime I call that customer,” he explains. “I want her to remember me, so she can facilitate my connection to the right person.”

Sumar also recommends spending time with everyone in the accounts payable process: the person who receives and processes the invoice, the person who signs the check, the person who authorizes release of the check, and so on. “You want to make all of them feel important,” he emphasizes.

As a former accounts payable person himself, Sumar understands what payables people experience. “I always remember wondering why salespeople visited the purchasing people, gave them gifts, and took them to lunch, but never paid attention to us,” he recalls. Sumar feels credit execs should makes it a point to give small gifts of introduction and appreciation to payables people, such as pens or key chains with your company logo, or to take them out to lunch. He has received a number of calls from these people thanking him for these gestures, he says.

More important than the appreciation he receives, however, are the results.

Three Big Benefits

Sumar has also found that personal visits can clear up misunderstandings that might have occurred over the phone. Once, for example, he had the opportunity to visit a customer whose payables person had been very difficult to deal with in the past. “When I visited, we seemed to hit it off almost immediately,” he reports. Following that, she did not default on even one payment, he related.

Another benefit: Many customers, when they are experiencing cash-flow problems, will be much more prone to initiate contact with you if you have taken the time to visit and discuss your problems before they become serious, allowing you to work out appropriate arrangements.

An unexpected benefit is also improved relationships with the sales department. “When salespeople see the value you can provide to an account, it often pays dividends,” he says. “Once, for example, a customer was so impressed with some of the things I was saying that he asked if I’d conduct a seminar for his employees. When the salesperson heard about this, it really strengthened our relationship.” Whether or not you take all the steps Sumar does, it always makes sense to think strategically about how to get the most out of your customer visits – and not to forget anyone involved in the payment process. They’re ALL important.

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

CreditScape Spring Summit Helps Identify and Prepare For Change in Credit

The CreditScape Spring Summit, Powered by United TranzActions, helped attendees uncover areas in their company’s credit operations where they could help implement change in their credit operations to improve the performance of their department. The event was an interactive learning seminar and workshop, which took place April 4 and 5 at the Hyatt Regency Orange County.

Based on the preliminary results of the post-event survey, attendees said they were provided with dozens of ideas to bring back to the office.

“This is an excellent opportunity to evaluate best practices and learn how to implement within your credit and finance team,” said Melissa Kobus, Assistant Director of Credit for Walters Wholesale Electric.

With the common theme of “dealing with change in the credit department,” attendees commented that the sessions met or exceeded their expectations, with every attendee who responded to the survey commenting that they would likely recommend CreditScape to a colleague.

CreditScape gave attendees insights on using social media to track their delinquent customers, tips on automation and how robotic process integration (RPI) will change the credit function in the near future, customer terms pushback assistance, preference claims, customer service tips, credit card surcharge strategies, reading and understanding your customer’s financial data, and a lot more.

Thanks to the attendees, sponsors and CMA members for their support of the event, and we look forward to having you at the next one in 2019!

Here are some photos from the event:

Bob Shultz addresses the audience at the 2018 CreditScape Spring Summit, powered by United TranzActions.
Keynote speaker Joel Block talks about managing change with the audience.
What would an event be without a selfie with keynote speaker Joel Block?
Eddy Sumar gives tips on good customer service techniques during one of the breakout sessions at the event.
Popular speaker Christopher Ng, Esq., updates the audience on construction law changes in California.
CMA Chairman Gent Culver addresses the crowd at the membership luncheon at CreditScape.

What to Say When Applicants Don’t Meet Your Credit Standards

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

Telling a new customer that they can’t get the credit they’d like is one of the most difficult — and important — things that a credit exec is called upon to do.

“Unfortunately,” says Bruce Diamond, formerly a credit manager at Horizon, “I do not think there is ever a win in trying to explain to a customer with poor credit why you will not extend credit. The explanation leads to a dialog that just goes in circles, and from my experience, usually ends with no better result than if you stick with your mantra. Mine is: According to the credit information that is available, you do not currently qualify for an open line of credit.”

By keeping your explanation very straightforward and to the point, you reduce the chance of getting into a deteriorating debate with the applicant.

The prospective customer will respond that he gets credit from others. Be ready for that. The simple reply to give is this: everyone has their own standards and unfortunately you do not meet ours.

Then stop talking and try to say goodbye.

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Boosting Credit Staff Effectiveness With Formal Performance Measurements

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

“It’s essential for every member of our associate family first to understand the limitations of our resources and then to be able to show how and why their function is important to the organization and how we can contribute to its profitability and growth,” declares David J. Carere, CCE, CPA, CIA, director of credit risk management for Rich Products Corp. (Buffalo, N.Y.). “Formal performance measurements help us demonstrate this. For example, we can show the total number of dollars in the receivables portfolio and the benefits the organization gets from timely collection of those accounts.”

Benefits of formal performance measures for associates include:

  • Clearly established expectations.
  • Alignment in pursuing goals and directions that are important.
  • Creation of a stable environment and a sense of certainty for the associates. “They know what is important and why,” explains Carere.

In setting targets, Carere realized that he needed to take several factors into account:

  • Targets must be consistent with and support the overall departmental mission and objectives.
  • Targets must be limited to a small number of important ones. “If you create too many, you not only water down the importance of each, but it makes it very confusing and overwhelming for the associates to deal with so many,” he explains.
  • Targets must be achievable. “If targets are not achievable, it only sets associates up for failure,” notes Credit Manager Suzanne Gastle.
  • Targets must be set for both individuals and teams. “There are some measures that are good for individuals and some that are good for a team,” explains Carere. “When individuals are recognized and rewarded for excellent personal performance, and a sense of team is fostered, you get the best of both worlds.”

Associate Input

While Carere and the department managers could have created the performance measures in a vacuum, they elected to encourage and utilize associate input. “Associates need to know that the measures are fair and objective, and they need to understand why they are important,” notes Carere. “For example, they need to understand how much money the organization saves when they are able to reduce DSO by one day.”

Carere began discussing the performance measurement initiative at monthly departmental breakfast meetings. He also began soliciting associate feedback at these meetings. One result of this feedback was a decision not to set individual DSO goals as he had initially planned to do.

“They helped me see that there was a real lack of comparability with this approach, as well as some other potential problems,” he explains. Taking this feedback into account, Carere eventually changed the DSO component to a team goal. He also implemented a feature that measures DSO performance from year to year, taking extenuating circumstances into account.

Departmental Measures

In the Rich Products’ organizational structure, the credit and collection department handles credit extension and collection efforts, and the accounts receivable department applies payments, reconciles accounts on a daily basis, and initiates deduction resolution.

Measurements/targets for Credit and Collections are:

Team Goals:

  • Current year DSO compared to prior year DSO (adjusting computation for changes and new unusual factors, such as differences in the customer base).
  • Bad debt as a percentage of credit sales (comparing current year’s percentage to prior year).

Individual Goals:

  • Percentage of accounts assigned to a credit associate that have been properly followed up on.
  • Achievement of mutually established targets for slow-aging categories.

Measurements/targets for Accounts Receivable are:

Team Goal: Timely application of customer receipts by specific deadlines throughout the week.

Individual Goal: Accuracy of receipt applications, measured by monthly self-reporting errors.

Communication, Rewards and Recognition

Providing feedback to associates on a regular basis is important to the success of an initiative like this. “Associates see their progress on a monthly and quarterly basis,” explains Carere. He posts performance numbers each month, and when associates meet with their managers to review quarterly performance objectives they discuss performance measurements, too.

How are associates rewarded for improvements in performance? While many executives might arbitrarily create a blanket reward system, Carere realized that each person is unique and is motivated by different things. For this reason, he arranged for the department managers to meet with each associate and find out what they wanted (e.g., time off, gifts, cash, etc.).

Despite the challenges associated with this process, Carere continues to focus on what he considers to be the most important motivator of all–recognition. “It doesn’t put food on the table,” he admits, “but people really like to hear how much they are appreciated.”

People or Technology? Where will the improvements come from in the department? Carere believes that the associates have always been doing a good job. As such, he does not expect them to work a great deal harder.

Where he expects improvements to originate is with technology. “For example, we’re implementing a document management system in the cash receipts area to improve performance there,” he says.

On the surface, it may seem that expecting technology to make the improvements runs counter to a performance measurement system. After all, if it is technology that is making the improvements, why reward the associates? In addition, what motivation do the associates have to improve if the opportunity to improve is in the hands of technology?

Carere explains that, while technology is the basis for the improvement, associate involvement with the technology is critical to success. “We arrange for them to participate in the selection of the technology,” he says. “In addition, the performance measurement system provides the motivation for them to embrace the technology and utilize it to its fullest.”

While it’s too early to see any specific improvements as a result of the system, Gastle expects some benefits soon: “I think the measurement system will eliminate a lot of the subjectivity we’ve had to deal with in the past.”

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Nine Key Questions to Ask Yourself Before Putting Together an Improvement Plan

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

  1. How does the credit department fit into the bigger corporate picture?
  2. Why are customers calling you?
  3. What are your ideal service-level objectives?
  4. What does it cost to run your department for one hour?
  5. Are your employees happy?
  6. What does the future look like in 12 to 18 months?
  7. How does existing and new technology affect your department?
  8. What’s your disaster recovery plan?
  9. What are your three most important improvement initiatives?

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Why Delinquent Accounts Require Swift Action, by Sam Fensterstock

When an accounts receivable ages past its due date, it is vitally important to take positive action, not only to maintain a healthy cash flow but to adapt to constantly changing market conditions. In our current economic times, a savvy management understands that managing the cost of doing business is vitally important. Cash is king, and too many delinquent accounts can bring your business to a standstill. Don’t let current economic conditions provide the basis for extending the time you will permit an account to age prior to instituting formal collection efforts. Relaxing payment requirements will severely impact your company’s cash flow and bottom line.

THE COLLECTIBILITY OF DELINQUENT ACCOUNTS

A survey by the Commercial Law League of America (CLLA) illustrates how much more difficult it is to collect delinquent debt as it ages.


Source: Commercial Law League of America

According to the survey, after only three months, the probability is that you will only collect about $0.71 of each delinquent dollar. After six months, only about $0.55 of each dollar will be collected. And after one year, you will have to settle for about $0.22 of every delinquent dollar. Essentially, time is your worst enemy. The sooner you implement aggressive collection proceedings the better off you will be.

THE BOTTOM LINE IMPACT OF WRITE-OFFS

When you write-off an account, cash flow is affected, but so are sales and marketing.

The “multiplier” impact on sales from bad account write-offs is shown in the following table:


For example, a business with a net profit of 2%, that experiences $100,000 in write-offs, requires an additional $5,000,000 in sales to offset the lost profit on the $100,000 in write-offs. Or, if you have a net profit of 4% and write-off $250,000 in bad debts you need an additional $6,250,000 in sales to recoup the lost profit. All the more reason to act sooner rather than later.

WHY USE A COMMERCIAL COLLECTION AGENCY

The primary reason most companies use a third party collection agency is because their internal efforts to collect the debt have failed and management believes that the company’s resources are best spent making better credit decisions and attending to the customers that are paying their bills rather than wasting their personnel’s time chasing accounts that are not going to pay.

A commercial collection agency is the embodiment of “third party psychology”. Once a third party agency becomes involved the debtor knows that the third party will do whatever is necessary to collect the money due including employing legal remedies if necessary to collect the debt.

A collection agency will not have any sympathy for the stall tactics and excuses employed by debtors. “Third party psychology” will motivate the debtor to pay because they want to avoid the additional costs, and the potential embarrassment that comes with a prolonged collection effort and the possibility of litigation together with negative information provided to credit reporting companies that may impact their ability to get credit in the future.

A professional collection agency has resources, methods and techniques for collecting delinquent debt that are not available to the average company. In some cases, a full asset and liability search is required to understand the current financial situation of the debtor and their ability to pay the money owed.

In particular, an agency has the ability to access databases that may be needed to assist in identifying and locating the responsible party related to the debt and in identifying and locating assets that may be used to satisfying the debt.

State-of-the-art collection software is expensive but vital when pursuing delinquent debtors. Collection agencies today utilize software that merges all account information into a sophisticated database that can be used to coordinate all collection activity, i.e., telephone calls, call history and notes, follow-ups, promises, call-dialers, collection letters series, etc. to maximize the collection process while keeping costs down. The result is a complete record of all collection history and the ability to use this information to make better collection decisions.

The above are only some of the reasons to use a professional collection agency. There are many more, like skip tracing for example, but you get the point.

CONTINGENCY FEE STRUCTURE

Professional collection agencies usually work on a contingency fee bases. If they don’t collect they don’t get paid. Additionally, agencies are also adding and collecting the collection costs and attorney fees to the past due balance. This helps to reduce the overall collection related costs if a collection is made. Collection personnel employed by agencies are primarily motivated by the opportunity to make more money. Today, most collection agencies compensate their collection staff based on their performance rather than on an hourly basis. This has increased individual collector performance. In summary, when you utilize a professional collection agency they will exert every effort possible to collect the money due you. If they aren’t successful they have increased their overhead and impacted their bottom line. Not a welcome outcome.

CONCLUSION

When should you employ the services of a professional collection agency? According to the chart and table above as soon as you are being stonewalled by your debtor. The sooner you act the more likely you are to collect at least some of the delinquent debt. And, the multiplier effect of write-offs is significant. Timing is everything if you want to maximize your cash flow. The increase in debt that is not collectible from 90 days overdue to 180 days overdue is over 44%. Sooner is better!

For information about AG Adjustments and our commercial collection services visit www.agaltd.com or email us at info@agaltd.com.

Survey: Thirty Percent of Credit Departments Are Understaffed

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

Thirty percent of today’s credit departments are understaffed, according to data from Credit Today’s soon-to-be-released Staff Benchmarking Survey. That is despite a significant ramping up of staff sizes in comparison with seven years ago, during the depths of the Great Recession.

Credit Today has been working diligently behind the scenes for some months now putting together its most comprehensive Staff Benchmarking Survey ever, and here’s the first unveiling of data from this significant industry survey.

Just How Short?

Of those departments that are understaffed, it would require, on average, 4.1 additional staffers to get them up to where they’d like to be. This is up markedly from 7 years ago, when the average shortfall was pegged at 1.7 staffers. Digging a little deeper, we find that consumer products manufacturing credit execs — in particular the larger firms — are facing the greatest staffing shortfall.

Understaffing Impact on DSO

The second big takeaway from this stat is a comparison of the DSO of those who are understaffed with those who are fully staffed. Companies whose credit departments are understaffed have a DSO 3.3 days higher than those describing themselves as adequately staffed.

We can’t say definitively whether the under-staffing is the cause of the higher DSO — certainly many variables come into play — but a staffing shortfall leaves credit departments unable to manage A/R as effectively as they could and DSO is certainly likely to suffer as a result.

Our belief has always been that at a well-run credit department, staffing is an investment that pays dividends and this statistic bears that out.

Top management — when considering the costs of staffing — ought certainly to also factor in the costs of DSO, as well as all the other profitability metrics associated with well-run receivables.

The following table breaks down the relationship by industry.

Stay tuned for the formal release of this survey — and much more in-depth data — soon!

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Piece by Piece, Step by Step, by Joel Block

Goal setting is very difficult for many people, in part because they try to swallow the whole elephant all at one time. Sometimes goals are very easy to understand but for whatever reason, they’re very difficult, confusing, and sometimes seemingly impossible to achieve.

In the 1991 movie “What About Bob,” Dr. Leo Marvin wrote a book called “Baby Steps” and that pretty much summarizes the way that goals need to be achieved.

I travel frequently. Let’s say that I’m going to Florida. I don’t focus on going to Florida; I focus on the many steps that it takes to get to Florida. For example, first, I have to get in my car and make sure that the car has gas. Second, I have to get myself to the parking area at the airport. Then once at the parking area at the airport, I have to get myself onto the shuttle bus to the terminal. And once I’m at the terminal I have to get through security. And once I’m through security I get to the gate, board the plane, take my seat, change planes, whatever the next series of steps are. There might be 15 different steps, but when I travel I focus on doing one step at a time until I’ve arrived at my destination.

Business goals, educational goals, personal goals, and social goals all work the same way. Break them down into little pieces.

Sometimes it’s easier to understand sports than it is to understand real life, because sports are so definable. The rules are so clear and well understood. Any game or sporting event is easy to follow if you understand the rules. Everyone on the field understands the rules, and everyone in the stadium understands them too, and for those reasons, everyone knows when a player is making the right move, the wrong move, or if he is completely off course. But somehow in our life, setting goals just doesn’t work the same way.

We have to get in the habit of breaking big and seemingly impossible goals into bite size pieces. For example, writing a book is not a book, it’s a series of chapters. Or maybe the focus shouldn’t be on the whole chapter but rather on a number of pages or a series of paragraphs. And maybe those paragraphs follow a series of outlines that require some research.

One way or the other, you have to ask yourself, “What are the pieces that will eventually get me to the place I want to go?” By asking that critical question, you will eventually get yourself to the goal line. It’s very tough to get through the Red Zone to the goal line. The first 80 yards are pretty easy, but once you get into the Red Zone, those last 20 yards, the field is short, players are on their guard and there just isn’t a lot of margin for error. The Red Zone is where most of the fumbles take place but it’s also where the points are made.

Taking the ball 90% of the way down the field isn’t good enough because you don’t get any points for 90%. You have to cross the goal line. You have to identify your goals, you have to understand the objectives, and you have to really be clear about what it is you want to do and why you want to do it. When you understand what the outcome is going to be and what the reward is to you when the job is done, it gets a lot easier to plan the work and break the job into lots of little pieces.

We’re all doing more with less these days. As the organization changes, how can credit professionals create meaningful goals despite internal and external changes that are beyond their control? How can credit professionals proactively bring change to their organizations by changing process and policies to increase cash flow? How do you create a credit culture where people think about doing business differently and are purposeful about making and accepting change that they believe will make a positive difference? Attending CreditScape will help arm you with tools to do your job better. Visit CreditScapeConference.com for more information. I hope to meet you there.

Joel Block is a business advisor and long-time venture capitalist and hedge fund manager (gobbledygook for “professional investor”) who is based in the San Fernando Valley area of Los Angeles. He will speak on Managing Change in Your Credit Department at CMA’s Spring CreditScape Summit on April 4-5, 2018. For more information about the event, visit www.CreditScapeConference.com.

Predicting the Future, by Joel Block

Did you ever notice how some people always know when the light is going to turn green while sitting at a red stoplight? Do you think maybe that they are looking side-to-side for the predictor about when the green light is going to turn red going in a cross direction? The same in business, there are some people who just are more in touch with signals and signs that point to trends and activities that are about to take place.

Driving is a great example of being predictive and looking for signs that indicate trouble or that help to change your strategy. There are clear rules in driving. One should stay a certain distance from another car in driving. However, sometimes cars do not apply their brakes evenly and they will jerk on their brakes a lot like in business sometimes people do not do things in the smartest way. When you are behind that kind of driver, maybe the best strategy is to look at brake lights of a car ahead of him so you can get a sense of when the slowdowns are coming. Business people need to develop signs of their own that are similar to the kinds of signs that drivers work toward or use. Similarly, traffic signals and the way that you can predict when a light is going to turn red based on the yellow or when a light is going to turn green based on the crossing red. What are the signs you are looking for?

When you come to CreditScape, I’ll be talking about some of these predictors in helping you navigate a changing business environment. With more metrics than ever before available, and the adage of “doing more with less in credit” becoming a reality for most businesses, attending an event like CreditScape will help arm you with tools to do your job better. Visit www.CreditScapeConference.com for more information. I hope to meet you there.

Joel Block is a consultant and long-time venture capitalist and hedge fund manager (gobbledygook for “professional investor”) who is based in the San Fernando Valley area of Los Angeles. He will speak on Managing Change in Your Credit Deparment at CMA’s Spring CreditScape Summit on April 4-5, 2018. For more information about the event, visit www.CreditScapeConference.com.

Sometimes, You Have to Get On an Airplane, by Joel Block

Unfortunately, we can’t accomplish everything by telephone, email, webinar, TeleSeminar, text or Skype. There was a great United Airlines TV commercial in the 1990’s with a CEO passing out airline tickets to his team telling them to get “face to face” with the customers once in a while.

Some years ago, I found myself in a similar situation, up against such a frustrating problem, that I finally got on an airplane to go and solve the problem in person. The result was shocking, and fast.

I started my career in the CPA business in the mid 1980s, when I worked for PriceWaterhouse (now called PwC). The last account I worked on at PwC was a giant syndicator. My job, with an army of other guys, was to convert the books and records of over 500 partnerships into tax returns. The accounting was horrible and the tax work was tedious but I loved reading the partnership agreements. So I left the firm and went straight into real estate syndication but along the way, I became a CPA in Colorado but I gave up my license after 10 years because I didn’t practice accounting anymore.

At one point in time, it became advantageous for me to reactivate my CPA license. As an Expert Witness, having a CPA license adds to my credibility.

Even though I worked for PwC 25 years ago, the HR department sent a letter to the California State Board of Accountancy indicating that I did work for the firm, but the CPAs at the firm who I worked for have all either left or by now, retired. Therefore, no one could vouch for the work I did. Unfortunately, the State Board of Accountancy wanted a CPA to sign off on my hours worked at the firm.

I was unable to get a CPA at PwC vouch for me and the State Board of Accountancy wouldn’t budge. This went on for over two years and I couldn’t bring it to resolution although there was one woman at the State Board that been overseeing my case and the back and forth of our discussions.

One day I had enough and I decided the only way to break the log jam was to get on an airplane, go to Sacramento and physically show up at the offices of the State Board of Accountancy. I didn’t have an appointment but I knew they were open.

When I arrived in Sacramento, I called the State Board of Accountancy. As expected, the person that I had been dealing with was in the office. Not having an appointment would normally be a terrible idea but showing up unannounced seemed like a better tactic in this situation. So I showed up.

I explained the problem to her in person one last time – that no CPA at PwC would sign off on my hours, but their HR Department had done so, and it just didn’t seem reasonable that I should be penalized because I wasn’t able to find a CPA willing to sign off on my hours.

When I explained the situation in person, it seemed to make more sense to the woman who was working with me. Maybe she was more focused on the problem because I was standing in front of her. She went and got her manager who ran the initial licensing unit, and after I explained my story to her, it wasn’t five minutes before she signed her name on an approval slip and attached it to my file. A problem that I had been working on for over two years was resolved in less than 15 minutes.

There’s a big lesson here. Sometimes you have to just get on an airplane and deal with the problem head-on and face-to-face. If you don’t do that, sometimes you’ll drown in your problems for years on end. If you deal with people that are far away or if you sometimes get in the habit of talking to people only by telephone or other electronic media, you’re missing the boat. Sometimes you just have to change things up, get on an airplane, and go make it happen. It worked for me. Maybe this advice will help you.

When you come to CreditScape, I’ll be talking about change, including changing your mindset about how you do your job and approach credit. As the credit profession (and the whole world, for that matter) has changed with technology, attending an event like CreditScape will help arm you with tools to do your job better. Visit www.CreditScapeConference.com for more information. I hope to meet you there.

Joel Block is a business advisor and long-time venture capitalist and hedge fund manager (gobbledygook for “professional investor”) who is based in the San Fernando Valley area of Los Angeles. He will speak on Managing Change in Your Credit Department at CMA’s Spring CreditScape Summit on April 4-5, 2018. For more information about the event, visit www.CreditScapeConference.com.

Coming Soon: How to Effectively Manage Change in Your Company’s Credit Department

The only thing constant in business these days is change. As the organization changes, how can credit professionals respond effectively to internal and external changes beyond their control? How can credit professionals proactively bring change to their organizations by changing process and policies to increase cash flow? How do you create a credit culture where people think about doing business differently and are purposeful about making and accepting change that they believe will make a positive difference?

Stop us if you’ve heard any of these scenarios before. Your boss comes to you and tells you that you need to start accepting credit cards (when your company hasn’t done that before). How about this: your company is repurposing someone in your already short-staffed credit department. Or, maybe your previously great-paying customer of many years tells you, “We’re changing your terms. You must accept in order to continue to do business with us.” Or, have you wished that you could have that proverbial “seat at the table” with upper management?

At CMA’s Industry Credit Group meetings, the majority of the best-practice conversations that were had in 2017 had something to do with managing changes like the ones mentioned above. As a response to these conversations, CMA has put together a program centered around managing changes like these, to help you do your jobs better. The program is geared towards practitioners with all levels of experience and expertise to leverage the knowledge and experiences of practitioners who can help you be ahead of the curve and effectively manage change.

The 2018 CreditScape Spring Summit, powered by United TranzActions, will feature a two-day workshop that includes a keynote address on change management, training sessions, expert practical and legal advice, and networking with other credit professionals. The goal of CreditScape is to provide an opportunity for credit practitioners at all levels of experience and expertise to come together to solve problems and provide solutions for their real-world issues they face at work.

Over the next few days, our keynote speaker Joel Block will be guest blogging about dealing with change in your credit operations, a topic he will explore at CreditScape.

We invite you to join us at the Spring CreditScape Summit, powered by UTA, April 4-5, 2018 at the Hyatt Regency Orange County (or view the website at www.creditscapeconference.com), and to read the blogs, as the information you’ll receive can help you do your job better in the long run.

What changes in your credit department do you think are the most difficult to deal with? We welcome your feedback.

Here are the other posts in this series:

Coping With the Chronic Complaining Customer

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

Like it or not, handling complaints is part of the work that goes on in a credit department. And it’s a task that’s vital to your company’s success. How well you handle gripes from disgruntled customers can make the difference between getting paid and keeping the customers–or losing their business altogether.

You answer the phone, hear the voice on the other end of the line, and feel your blood pressure begin to rise. It’s one of your chronic complainers, credit customers that always have a problem. Much as you’d like to turn the call over to someone else, you’re the one of the firing line. How are you going to keep from losing your cool–and losing the customer? Here’s help.

  1. Listen actively. It’s important not to turn a deaf ear to the chronic complainer. To begin with, there is often a legitimate grievance of some kind. If you don’t take corrective steps, the problem could come back to haunt you.

    Key Point:
    Paraphrase the complainer’s main points. Say something like “Excuse me, but do I understand you to say that the package didn’t arrive, you’ve written twice and received no response, and that’s why you didn’t pay your bill?”

    Added point: Be sure to acknowledge the caller’s feelings. A big part of the chronic complainer’s problem is the sense of powerlessness that comes from feeling that nobody knows, cares, or even understands how he or she is suffering. Verbalizing what you take to be the customer’s emotional reaction to the situation helps to break the cycle of blame, ignore, blame-for-ignoring, etc.

  2. Establish the facts. A key feature of chronic complainers is their tendency to exaggerate facts and then to overgeneralize them. Thus, if a chronic complainer tried to call you three times during lunch hour, it becomes: “I tried calling you all day, but, as usual, you were trying to avoid me.”

    Key Point: Limit the scope of the complaint by asking questions that isolate the facts. Ask when, exactly, the customer’s unanswered calls were made, unanswered letters were written, or the problem was first noticed. Check your files or phone logs to verify these statements, and state your findings. Remember to keep the discussion on a factual level. Don’t comment on the implications of the facts because this will lead very naturally to responses like: “You see, I told you your department fouled up.”

  3. Resist the temptation to apologize. Although apologizing for some glitch may seem like the most natural thing in the world, it’s the wrong thing to do when you’re faced with an unhappy credit customer.
    Reason: Since the main thing the person is trying to do is fix blame–not solve problems–your apology will be seen as an open invitation for further blaming.

    Key Point: Ask problem-solving questions. For instance, ask “Would an extended warranty solve your problem?” or “Would a credit to your account be satisfactory?”

  4. Force the complainer to pose solutions. If the chronic complainer ignores your suggested solutions, evades the opportunity to help, and persists in trying to get you to admit what a poor company you work for, throw the ball back into the complainer’s court with this gambit:

    “I have to speak with someone else in 10 minutes. What sort of action plan can we work out in that time?”

    If the customer can’t come up with anything, he or she should at least recognize by this point that you alone can’t take all the blame for the impasse. And if the person does come up with a suggestion–no matter how impractical–you will have at least succeeded in getting him or her to stop complaining. Now your customer should be much more receptive to whatever reasonable compromises you come up with.

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

D&B Credit Helps You Monitor & Manage Your Account Risk

When you work with multiple accounts, staying on top of each and every one can seem impossible. When risky accounts slip through the cracks, your business could be affected. But by closely monitoring your accounts and being alerted to changes, you can make faster credit decisions and protect your business.

D&B Credit can help you manage and monitor your account risk with ease. User-friendly, smart and simplified, D&B Credit makes accessing the industry-leading relationship data and financial scoring models from Dun & Bradstreet easier and more effective than ever. Now you can keep a close eye on your key accounts and better monitor your entire portfolio.

D&B Credit is a modern, dynamic platform that allows you to:

  • Configure alert profiles to effectively monitor customer financial health and protect your business.
  • Consolidate alerts into a daily email, plus view them on your portfolio dashboard, homepage and credit reports.
  • Get a detailed history of alerts on any of the businesses you’re tracking.
  • Enhance corporate governance by ensuring that all accounts are monitored and meet corporate standards.

Talk to your CMA account rep to learn more about D&B Credit!

How CreditScape Can Help You Achieve Your New Year’s Resolutions, by Gent Culver, ICCE

As a seasoned credit professional of more than 30 years, I have never seen so many changes in my career as I have in the past few years. From electronic payments and credit cards, to fairly consistent paying customers changing their own terms, to expanding markets and doing more with less, change is something that’s been happening at a much more frequent rate. How you deal with these changes can really make or break your company’s credit department, its cash flow, and ultimately your career.

Now that we have all made our “New Year’s resolutions,” and a month has come and gone since we made them, I urge you to make sure you don’t drop the ball on your personal and professional goals.

Maybe you would like to improve your own personal skill set and the overall skillsets within your organization. Or perhaps you want your team to get up-to-date with the latest credit training / information in the marketplace. For me, as I plan for 2018, I look at ways to improve our credit department and include them in my budgeting process. I urge you to please take some time to review the latest CMA CreditScape Spring Summit information. By attending the two days of workshop training, I believe that it will propel you and your department to the next level.

What will be covered this spring…“Dealing with Change Management.”

Here are a few of the items that stood out to me:

  • All Levels of Expertise Welcome – Good for beginners to experts in your departments. With 14 sessions, there is something in there for everyone, including customer service skills, stress management, and financial statement analysis.
  • Skills for the credit manager of 2022 – What should credit professionals be doing now to make sure they’re ahead of the curve in 5 years, and what skills should they already have.
  • Customers who change their own terms – With an increasing number of companies trying to dictate their own terms, what can, and should, credit professionals do?
  • Changing existing processes through automation.
  • Managing change within and outside of your company.
  • Getting a “seat at the table” with upper management.
  • …and a lot more.

Plus, the discussions are led by practitioners, not marketing people, to provide you with tangible results to bring back to the office.

In an environment where a credit professional’s time is at a premium, we hope to have your support and attendance to help “prove” that CMA is doing what’s best to help your company’s credit department.

I hope you have a great year and are able to reach your personal and professional credit goals. Please remember that CMA is here to help.

Thanks for reading!

Can the bank seize these goods, even though the creditor and supplier agreed they were on consignment?

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

“We just heard you’re going to be selling off inventory from Claire’s Concrete, Inc.,” said Florence Sherman of FirstRate Concrete.

“That’s right,” replied Joe Kaplan of WestEnd Bank. “We had a security interest in all of Claire’s inventory.”

“Well, a lot of the raw materials Claire’s had belonged to us,” Sherman said. “We sent them materials on consignment. If they didn’t sell, we could take them back. Or, if we needed material manufactured into specific forms, we had Claire’s do the work, and we paid for it. So, we’ll be taking those materials back.”

“I see no indication that those materials belonged to you,” Kaplan replied.

“Look on the inventory sheets. Some of the materials have ‘FR’ in front of them. That means they belong to us.”

“But I can’t tell by looking in the warehouse which material is which,” Kaplan complained. “You didn’t post a sign. I didn’t find any UCC filing that identified your interest in any of these materials.”

“We didn’t have to file under the UCC,” Sherman snapped. “Claire’s knew which goods were which, and we had a firm understanding that our goods were to be kept separate from theirs.”

“Do you have this agreement in writing?” Kaplan inquired.

“No, it was an understanding,” Sherman stressed.

“Well, if you wanted to protect your interest in your raw materials, you should have identified them,” Kaplan repeated. “As a secured creditor, I must be able to come in and decide what goods belong to whom. The way things look, it appears everything belongs in Claire’s inventory. We’re going on with the sale.”

Can WestEnd Bank sell all the raw materials?

Yes they can.

Under the UCC, if goods are “delivered to a person for sale and such person maintains a place of business at which he deals in goods of the kind involved, under a name other than the name of the person making the delivery, then with respect to claims of creditors of the person conducting the business the goods are deemed to be on sale or return.”

Therefore, when Sherman shipped raw materials to Claire’s, they became part of Claire’s inventory since Claire’s dealt in the same goods as the type Sherman shipped.

Had Sherman wanted to protect her company’s interest, she should have either posted a sign near those specific raw materials to evidence her company’s interest in the goods or she should have filed a security interest. Because she did not take either step, the court found the bank had priority, and ruled that all of the raw materials belonged to the bank.

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Joel Block to Deliver Keynote at CreditScape Spring Summit

Joel Block has been added as the keynote speaker at the upcoming CreditScape Spring Summit, powered by United TranzActions on April 4-5.

Block, who will talk about change as a constant practice in your company’s credit department, is a long-time venture capitalist and hedge fund manager (gobbledygook for “professional investor”) who lives in a Shark Tank world like what you see on TV. Companies regularly pitch ideas to Joel’s company, looking for business capital so he has learned to spot likely winners – frequently in 3 minutes or less and sometimes in under 30 seconds.

Speaking on business and money for over 15+ years, Joel has put together more than 40 companies; he has advised hundreds more and he has taught thousands of people innovative ways to think about leadership, strategy, sales, and money.

Unlike most business speakers, Joel explains sophisticated concepts around personal effectiveness, money, and business leadership in plain English – no jargon, no hype, and no fluff. Nobody breaks down complex issues like Joel Block with hard-won lessons and practical principles from the real world to help your attendees gain traction personally, professionally, and financially.

Nicknamed The Money-Making Guy™, Joel’s massively unique and immensely powerful leadership, sales, and disruptive innovation message is perfect for senior management, middle managers, and sales teams. His programs are refreshingly memorable, quotable, and actionable so your people leave your event ready to think, act, and work differently – impacted by big ideas and actionable insights at the convergence of money, success, and significance.

The 2018 CreditScape Spring Summit will feature two days of workshop training, expert practical and legal advice, and networking with other credit professionals, designed to give you insight on areas where you can make improvements in your company’s credit operations.

The goal of CreditScape is to provide an opportunity for credit practitioners at all levels of experience and expertise to come together to solve problems and provide solutions for the real-world issues they face at work.

While the Summit features subject-matter experts sharing their experiences with credit practitioners, much of the learning at CreditScape will come from practitioners sharing real-world experiences with each other in workshop-style settings. This is a perfect opportunity for credit and collections teams to get away from the office to pursue a journey towards process improvement.

For more information, and to sign up, visit www.CreditScapeConference.com.

How to Evaluate Your Collection Agency’s Recovery Rate, by Sam Fensterstock, AG Adjustments

At the end of each year, when you evaluate your collection agency performance, what method do you use to calculate their recovery rate and over what period of time do you analyze? We discuss this topic very frequently with our clients. Contingency based collection agencies only earn revenue if they collect the debt that is placed with them, therefore, the recovery rate is usually the critical factor for allowing both the client and the agency to properly evaluate their relationship.

If a collection agency has a 50% recovery rate for your company, an excellent result, it still means that 50% of the time they are working for free as they still must work the files they are not able to collect on. Fixed expenses such as rent, payroll, insurance, electric, phones all must still be met. Given this, and the fact that over the past 20 years the average fee charged by an agency has been dramatically reduced, collection agencies are laser focused on collecting as much money as they can, in-house, in the shortest period of time. This is how they make the most money for both their clients and themselves.

As many companies use more than one collection partner, most measure head to head performance by how much money an agency brings back to the bottom line. Ultimately, the agency that nets you the most cash will probably get the most placement volume. However, is the method of evaluation you are using really showing you who is doing the best job for your company in the long run and collecting on the most files? You should realize that how collection agencies judge themselves is often very different from how they are judged by their clients.

To compare the various performance measures, let’s assume that you are turning over, to your collection agency, 30 past due accounts per month with an average accounts receivable balance of $5,000 per file. The accounts are from 120 days to 240 days past due, and two accounts per month or $10,000 are defunct corporations or uncollectible at placement that cannot be recovered. Now let’s look at three different ways that collection agency recovery performance can be evaluated on the last day of the year, six month later, twelve months later and twenty-four months later.

Gross Collections Method (GCM)
GCM = Amount Collected / Total Dollars Placed

In Year 1, the total dollars placed was $1,800,000 and the amount collected on Year 1 placements at the end of Year 1 was $700,000. Therefore, at the end of Year 1, the GCM for Year 1 placements was 700,000/1,800,000 or 38.9%.

Six months after the end of Year 1 an additional $250,000 has been collected on Year 1 placements so at that time the GCM for Year 1 placements is 950,000/1,800,000 or 52.8%

Twelve months after the end of Year 1 an additional $50,000 has been collected on Year 1 placements so at that time the GCM for Year 1 placements is 1,000,000/1,800,000 or 55.6%

Twenty-four months after the end of Year 1 an additional $25,000 has been collected on Year 1 placements so at that time the GCM for Year 1 placements is 1,025,000/1,800,000 or 56.9%

Net Collections Method (NCM)
NCM = Amount Collected / (Total Dollars Placed – Uncollectable at Placement)

In Year 1, the total dollars placed was $1,800,000 and the amount uncollectible at placement was $120,000. Therefore, the net amount available for collection was $1,680,000. The amount collected on net Year 1 placements at the end of Year 1 was $700,000. Therefore, at the end of Year 1, the NCM for Year 1 placements is 700,000/(1,800,000-120,000) or 41.7%.

Six months after the end of Year 1 an additional $250,000 has been collected on net Year 1 placements so at that time the NCM for Year 1 placements is 950,000/1,680,000 or 56.5%

Twelve months after the end of Year 1 an additional $50,000 has been collected on net Year 1 placements so at that time the NCM for Year 1 placements is 1,000,000/1,680,000 or 59.5%

Twenty-four months after the end of Year 1 an additional $25,000 has been collected on net Year 1 placements so at that time the NCM for Year 1 placements is 1,025,000/1,680,000 or 61.0%

Net Cost of Collection Method
NCCM = (Amount Collected – Commissions Paid) / Total Dollars Placed

In Year 1, the total dollars placed was $1,800,000, the amount collected on Year 1 placements at the end of Year 1 was $700,000, and the commissions earned were $140,000. Therefore, at the end of Year 1, the NCCM for Year 1 placements is (700,000-140,000)/1,800,000 or 31.1%.

Six months after the end of Year 1 an additional $250,000 has been collected on Year 1 placements with additional commissions earned of $50,000. Therefore, at that time the NCCM for Year 1 placements is 760,000/1,800,000 or 42.2%

Twelve months after the end of Year 1 an additional $50,000 has been collected on Year 1 placements with additional commissions earned of $10,000. At that time, therefore, the NCCM for Year 1 placements is 800,000/1,800,000 or 44.4%

Twenty-four months after the end of Year 1 an additional $25,000 has been collected on Year 1 placements with additional commissions earned of $5,000. At that time, the NCCM for Year 1 placements is 820,000/1,800,000 or 45.6%

CONCLUSION

All of the methods described above provide a reasonable approach for evaluating collection agency performance as long as they are applied consistently. Consideration must also be given to open inventory at the time of evaluation. A percentage of the open accounts will still turn into dollars at some point. Given the historical 90-120-day lag on in-house collections as well as the overall backlog of the legal system that is often used in collection agency recovery efforts demonstrate that only evaluating collections in a single placement year at the end of that year, can produce a measure that does not truly represent agency performance. Our choice for the one which that most reflects true agency performance is the Net Collection Method, but no matter which method you choose, we feel recovery results for a specific period of time, such as annually, should be evaluated six, twelve, eighteen and 24 months after the end of that period. This will provide the best measure of agency performance short-term and over-all long-term. Given with most collection portfolios the majority of collections for placements made in the last quarter of a year will most likely occur in the first six months of the following year, if you only review results at the end of the year, this performance will be excluded from your analysis.

Additionally, evaluating an agency based on accounts that when placed are out of business or defunct corporations and are impossible to collect from is inherently unfair and will produce a biased comparative measure if different agencies are given placements with different percentages of uncollectible dollars.

Once again, you can look at this topic many ways and our goal in this blog post has been to shed some light on the difference approaches and how it may affect your agency review.

Sam Fensterstock is Vice President of AG Adjustments, CMA’s chosen collections partner. For over 40 years, AGA has been the most respected commercial collection agency in the nation. The company assists corporations with improving cash flow, while preserving a positive image with customers. It accomplishes this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

CMA President’s Blog: How CMA Plans to Expand the Credit Community to Offer More Educational Resources, by Mike Mitchell

CMA President and CEO Mike Mitchell

Happy New Year everyone! With the beginning of every new year, we like to think about the goals and objectives we set for ourselves in the coming year, to move forward both personally and professionally. A major goal of CMA’s this year is to expand the credit community, creating a better network for our members. Traditionally, we have looked at growing that community unilaterally within our own market (primarily California and Nevada). Now, we have the opportunity to expand the community by working with other credit associations to bring our respective communities together. By bringing credit professionals together through various networking activities, we can create a unique benefit through collaboration that our individual associations cannot achieve on our own. This is the true essence of what associations like CMA are designed to do – leverage the power of many individuals and organizations to create value that no one individual or company can create on its own, especially in the increasingly global nature of all of our businesses.

For the first time in its history, CMA is working with other credit associations to share educational and training resources, and to host customer account discussions among members of our common industry groups. CMA is collaborating with NACM Business Credit Services in Seattle and Southwest Business Credit Services in Phoenix to produce educational webinars and industry credit networks that our three associations can offer to our respective members – for FREE. Our goal is share our collective resources to add more value to our annual memberships. We all want our members to get more for their membership dues.

We are kicking off this collaboration with Bob Shultz’s Collections Negotiation Skills webinar on January 25 at Noon PST. Collectively, there are more than 150 credit professionals from all across the West registered to attend. In an environment where a credit professional’s time is at a premium, we are very encouraged to see members express interest in learning more skills and gaining more knowledge to improve performance. We hope that the members who participate in these new joint programs will see the untapped potential value that an expanded credit community has to offer. More information on this and other educational offerings is at www.creditmanagementassociation.org/events.

Along the lines with this is an expanded CreditScape program, which includes the hottest topics we’ve heard in nearly every conversation we’ve had with members: credit card chargebacks, companies changing their own terms, skills that credit professionals need to stay relevant, and overall dealing with change in your organization. I really hope to have your support and attendance to help “prove” that CMA is doing what’s best to help your company’s credit department.

We hope you have a great year and are able to reach your personal and professional credit goals, and we remind you that CMA is here to help.

Thanks for reading!

Talking Points For Speaking to Sales

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

 

Communicating With Sales Regularly – Formally or Informally – is Always Important

Do you speak to your sales reps about what you’re doing in credit?

If you don’t, you should.

One of the most important roles of a credit exec is to constantly communicate credit’s role in your organization and how it relates to sales.

In a recent Credit Today listserv discussion, a member asked for suggestions on what she might include in an upcoming presentation to her company’s sales team. A number of great responses were received.

Lisa Childress, Corporate Credit Manager at Bison Building Materials, recommended covering the following topics with sales:

  1. How company profits are diminished the longer an invoice remains unpaid.
  2. What the cost of money (borrowing) is for your company. Also, are bank covenants you must adhere to?
  3. What their commission structures are. For example, are they on a “paid-when-paid” commission structure or do their commissions diminish as the account ages?
  4. How they and credit can maintain customer relations.
  5. Why you in credit absolutely recognize the importance of continued sales.

Cheryl, Fischer, CCP, credit manager at Barber Glass Industries, advised that the way you make your presentation with sales can make a big difference. “You have to communicate to them on their level, she wrote. “And that is definitely not a slight!” she clarified.

Visuals are Key

She’s learned over the years that sales reps in general are visual people and suggested very brief overhead computer visuals. “Graphs are always very helpful. Keep it short, sweet, and to the point with pictures and I don’t think you will find their eyes glazing over.”

And Jeff Borgens, CBA, Corporate Credit & QMS Manager at Aiphone Corporation, offered up some great suggestions as well.

First, he suggested, emphasize the principals of business partnership and mutual expectations. “It’s a partnership and we look for quality partners (customers) we can count on.”

Sales should also understand that credit will do what it says it will do and that “ongoing payments equal ongoing shipments.”

Second, make sure you “talk their language” when communicating with sales people. This means emphasizing customer needs and how you strive to meet those within the policies you’ve established. Talk to them about how you will help make the sale, rather than stop a sale if at all possible. And cover some of the tools you have to make that happen, such as guarantees, credit cards, letters of credit, or other security agreements. Make sure they know you’re not “sales prevention,” but are there to facilitate the sale, he wrote.

Finally, he suggested reminding sales that we need to be aware of the role our customers play with our product.

If you sell to someone else who is depending on delivery of “your” product, and that customer ends up on credit hold and hence can’t get the goods down thru the channel, it potentially puts your firm a bad light. “We need to be conscientious of those that buy thru the channel by making sure our business partners are reliable,” he wrote.
This article originally appeared in Credit Today, the leading publication for the credit professional.

Click here for Special CMA Member $10 Trial!

 

Nominations for 2018-2019 CMA Board of Directors Now Being Accepted

The CMA Nominating Committee is now accepting nominations and applications for service on the 2018-2019 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 February 1, 2018.

Click here to download the forms and for more information.

Tips For Setting Your Automatic Write-off Threshold

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

Do you have an automatic write-off threshold for small balances left outstanding on your A/R?

Some companies can research every short payment that comes their way, but for many, it’s simply not practical to do that. To keep up, you must set a minimum threshold, under which you automatically write off everything.

The two key variables to consider when setting this limit are:

  1. The cost to you of researching a short payment, and
  2. The likelihood of receiving payment.

As to number 1, the cost is simple. It’s the manpower required, per deduction, to research. You’ll want to take a couple of weeks and come up with an overall average amount per deduction. Let’s say you come up with 15 minutes per deduction. Then multiply this by the hourly cost of the staff involved.

But your cost is only one part of the analysis in this situation. If you find that traditionally your customers are right 85 percent of the time when taking a deduction (which is the typical average), then you will collect only 15 cents out of every dollar deducted.

At what level does your research become profitable? Do the math. You might find it’s higher than you realized. But two words of caution:

  1. don’t let anyone in your customer base know that you do this, and
  2. periodically research balances lower than your threshold so you can spot abuses.

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

Why CMA Still and Always Will Matter to My Company and Me!  by Gent Culver, ICCE

With the turning of the calendar to the New Year, I always like to evaluate my relationships and reflect on the year that has just past. In doing that in 2018, I can’t help but think about the many ways that Credit Management Association (CMA) makes my job as a credit manager easier.

Here are some reasons that are important to me as a CMA member:

 

  • CMA continues to bring the credit community together via networking at Industry Credit Group meetings (my company and I are regular participants) and at educational events such as CreditScape and other webinars and programs.
  • CMA’s anscers.com website platform is unique in that it allows me to obtain past payment history of customers that also do business with other CMA member companies.
  • CMA also offers extremely competitive pricing on credit reporting contracts with the major credit bureaus. They also have a professional staff that can walk you through the best features of each report, enabling you to compare similar products so that you can choose the best ones for your company’s needs.
  • If your company supplies materials or labor for construction projects, CMA can make sure that your company’s lien rights are protected under the law through its construction lien filing department.

CMA is here to stay.  It has been providing high-end credit services and education to companies like yours throughout California and Nevada for over a century and it plans on continuing this service for years to come.   As CMA Chairman of the Board, I thank you for your continued support of CMA and its vision of a united credit community  and I would also like to thank the staff of CMA for their dedication to the members of CMA.

Thanks for reading!

 

Gent Culver

Happy holidays from Credit Management Association!

From our family to yours, CMA wishes you happy holidays and a prosperous New Year! We thank you for your support, and we look forward to serving you again in 2018.

Click here or on the picture below to see and hear some of CMA’s Las Vegas members sing their take on the “Twelve Days of Credit”

 

 

Please also note that CMA’s offices will be open during regular business hours through the holidays except for December 22 (closing at 3pm), December 25 (closed all day), December 29 (closing at 3pm) and January 1 (closed all day). Normal business hours resume January 2.

Experian Expands International Alerts

In this global economy, one of the biggest challenges for many businesses is being able to detect financial duress by monitoring companies’ whose headquarters are outside of the United States.

Early identification of negative activity helps your company prevent lost revenue and service interruptions, it also helps minimize reputational damage caused by doing business with a company in violation of U.S. laws. These early notifications can also help mitigate the effects of changing economic conditions while growing new business opportunities with lower risk.

Experian has announced that its commercial alerts now enable you to monitor more businesses in more countries with greater precision.

Experian now offers 25 alerts on 8 countries in Western Europe, with 8 more countries coming soon! These international alerts offer the ability to stay up to date on changes such as: change in ownership, business name and address, as well as changes in credit limit, balance sheet information, and company status and much more.

Proactive notifications empower you to act quickly and mitigate risk, collect on overdue amounts and retain your best customers.

Want to know more? Contact your CMA rep today at 818-972-5300 so we can start helping you reduce the risk in your growing business.

Supplier Risk Credit Group created to help manage your vendors, by Larry Convoy

During my time in credit management, I’ve often heard the following: “We can survive if a customer goes bad, we cannot survive if one of our primary or secondary vendors has an interruption in delivering product, raw materials or services to us. For that reason, we invest an equal amount of resources investigating our vendors.”

CMA Industry Group Leader Larry Convoy
CMA Industry Group Leader Larry Convoy

Responding to members requests, CMA has established the SUPPLIER RISK CREDIT GROUP for companies that have expanded the credit departments’ risk management role to include key suppliers. There has been a tremendous increase in companies evaluating the risk and cost of business disruption when vendors are unable to deliver goods for reasons ranging from economic to political.  Credit Managers deal in risk evaluation daily, they have the skill set necessary to transition from customer analysis to vendor.

This new group will help companies assess their exposure to vendor failure, develop, implement and maintain a process to evaluate risk and gather business intelligence more efficiently and cost effectively.

CMA invites you to attend a complimentary organizational meeting to explore the benefits and features of a Supplier Risk Credit Group.

RSVP to lconvoy@emailcma.org and we’ll save a seat — either virtually or in-person — for you.

We hope to see you there!

A New Way to Receive Your CMA Invoices, by Kim Lamberty, CAE

Throughout the past several years, CMA’s webinars and events have had the overwhelming theme of utilizing technology to bring efficiencies to businesses. Your CMA team is following this theme. As many of our members have gone through and will go through systems conversions to make their business operations more efficient, CMA is doing the same thing.

I’m happy to announce that our new association management system will be implemented in December to give our customers added convenience and bring CMA internal efficiencies.

Your December statement will be emailed with an electronic link to all primary CMA member contacts. For those members that have designated a billing contact that is different than our main contact, as the primary contact you will be able to set that contact and others up yourself, giving you better control of who should have access to your company details. Through this link, you’ll also be able to view your post-December 2017 billing history with CMA, with the ability to print and save statements and invoices electronically.

Subsequent to the implementation of our new AMS we will be implementing the ability to pay online and hope to have this completed in January. This will mean that members will not only be able to access their invoices, but they will be able to pay electronically.

We thank you for your continued trust and loyalty to CMA, and we look forward to continuing to listen to our members wants and needs. If you have any questions, please feel free to call me directly at 702-259-2622.

“The world hates change, yet it is the only thing that has brought progress.”
-Charles Kettering

Kim Lamberty, CAE, is Vice President of Operations for CMA. She can be reached at 702-259-2622 or klamberty@emailcma.org.

How to Assist Your Customers to Stay in Business After Natural Disaster, by Sam Fensterstock, AG Adjustments

The recent outbreak of natural disasters left certain areas of the country reeling. No power, no water, and blocked roads resulted in no way to distribute product or services, and no way to collect receivables. Businesses both large and small were in a panic. Why? No cash flow. How are they going to get paid? The answer is – they are not! At least not in the near term. Whether a customer is in collection or about to be, the problem is the same – they can’t pay their debts. As a vendor, your problem is how to help them stay in business so that you have a chance of getting your money – eventually!

HOW TO IMPROVE YOUR CHANCES OF GETTING PAID

Obviously, you are going to have to wait for your money, so making it formal by giving them a moratorium on payment is a good first step for alleviating some of your customer’s/debtor’s stress and it makes you look like a good guy and may put you at the head of the line when they are operating again. Of course to do this you need to communicate with them, which could be a problem if they have no power, but eventually you will get through and giving them an extra 45 to 60 days for meeting their obligation will be very welcome and improve their odds of staying in business.

However, planning is everything and the very best way that you can increase your customer’s chances of surviving a natural disaster is to convince accounts that are in potential disaster areas (Florida, Texas, Louisiana, Oklahoma, Kansas, and California are some localities, but they can also be affected if they are hundreds or even thousands of miles away) to plan in advance for its occurrence. Not a simple problem as most people are resistant to this type of suggestion, even if they know it’s for their own good.

If a business is forced to cease operations after a natural disaster they run a substantial risk of never opening their doors again. You can’t effect the probability of a natural disaster, but you can prepare for it. Having a well thought out disaster plan and sufficient insurance will help your customers recover when disaster strikes. The following are some of the things they need to do if they want to survive a natural disaster.

CRITICAL COMPONENTS OF A BUSINESS RECOVERY PLAN

They need to:

  • Create a detailed disaster response plan and make sure employees know whom to notify and what to do to limit employee casualties and property losses.
  • Practice the procedures set out in the disaster response plan on a regular basis.
  • Prepare a list of critical phone numbers and email addresses. They will want to get in touch with key people after a disaster. Include local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents and insurance company claim representatives.
  • Develop a strategy to communicate with customers to limit loss of business.
  • Develop answers to the following questions:
    While a natural disaster is occurring, will they need a back-up source of power and a back-up communications system?
    What impact will a natural disaster have on their employees’ ability to return to work and their customers to receive goods or services?
    What impact will a natural disaster have on their plant and equipment?
    If their business escapes the disaster, do they still have a risk of significant losses due to the inability of suppliers to deliver goods or services?
    What is the financial impact to their business if it shuts down as a result of a disaster for a day, a week or longer?
    Can they run their business at another location if they cannot afford to curtail operations?
  • Make sure they back-up computer files and critical systems every day and also maintain a copy off-premises (the cloud). Store copies of all critical records and documents in a safe deposit box and keep them current.

REVIEW THEIR INSURANCE COVERAGE

They need to sit down with their insurance broker and make sure their business is protected. They need to review their insurance policies to ensure there are no gaps in coverage and that every type of insurance they need to guarantee their business’ survival is in place. Make sure they are covered for business interruption and the cost of repair or rebuilding. If their policy does not cover flood or earthquake damage they may need to buy additional insurance. Other types of specialized insurance that may be pertinent to their business should be discussed. As insurance is not cheap, they’ll need to make some decisions on a risk – reward basis as to how much coverage they can afford.

CONCLUSION

We have covered some of the basics for preparing for a natural disaster with the expectation of hoping to help you improve the chances of your customers’ surviving. We recommend that you check out the internet for business continuity and disaster recovery templates that go into far more detail than we can in this short article and recommend to your customers that they review them and plan accordingly. If a natural disaster strikes some of your customers there is little you can do to help them if they haven’t planned ahead. If you want to improve your chances of ever collecting what they owe you they need to stay in business and anything you can do to reduce the likelihood of them failing is in your best interests.

Sam Fensterstock is Vice President of AG Adjustments, CMA’s chosen collections partner. For over 40 years, AGA has been the most respected commercial collection agency in the nation. The company assists corporations with improving cash flow, while preserving a positive image with customers. It accomplishes this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

How Credit Managers Can Help their Bankrupt Customers

Recent news that Sears Canada has failed in its efforts to compete an effective reorganization, and will be forced to liquidate through Canada’s equivalent of Chapter 7 bankruptcy, has brought to light a point often ignored in analyzing your strategy with respect to money owed to a customer in bankruptcy.

For example, pretend for a moment that you’re on the committee in the Sears case. You’re meeting with attorneys and discussing potential bids. Something seems strange about these bids and you’re unable to get behind the low prices being offered. Additionally, your attorney tells you that you’ll get more back on your claim through a liquidation. Well, this is obvious, right? Vote against the plan for a sale and go to liquidation.

Retail bankruptcies are throwing a huge wrench in the business landscape these days. Liquidations are becoming more and more tricky because buyers are becoming harder to find. With so many bankruptcies in one sector, valuations are inherently lowered. According to a recent article in the American Bankruptcy Institute, trade creditors reaching compromises in retail bankruptcies are causing a real positive impact on the road to recovery. If investment firms who are owed enormous amounts of debt liquidate, the recovery for trade creditors is very little. However, a meaningful reorganization means money coming back to the creditors’ companies in the form of settlements and continued business.

As a credit manager serving on a committee, one may be tempted to take the money and run as quickly as possible. However, as this article posits, sometimes it’s much better to have a long-term relationship that a small instant recovery. The over-leveraged company is more and more commonplace after nearly 10 years of interest-free money. Credit managers who take a more long-term view of the issue may end up with a better impact for their company than simply taking what a liquidation would allow. Next time you’re faced with this situation, feel free to call CMA Adjustments for more information on how a different view of your bankruptcy claim could provide a positive impact on your company in the long-term.

Hurricane Impacted Credit, By Wayne Muller

Houston, much of Florida, all of Puerto Rico. This has been a hurricane season for the ages. What do you do when, practically overnight, normally prosperous and prompt-paying customers are, at least temporarily, ruined by wind and water? This company shows the way.

Kichler Lighting got lucky this year. Few customers were affected by the hurricanes and even those did not suffer much damage. But back in 2005 when Katrina ravaged New Orleans it was a different story entirely. Several customers lost all or major parts of their businesses to the catastrophic flooding. Kichler pitched in to help immediately.

“First we delayed the due dates on their invoices and worked with them as to what they thought would be an appropriate time frame,” explains David Feigenbaum, CCE, Director of Corporate Credit. No one asked for anything outlandish, so they were all given what they asked for and assured that Kichler would be there ready to help with new shipments whenever they needed them.

One customer had two locations, both in the city. One was totally devastated, to the point where he never reopened it. Consolidating the stores and getting them operational took months. “We just worked with him and told him nothing would be due until he was ready to go,” says Feigenbaum. “The big thing these folks have to go through is insurance claims. They take months.

“We worked with a few customers who were out of business for months, carrying the debt until such time as they were back in business. Then they needed to restock because everything in their inventories was ruined. We worked out special terms to allow them longer payouts on the new goods so that it didn’t come due until they had the chance to sell it and turn it into cash.”

This year Kichler sent out an email to the sales force immediately after the storms in Texas, Florida and Puerto Rico. “We stressed that we wanted to help and did not want to be part of the problem,” he says. “The email stated that if any customers needed assistance they could either call us directly or go through them. On those occasions where we’ve been asked, that’s what we’ve done.”

A few have asked for some time beyond normal terms because their computers are down, but the requests have been few and far between.

“If someone comes to us and says, ‘My inventory is all wet. I need to restock. I’ve got my insurance check but it won’t cover my loss in full’ we’ll work with them to spread it out and make it fit their cash flow,” he says. “The last thing we want to do is have them have a huge bill come due when their cash flow isn’t healthy. All that will do is make a bad situation worse.”

All of Kichler’s customers in New Orleans eventually recovered and are now back to good health. But the city’s population has shrunk considerably. A lot of people left and never came back.

The son of one of the company’s New Orleans customers moved to Houston after Katrina and is now a very significant customer there. “So we ended up with a new customer in a new place,” notes Feigenbaum. “And the really good news is that he’s in a part of Houston that didn’t get hit by Irma.”

Addendum: At press time, just as we were about press “send” on this week’s tip, we learned that Kichler received the following note of appreciation from a customer:

“I wanted to thank you guys for helping us out on our cash flow issues that we’re in due to Harvey. Thankfully all our employees and myself were extremely fortunate in the storm. We had a couple employees that had minor flooding, one with less than an inch and one with about 6” of water. Our office was untouched and the majority of our customers got through it with very little damage. The biggest issue at the moment is the slowdown of business while everyone is getting back on their feet. Our billing was cut in half but we’re hoping it will bounce back in October.

“Again, thank you for everything you guys do for us. It’s never been over looked or gone unappreciated. We will be catching everything up ASAP.”

Hard to buy that kind of goodwill!

Copyright Credit Today Online. Reprinted with permission. www.CreditToday.net.

If you’d like more tips like this, sign up at www.CreditToday.net for their free e-newsletter!

President’s Blog: Survey Says! What Do You Value Most About Your CMA Membership?, by Mike Mitchell

CMA President and CEO Mike Mitchell

Thanks to everyone who participated in CMA’s Member Value Survey last month. Nearly 20% of our members responded, and I would like to share some of the results and insights we have gained from the feedback.

The top 5 reasons that participating members joined CMA were:

1. Networking with other credit professionals (73%)
2. Access to information on potential customers (67%)
3. Obtaining trade references from other CMA/NACM members (60%)
4. Credit education and training (49%)
5. My company was already a member when I started (48%)

Industry credit groups came in at #6 with 41%, but credit groups offer the benefits that members rated as the #1 and #2 reasons they joined (access to customer information and trade references, above).

The three benefits most important to participating members are:

1. Networking with other credit professionals (69%)
2. Access to information on potential customers (59%)
3. Obtaining trade references from other CMA/NACM members (43%)
4. Industry Credit Group membership (27%)
5. Credit education and training (27%)

More than half of all participants feel that the most valuable aspect of NACM membership is being part of a national credit community.

Almost 90% of participating members feel that their companies’ upper management understands the value of CMA membership.

Based on how likely a member is to recommend CMA to a friend or colleague, more than 83 percent of responders said they’d rate CMA at least 8 out of 10 or higher.

Here are a few member comments that best illustrate the survey results:

“Mostly networking and better knowledge of customer paying habits.”

“Be able to get first-hand, latest information about customers.”

“I think it’s very important to communicate with other Credit Professionals. Bringing our knowledge together will help in the success of our departments.”

“The continued education and training is priceless and networking with other credit professionals”.

Here’s what we learned:

Members who participated in this survey want CMA to continue to focus on providing opportunities to network with other credit professionals, access to customer payment information, and credit education and training. Some members suggested that CMA could improve upon those core benefits by encouraging credit group members to increase participation (attendance and data contribution) in credit group meetings, create more credit groups that are better aligned with certain industries, offer more advanced credit education and training programs, and offer an online forum for members to exchange best-practices. Additionally, a number of members suggested that CMA should offer more job-related services (job postings and resume search).

Thank you again to all who participated in our member value survey, and I will be reporting back to our members about the progress we make toward improving the benefits that you have deemed the most important to you and your companies.

When Talk is Not Cheap, by Larry Convoy

Larry Convoy, lead group facilitator

We have all heard the expression that “talk is cheap.” Here’s an instance when it’s not: whenever 2 or more competitors get together to discuss the terms of business. In that situation, the potential to cross over into prohibited topics could put all companies at risk. That is one of the main reasons that you have chosen to protect your company by joining an industry credit group facilitated by a representative from CMA.

Your CMA representative monitors all group discussions to ensure compliance with the three statements read at the beginning of each meeting, Anti-Trust, Confidentiality and Anti-Defamation. CMA Group Facilitators have all been trained, certified and are responsible during the meetings (and extending to those conversations in the parking lot) to assure that all members adhere to the guidelines set forth by the government. We listen for any suggestions to restrict free trade or for any attempt to try influencing another’s decision to sell or not to sell an account. If the conversation drifts in that direction, your CMA rep will shut it down.

Sharing historical, factual data on common customers is perfectly legal. We encourage group members to bring new credit applications, slow paying customers and accounts sent to legal to the meeting to alert other members, who will in turn share similar information about their customers with you. The trust built up between competitors allows them to participate honestly and share information in good faith as long as only historical and factual trade experiences are exchanged.

So the next time your attempt at humor is shot down by your group facilitator, think if the punchline falls into one of the 3 statements read prior to every meeting. If it does, he or she has steered your company away from litigation with fees far exceeding the cost of membership for years to come.

We, at CMA, know that your time is valuable, that you are probably wearing more hats then in previous years with a reduced staff. Wasting time is not an option. Our job is to provide a comfortable environment free of distractions for you to gain knowledge, network and to get you back to the office so you can process what you learned quickly, and in turn make quicker, educated credit decisions.

Without a governing body like CMA overseeing your monthly get together, talk could be very expensive.

Coming Together in Times of Tragedy

Tragedy has struck our nation yet again, in the wake of the senseless events in Las Vegas last night, our Las Vegas based team and I are encouraged by the outpouring of love and community support that is occurring. We all knew someone who had a loved one, friend, or acquaintance that was affected by the senseless shootings.

For those who want to help the victims, here are a couple of ways you can get involved:

Again, it’s amazing to see how communities come together in times of crisis. Thanks to everyone who sent their well wishes to our staff and our Vegas-based members, as we send our heartfelt condolences and prayers to the families of those who were affected by this senseless event.

Kim Lamberty
V.P. of Operations
Credit Management Association

Customer Receipts- 503(b)(9): New Ruling in In re ADI Liquidation casts further doubt on ability to recover goods from bankrupt customer, by Molly Froschauer

If your company sells to a customer and delivers goods within 20 days of the customer filing for bankruptcy, one may believe that your company may have an administrative (highest priority) claim for the value of those goods. As many credit managers know, however, the claim under 503(b)(9) of the bankruptcy code has many problematic caveats with the way we do business today.

Many companies use intermediaries like fulfillment houses to deliver goods to customers. This issue has been taken up several times but the recent case presents an interesting twist on the same issue.

The Debtor in this instance, was a billing and servicing platform through which its customers would order items. The manufacturer and distributor would deliver directly to the Debtor’s customers and the Debtor would remit payment for those goods minus its fee, to the manufacturer. The question in front of the court was whether a third-party partner who never possesses the goods, but who possesses the payments for goods recently delivered, constitutes a receipt by the debtor. The court held it does not.

“With continuing complexity in billing and delivery systems in business today, it’s important to consider the implications of third-party partnerships when delivering goods to a party that does not directly owe your company money.”

Current case law requires physical possession of the goods by the Debtor. With third-parties being utilized for help in distribution, billing, customer service and many other aspects of business today, it’s important to understand the impact of everyone in your value chain. At any point, one part of the chain could file for bankruptcy and despite the spirit of 503(b)(9)’s intent to compensate recently-delivered goods, the fact that the end-user doesn’t pay your company directly creates greater risk.

These issues are circling the appellate courts currently and further clarity is sure to develop. One can hope that the spirit of the statute, fairness to trade creditors, is once again respected in light of the complicated supply and distribution chains existing in today’s business climate.

Molly Froschauer is the General Manager of CMA Adjustments. She received her J.D. cum laude from Pepperdine University and her Bachelors from Claremont McKenna College. Before joining CMA, her practice was centered around bankruptcy and other out-of-court debt issues. She’s a member of the Bankruptcy Inn of Court, Los Angeles Bankruptcy Forum, and the Turnaround Management Association.

When Customer Won’t Pay, Should you go to Collection Agency or Attorney?, by Sam Fensterstock, AG Adjustments

Your internal efforts have failed to collect a severely past due account. Now, it’s time to call in another source. But who should you call, your corporate/general counsel, a collection attorney or a collection agency? Let’s look at all three and determine what your best course of action is.

USING YOUR CORPORATE/GENERAL COUNSEL

Corporate counsels are lawyers who work directly for a business and general counsel is a law firm that is on a retainer to work a certain amount of time each month for your company. As such, all their time and energy is spent on their employer’s requirements in various capacities and do not have a specific focus in collections. Their main job is to provide legal representation to their employer and their employees. Specifically, they will offer advice on legal matters and perform legal research for the benefit of the corporation. Additionally, they will offer opinions on issues like contracts, property interests, collective bargaining agreements, government regulations, employment law and patents. They may also represent their employers in court on defense matters and they are also utilized in forwarding litigatory matters to experts in pending litigation matters.

Now when it comes to handling a collection situation, yes, they can handle it, but will they do the best job for you? If you have a large volume of placements can they handle it? Corporate/general counsel typically have little (if any) collections experience and very little of their day-to-day time is focused in this area. Collection agencies and collection attorneys have specific training and experience in handling collections that a corporate/general counsel usually does not have.

Also, if you use your corporate/general counsel to file suit against a customer who operates in another state, normally they file the suit where your company is located as it is much easier to do. However, once you obtain a judgement, you will need to find an attorney in the local jurisdiction of your customer to domesticate and enforce it. Now you have two attorneys involved, a delayed resolution and increased expense.

Using your corporate/general counsel to collect a debt may be easier as they are either part of your company or are local and on a retainer and you might think your costs will be less but the retainer is only a charge against their hourly billing. A collection matter can cost a lot of money to pursue with no guarantee of success based on an hourly structure, especially if your customer files a counter claim, it could wind up costing you much more in the long run. So, will using your corporate/general counsel get the best results? We do not think so.

USING A COLLECTION ATTORNEY OR A COLLECTION AGENCY?

Based on the previous assessment the choice is now a collection attorney or a collection agency? There are hundreds of collection attorneys listed with the Commercial Law League of America and all of them have experience in collections and many do a great job. But, if your customer is delinquent and you cannot get paid, should your first stop be a collection attorney or a collection agency? This is a choice that companies frequently face as they try to find a collection professional to handle their placements who will provide the greatest chance of collection in the shortest period of time with the lowest costs. We think the decision is a straight forward one.

To further explain, let’s look at the differences and why one choice is rather clear: collection agencies work on a contingency basis. That is, they will keep a portion of what is collected. If nothing is collected there is zero fee. When they do collect, a contingent fee is charged on the amount collected. Often these fees can be negotiated based upon the volume of accounts placed, size of the account and circumstances such as age of invoices, disputes, etc. A collection agency’s goal is to collect to collect your money in-house in the shortest period of time, without having to use an attorney. When a collection agency has to forward a file to an attorney, it is their last resort in trying to get your money.

Collection attorneys, while many may work on a contingency basis, there are those that work on a fee for service basis. They will earn a fee based on the time spent regardless of the outcome. Additionally, attorneys earn their living by suing and filing a lawsuit costs money. Included in the suit costs will be the cost of filing a summons and complaint, serving the debtor, and various required attorney actions during the lawsuit. Collection attorney’s make more money litigating. Unnecessary lawsuits are filed frequently and as the collection effort is non-apparent during the time of litigation, many times your customer can go out of business, pay other suppliers instead or file a counter suit, which will further increase your exposure. Once a lawsuit has been filed you are now at the mercy of the courts and the time frame to get you paid just got extended 6-12 months.

Collection attorneys are also normally regionalized to geographic locations. They usually do not have the reach to handle accounts in multiple states let alone matters that are international. Furthermore, if your placements are spread though out the country or around the globe you have much more “clout” when dealing with a national or international collection agency as opposed to a local law firm.

One of the critical difference between collection agencies and attorneys is that collection agencies are equipped to handle a large number of accounts. They are specifically designed and have the personnel and computer capability to deal with thousands of accounts at any one time and handle files that range in dollar amounts from $100 to millions of dollars. Collection attorneys rarely have the capability to properly control a large volume of collections files and do not typically want to handle low dollar files. Agencies are designed with this capability, in mind. If they cannot successfully handle high volumes and low dollar files they will not be a very profitable business. Attorneys have assistants and associates handling incoming calls and payments while working on other more important business, themselves. They are law firms not collection agencies and therefore do not operate like a traditional collection agency

If litigation is needed using a collection agency is still your best bet as collection agencies usually have a network of local attorney’s that they utilize to bring suit, secure judgments and collect in a creditors behalf. They are staffed to “quarterback” attorney efforts to move the case as swiftly as possible. When questions arise, collection agency staff are versed in the various nuances of the litigatory process and are well prepared to get you the answers needed quickly and efficiently. Reputable agencies are fully bonded and insured and only utilize attorneys who are equally bonded and insured to provide creditors with maximum protection.

As collection agencies handle a large volume of accounts they also place substantial business with local law firms. Agencies have vetted the law firms they use who they feel do the best job in securing recovery for the creditor. Furthermore, an agency that is national in scope actually has more clout with a given law firm than any single creditor. Those attorneys that accept business from both collection agencies and credit grantors are bypassing the triadic system that has been in existence for over 100 years. It is unethical to accept business from a creditor as well as a collection agency. While you certainly want recovery of your funds we would believe that it should be accomplished in the most ethical manner possible.

CONCLUSION

Collection agencies FULL time responsibility is to collect the delinquent debt of their customers in the shortest period of time without litigation. Collection agencies are set-up and geared to making a maximum number of attempts at third party intervention to bring forth payment, quickly. When a customer asks that the agency call back next Tuesday at 10am, the agency has software to ensure that the call is made next Tuesday at 10am. This is what they do all day, every day. This is not how your corporate/general counsel or collection attorney is set up to operate and therefore they cannot deliver the results that a collection agency can. Also, if litigation is needed a collection agency will hire for you the best collection attorney in the jurisdiction of your customer, contain your costs and make sure the account is handled as efficiently as possible and bring you the results expected. A collection agency’s goal is to collect your money in the shortest period of time and that means doing It ethically and as expeditiously as possible.

Sam Fensterstock is Vice President of AG Adjustments, CMA’s chosen collections partner. For over 40 years, AGA has been the most respected commercial collection agency in the nation. The company assists corporations with improving cash flow, while preserving a positive image with customers. It accomplishes this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

Ninth Circuit Court of Appeals Finally Hears the Credit Card Surcharging Argument, by Wanda Borges, esq.

By: Wanda Borges, Esq.
Borges & Associates, LLC

Those companies which are still following credit card anti-surcharging litigation know that the case of Italian Colors Restaurant v. Harris (as Attorney General of the State of California) has been sitting still before the 9th Circuit Court of Appeals for more than two years. The United States District Court for the Eastern District of California, on March 23, 2015 ruled against the California statute which prohibits the pass-through of credit card surcharging. The pertinent statute (California Civil Code section 1748.1) says: No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means. A retailer may, however, offer discounts for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.

The U.S. District Court found the statute to be unconstitutional and permanently enjoined its enforcement. The California Attorney General filed an appeal to the 9th Circuit Court of Appeals and there the case has sat. It is this writer’s impression that the 9th Circuit was waiting to see what would happen with the New York case of Expressions Hair Design which was to be heard by the United States Supreme Court.

On March 29, 2017, the U.S. Supreme Court vacated the decision of the 2nd Circuit Court of Appeals which left the New York statute to be deemed unconstitutional as District Court Judge Rakoff had determined. On August 17, 2017, the 9th Circuit Court of Appeals finally heard oral argument on the Italian Colors v. Becerra (the current Attorney General of California substituted for Harris). What was most interesting was the Attorney General’s statement that California permits dual pricing as long as it is clear and conspicuous. He said that the statute means a merchant cannot post a single price and then add on a surcharge.

A strict reading of the statute would not agree with that statement. The 9th Circuit panel often referred to the Supreme Court decision in the Expressions Hair Design case and seemed to be leaning towards mimicking the Supreme Court in declaring the California statute to be unconstitutional and allowing a surcharge to be added provided it is clearly and conspicuously noticed. It was also interesting to note that both sides consistently argued that the surcharge prohibitions exist to protect consumers. This supports the opinion that the passing through of credit card surcharges is perfectly permissible for business-to-business transactions. It may take several months for a decision to be handed down but at least the 9th Circuit has moved forward on this matter.

WANDA BORGES, ESQ. is the principal member of Borges & Associates, LLC, a law firm based in Syosset,
New York. For more than thirty years, Ms. Borges has concentrated her practice on commercial
litigation and creditors’ rights in bankruptcy matters, representing corporate clients and creditors’
committees throughout the United States in Chapter 11 proceedings, out of court settlements,
commercial transactions and preference litigation. She can be reached at 516-677-8200.

The Importance of Credit Applications

When starting to do business with a customer, it’s in any selling company’s best interest to be in control of the situation. For this reason, it’s important for a company to have their own well-constructed credit application and to take the time to create a form that allows them to dictate the terms of the business relationship. “If you accept their forms, you are bound by whatever legal terms they have,” said Greg Hesse of Hunton & Williams, LLP. “It’s much better to have them fill out your form and get the information you want.”

Hesse delivered a past CMA webinar entitled “The Importance of Credit Applications,” which offered attendees advice on how to properly use a credit application to get the information necessary to make a solid decision and to reduce legal exposure.

First, Hesse noted that it’s important for creditors to decide what they want their credit application to do. “You need to decide if you’re doing it just for informational purposes or also an agreement,” he said. This will determine what information you request from the customer on the application. “If the goal is to get specific information, you should focus the application and pare it down for that purpose,” he added.

Certain items are critical to the success of any credit application, like names, addresses and contacts for the officers of the organization and the company. While these items often go without saying, Hesse urged attendees not to take this information lightly, noting that creditors should require specific information, like the legal name of the customer, rather than just a “doing business as” name or a trade name, the state in which the organization is incorporated and also the customer’s type of organization, whether it’s a corporation, a partnership, an LLC, etc. All of these items help in instances of default and can provide creditors with quick access to information needed to better prepare them for legal action.

Hesse also offered suggestions on verifying the information received from a credit application and requiring, in the application, that customers alert a seller of any changes in ownership or location.

For more information about CMA’s education program, visit www.CreditManagementAssociation.org/events.

Credit Protection, Does It Guarantee Payment or Do You Need to Be “All-In”?, by Sam Fensterstock, AG Adjustments

“We have lien rights and we don’t need collection agency”. “We have credit insurance and we don’t need a collection agency”, “We factor our receivable, so we do not need a collection agency”. Are any of these statements 100% accurate? We hear these statements all the time and the answer is no.

Chasing debts can be a difficult and sometimes impossible job for any credit department regardless of your resources. As well as being time consuming, the problems associated with managing delinquent payment and writing off bad debt can be crippling to your company. At AGA, we believe in a proactive “all-in” approach using all the credit and collection management tool and services available to you that will help you avoid many of these complications.

Your perspective regarding how to manage the optimum credit department will shift and change depending on your company and industry. As with any career, your career in commercial credit is an evolution. I’d argue credit and collections is the ultimate onion profession, layered; Regardless of how long you’ve been in the credit profession the best of the best keep peeling back the onion learning more, trimming days.

For those in the construction trade it’s all about secured transactions and the lien and bond process. Are preliminary notices prepared timely and accurately, are deadlines being managed, liens filed correctly suits initiated on time? Some credit managers limit their focus to the collection efforts relating to the owner via his/her property as collateral or through a payment bond on a public job. We do not think you should limit yourself, think “all-in” with your credit tools. Obviously, you’ll need to maintain your rights efficiently in those construction situations where the dollars justify the expense, but what about putting pressure on your debtor? Think “all-in” and place the customer with a collection agency and pursue aggressive 3rd party collections in conjunction with the ladder of supply pressure. Even a personal guaranty, not typically used in construction credit, can assist your collection agency during their process.

The job is get the cash thru the door as quickly as possible. In the construction market, resolving your delinquencies from the bottom of the ladder of supply (debtor pressure from your 3rd party agency) in conjunction with pressure from the top of the ladder (serving your notice and filing your lien to engage the property owner and general contractor to force funds downward) can pay dividends. Save time and money, think “all-in” with the addition of 3rd party agency pressure being placed on your debtor simultaneously will typically help resolve your claim faster than simply serving and filing a notice or lien. In most cases, without the expense of filing suit against a payment bond or foreclosure, you won’t be giving up your rights to proceed should that need arise. Lastly, don’t assume your notices and liens are going to be 100% bullet proof, when it’s time to file a lien it’s time to place the account for collection. Of course, it’s important to work with an agency that understands construction credit.

Credit Insurance is another tool. It is commonly used to increase sales, increased borrowing availability, and help prevent catastrophic loss. The cost of credit insurance is based on the accounts that are subject to the insurance and their inherent risk. The cost for the policy will be a percent of your sales and depends on many variables, including trading history and historical debt loss of your company, your trade sector, and your customer portfolio.

Deductibles for credit insurance can also be an issue. The analysis of the solvency of your clients is followed by the setting up of limits carried out by the insurer. Credit insurance covers your company for loss of the credit insured, but rarely covers 100% of your accounts receivable, it’s usually up to a predetermined percentage. Depending on the risk category, the insured’s deductible can vary between 5% and 20%. The deductible is the amount that the insured must pay toward his own losses before he can recover from the insurer. Like any insurance submitting a claim can affect your premium therefore your “all-in” approach should include 3rd party collection efforts prior to submitting a claim to your carrier thereby reducing your need to submit the claim, paying the deductible and most importantly getting you paid faster.

Factoring is another tool that is used in many industries where extended terms are granted like apparel and furniture. However just because you have factored your receivables doesn’t mean that your fully protected. The most common type is Recourse Factoring where if your customer does not pay the factor on the factored invoices, you must repay the factor and collect your delinquent customer on your own. The other type is Non-Recourse Factoring where if your customer does not pay due to bankruptcy or insolvency you do not need to re-pay the factor. Given that Recourse Factoring is the most common, just because you have it doesn’t mean that you will never need to engage with a collection agency and sometimes you may have to go “all-in” and leverage every resource you can to help you collect what you are owed.

Conclusion

Waiting until customer’s invoices are past due is still a typical approach many credit & collection departments take to manage their accounts receivable, but this just creates problems and leads to a greater probability of incurring bad debt. Mitigating credit risk from the start, with an “all-in” strategy will enable you to better manage your accounts and prevent cash flow problems in the future.

Today, many organizations both large and small are taking a closer look at their credit & collection management process. Many have taken this analysis a step further by addressing all aspects of their credit process performance including efficiency, cycle times, available outside credit tools and their connection to performance. Understanding all the tools of your trade; To include credit applications, personal guarantees, credit reporting/monitoring, security and the utilization of a professional, methodical collection agency is the starting point then determining the combination that’s right for your business will have your department consistently in the best possible position to get paid, that’s “all-in”.

Sam Fensterstock is Vice President of AG Adjustments, CMA’s chosen collections partner. For over 40 years, AGA has been the most respected commercial collection agency in the nation. The company assists corporations with improving cash flow, while preserving a positive image with customers. It accomplishes this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

CRF Extends Discount Rates to CMA Members for Education Courses

New CMA Member benefit: Credit Research Foundation just extended a discounted rate for their proctored education program, bring you topics that cover core skills that every credit professional should have. CMA members will receive $200 off each course below by selecting “CRF Partner Association Member” when you register for these courses on the CRF website. Details about each course, along with the registration link, is contained within the link below.
• Aug. 21: Credit Risk and Accounts Receivable Management Course (Course)
• Sept. 18: Financial Ratio Analysis Course (Course)
• Sept. 18: Diagnostic Cash Flow Course (Course)
• Sept. 18: Working Capital and Liquidity Risk Assessment Course (Course)

Thanks to CRF for offering this great discount to our members!

What is the Information in the Group Reports Not Telling Me?, by Larry Convoy

Larry Convoy, lead group facilitator

Having just completed a very informative Industry Credit Group call, I thought for a minute of the companies that did not participate on the call. Most of them contributed accounts to the monthly Past Due Report, many with considerable dollars in the 90-day past due column. That satisfied one part of their group responsibilities, yet by not attending, they lost out on valuable trade info about the accounts they had reported.

Had they been on the call or at the meeting, they would have heard two industry leaders give vital information on accounts they listed. They reported that they no longer sell to that account because of extreme slow pay, information not on the report but of great value. Had they been on the call or present at the meeting, they would have also heard about a major problem affecting payments on a large construction project that many suppliers are involved in or sell to a company who is. Again, this information was not on the report but of extreme importance. In fact, because the people on the call were major players in the industry, they knew something about most of the non-attendees reported accounts.

Numbers on a report do not always tell the entire story. Were you aware that there is a new A/P person at ABC Electric or that a Home Deport opened across from Acme Hardware causing a 60% drop in business? Did you know that a mutual customer is only cutting checks once a month or that Smith Food got hit with a large Tax lien? Information like this is routinely exchanged on these calls/meetings.

Only by attending the meeting/call can you be sure that you are getting the complete picture on the financial stability of your customers. The information is there for the taking. Insist on it by making it a priority to be at every group event and asking questions.

The answers might just save your company $$$ and you major headaches.

President’s Blog: In Memoriam: Harold Fraizer, by Mike Mitchell

Harold Fraizer, RelianceA traditionalist. A pragmatist. A very nice man. These were the thoughts that first ran through my head after hearing the news that Harold Fraizer, Director of Credit for Reliance Steel & Aluminum Company, passed away suddenly last week on July 18.

I was introduced to Harold in 2013 over lunch at the Grand Café in the Omni Hotel, just walking distance from Reliance’s downtown Los Angeles office. I was invited to chat about CMA and explore what the Association could do to support the credit teams at Reliance Corporate and at the many Reliance branch locations in California. What I found was a long-time credit professional who cared deeply about the credit profession and the people he supported. He wanted them all to have the best tools, resources, and training available so that they would be successful in their jobs. Clearly, he was a mentor as well as a leader.

Thus began a tradition of meeting for lunch about every six months or so, where I came to hear what Harold and Brian Lacey, his corporate credit manager, had to say about the state of credit.

This past April, I was thrilled when Harold agreed to participate on a panel discussion for our CreditScape Spring Summit. I interviewed him a few weeks before the event to help us both prep for the panel. During our discussion, he shared with me that Reliance concentrates on the front-end process and good credit management. He wanted his branch’s credit operations to focus on making good credit decisions and was willing to provide many options for tools and resources that would help accomplish that goal.

When I asked Harold about various automation tools that he was using or considered making available to his vast network of Reliance credit operations nationwide, he made it perfectly clear where he stood on the topic. “Credit’s not hard,” he said, “but what sets it apart from accounting is that it’s an art as well as a science. We don’t believe you can automate credit decisions. There will always be a role for the credit professional in making the final credit decision.”

What I learned from Harold is that success in credit is driven by the fundamentals – customer due diligence, smart data analysis, strong customer relationships, and good decisions. Automation will continue to drive modern credit processes, but can’t replace good professional judgement.

“You’re a credit manager – invest your time looking at all customers, not just the ones that are in front of you on the credit applications.”

I had lunch with Harold and Brian last month at our regular spot, the Grand Café. I asked Harold about how senior finance executives view the role of credit. He dismissed the idea that credit can be spun as a profit center. “It is a cost center, but if you let me do my job, I’ll save you a lot of money.”

On behalf of the staff and members at CMA, our deepest condolences to the Reliance Family for your loss.

Mike Mitchell is the President and CEO of Credit Management Association.

How to Spot Fraudulent Financial Statements

Evaluating a company’s financial statements can help credit professionals determine the creditworthiness of current or potential customers. However, sometimes fraud is committed within the highest company levels to deliberately alter these financial statements. That is why credit professionals need to be better educated at spotting distorted financial information on a company’s financial statement. This was the purpose of a past CMA webinar presented by Bruce Dubinsky, MST, CPA, CVA, CFE.

Dubinsky said credit professionals should ask one simple question when reviewing financial statements: “Does it make sense?” Dubinsky pointed out that certain information on a financial statement could send out a red flag that something is wrong. If that happens, a closer inspection of what went into the reporting of that information would be prudent. He said, “paper talks in different ways,” and offered tips on how to identify those things that should “jump out at you.” While some personnel may make some honest mistakes in preparing their company’s financial statements, Dubinsky noted that some company officials deliberately provide false information. When this occurs, it is fraud, which he defined as “one or more deliberate acts designed to deceive other persons and cause them financial loss.”

There are a number of ways people commit fraud. Some include the encouragement of investment through the sale of stock; demonstrating increased earnings per share or partnership profits interest thus allowing increased dividend/distribution payouts; covering the inability to generate cash flow; obtaining financing, or more favorable terms on existing financing; dispelling negative market perceptions; receiving higher purchase prices for acquisitions; demonstrating compliance with financing covenants; meeting company goals and objectives and receiving performance-related bonuses.

Financial statement fraud typically occurs through the overstatement of company assets and income and the understatement of liabilities and expenses, Dubinsky noted. Conversely, bankruptcy financial statement fraud typically occurs through the understatement of income and assets and the overstatement of company liabilities and expenses. For bankruptcy, the motive for committing fraud is to understate what the company is worth to its creditors. Therefore, it is important to determine the motives behind the presentation of a financial statement in order to figure out what type of fraud may exist on the statement. For example, overstating assets and income and understating liabilities and expenses could be designed to entice investors, to get bank loans, to obtain vendor credit and to get an inflated price in the sale of the business. The understating of assets and income and the overstating of liabilities and expenses could be motivated by a bankruptcy, divorce or, in shareholder disputes, as a way of reducing financial exposures. “Most times, fraudulent financial statements are used to deceive people to gain credit,” Dubinsky added. “Learning to understand the motive of why financial statements are submitted to you will give you a heads up of detecting fraud.”

Audited financial statements are no guarantee that the numbers haven’t been fraudulently manipulated. Dubinsky pointed to famous corporate financial fraud cases such as Worldcom and Enron that had audited financials. Audited financial statements are not designed to detect fraud, only verify that the numbers on the given financial statements add up correctly. He offered several examples of financial statements that could provide very different results by altering certain elements on the statements that are hard to verify without further investigation, such as the value of inventory or accounts receivables. For accounts receivables, Dubinsky recommended getting aging schedules for the end of the month for the last 12 months to determine any trends. If there is a sharp drop in accounts receivables, for example, he said this could be an indication of fraud. In order to provide protection from relying upon a possible fraudulent financial statement, he advised asking for a security interest in a particular asset that has appreciated, such as land. Another tip he offered was to pick out businesses listed on a financial statement and do a Google search on them to see if they really exist, to guard against fictitious companies providing fictitious receivables.

Other advice Dubinsky offered was to read audit qualifications carefully to learn more information about possible financial downturns of the company. He also recommended asking for the management letter of an audit. “There may be things in there to make you look at the financial statements differently. I would highly encourage you, if you’re granting a credit request for a high dollar amount to conduct a site visit,” he added. “When you’re doing a face-to-face meeting with someone, you’ll be surprised what they’ll tell you.” As a general piece of advice when evaluating financial statements Dubinsky said, “Put your level of professional skepticism as high as it can be without hindering the performance of your job.”

CMA has offered other webinars on this topic. To view a list of past and upcoming topics, visit www.CreditManagementAssociation.org/events

What You Need To Know To Protect Your Business From B2B Credit Fraud by Sam Fensterstock, AG Adjustments

INTRODUCTION

We usually associate credit fraud with the impact it has on individuals in the form of identity theft or phishing scams and the personal financial problems it causes, but what about businesses? What is the incidence of B2B credit fraud and is it a major problem?

Yes, it is a major problem. According to credit reporting agency, Experian, B2B fraud costs US businesses “more than $50 billion annually” and most analysts believe that that number is too conservative. It is also assumed that the incidence of fraud will continue to increase as the use of various electronic payment methods continues to grow.

HOW EXTENSIVE IS THE PROBLEM?

For an overview of the problem let’s take a look at some results from the Association of Financial Professionals (AFP) “Payments Fraud and Control Survey”, published in March 2015:

Some highlights from this survey are:

  • 62% of companies were subject to payments fraud in 2014.
  • The most-often targeted payment method by those committing fraud attacks are checks. Check fraud also accounts for the largest dollar amount of financial loss due to fraud.
  • The second most frequent targets of payments fraud are credit/debit cards.
  • 92% of survey respondents firmly believe EMV- enabled credit/debit cards will be effective in reducing point-of-sale (POS) fraud. EMV- Europay, MasterCard and Visa — is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions.
  • 61% of survey respondents believe that Chip-and-PIN validation will be most effective in preventing credit/debit card fraud.

Business fraud can devastate a company and as there are very few external protections it is up to the business to protect itself. A company must be aware of the various types of fraud that it may be subjected to and develop methods for protecting itself.

WHAT ARE SOME OF THE DIFFERENT TYPES OF B2B FRAUD?

There are many different B2B fraud schemes. Here are a few of them:

  • Account Takeover: This is similar to the phishing and telephone scams that affect personal identities. Here credit card or account information is intercepted and later used to place orders or otherwise defraud a legitimate business. This particular type of fraud accounts for a large percentage of B2B fraud occurrences.
  • Business Identity Theft: Here a scammer opens business accounts under the name of a legitimate business. The applicant acts as the business owner (or a representative) and utilizes their contact information to apply for credit or open accounts.
  • Commercial Bust-out: The culprit opens several lines of credit with the intention of eventually abandoning them once the credit limits have been reached. This requires that a good credit history be fabricated so that limits can be increased and maxed out right before the perpetrator disappears. This type of fraud results in millions of dollars of losses every year.
  • Never Payment: Here a business or individual opens a new account, by materially misrepresenting itself. They will obtain the maximum credit possible, but never make a payment.
  • Shell Companies: These are companies that are set up solely for the purpose of committing fraud. The entity will not sell a product or provide a service. Many times they are used to launder money. They rarely have a physical location, and if they do, it may be a storefront or offshore.
  • Bleed-outs: This method of committing fraud is similar to a bust-out. However, it is committed from within by insiders. Employees commit this type of fraud over a long period of time. They bleed out assets, leaving the company unable to pay its bills.

SOME CHARACTERISTICS THAT MAY INDICATE A POTENTIAL PROBLEM

Individuals and groups committing these types of frauds will often display many of the same characteristics. The following are some of the things you should look for:

  • Companies Without Long Histories: Typically, companies with longer track records are safer to do business with because they will have more credit history and references to check. The shorter the life of the company, the less you will have to work with.
  • Suspicious Changes in Ownership: A well-established company, with good credit, is taken over by a new group that tries to hide the change in ownership. This may signal a potential problem. It may be an indicator that members of the new owners are committing fraud.
  • Questionable Financial Statements: Mistakes or suspicious items on a company’s financial statements may be a harmless accounting error or signal a real problem. A detailed financial analysis is necessary before doing business with this company.
  • Fraudulent Credit References: False credit references on a credit application are a warning sign to forget about doing business with this applicant. Unless the applicant can prove it’s a clerical error and has other good references, doing business with this entity is an invitation to be scammed.
  • No Receivables: If a company’s financial statements do not list any receivables, assuming they are not a cash only business, they are probably a phony shell company that is not providing any goods or services to customers. Do not extend this company a line of credit.

HOW DO YOU PROTECT YOUR BUSINESS FROM B2B FRAUD?

Validate All Information

The easiest and most important step in B2B fraud prevention is to verify the information provided by companies that want to do business with you.

This means you need a credit application (see our blog on credit applications). All the information provided needs to be thoroughly reviewed and verified. Make sure everything on the application is accurate, and ask questions if it is not. Any material errors are a reason not to do business.

Additionally, if your business is contacted by a bank, credit card company, or government agency, don’t provide any sensitive information before verifying the legitimacy of their request.

Utilize External Credit Sources

A business can pull a credit report on another business to ensure that they are dealing with a credit worthy company. Unlike personal credit, which is protected by the Fair Credit Reporting Act (FCRA), anyone can pull a business’s credit report at any time without permission.

Utilize Fraud Detection Tools

Utilizing a fraud detection tool like Experian’s National Fraud Database allows you to compare credit applications and other information to current fraud records stored in a national database. If the applicant is in this database you want to be very careful about doing business with them. COD may be your only option.

Ongoing Transaction Review

Review your banking and credit accounts on a regular basis. Not doing so can leave you and your business a victim of fraud. Initially, transactions tied to fraud or illegitimate charges may not be large enough to indicate a problem, but by monitoring your accounts on a regular basis, you’ll be able to spot fraudulent transactions before real damage has been done.

Staff Education

Make sure you educate your employees on the various types of fraud and how to prevent it. You will sleep a lot better knowing your staff has the ability to protect your business against scammers and con artists.

CONCLUSION

B2B credit fraud is becoming more and more of a problem. Important business, financial and personal data are increasingly being compromised. Preventing and defending against B2B credit fraud is a challenge for companies. But you can limit your exposure and minimize losses due to such activity. Being aware of the problem is an outright necessity and implementing the protective measures described above will help reduce most of the risk of B2B credit fraud.

For over 40 years, AGA has been the most respected commercial collection agency in the nation. We assist corporations with improving cash flow, while preserving a positive image with customers. We accomplish this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

Save the Date: Credit Management Association Announces CreditScape Spring Summit and Annual Meeting

— Education Summit will focus on Change Management April 4-5, 2018 in Anaheim, CA–

 

Glendale, CA (June 27, 2017) – Credit Management Association (CMA) has announced plans for a Spring CreditScape Summit and Annual Meeting, a two-day event which will feature educational content that addresses how your company and credit operations can manage change in these turbulent business times. The event follows up several successful and highly-rated CreditScapes in Southern California, Las Vegas and Sonoma.

The CreditScape Spring Summit and Annual Meeting, taking place April 4-5, 2018 at the Hyatt Regency hotel in Anaheim, CA, will feature workshop exercises, peer panel discussions, expert practical advice, and networking with other credit professionals.

“CreditScape was born out of feedback from members who asked us for help with making their business processes more efficient. Survey results showed us that members learned a lot from subject matter experts and seasoned credit professionals sharing their experiences through discussions and interactive workshops. We plan to take that feedback and build a strong, expanded program for next Spring,” said CMA President and CEO Mike Mitchell.

“We’ve been listening to feedback from the past event surveys, from conversations with members, and in our Group meetings recently. In these turbulent business times of consolidation, automation and reorganization, the theme we heard most often is that companies are always looking for ways to deal with change. We are currently developing content around that overall theme,” Mitchell added. “We will continue to strive for a unique learning and networking experience that incorporates the latest techniques in content delivery for adult learners. Our goal is to create a thought-provoking and practical meeting experience that produces valuable take-aways and sustained value for participants and their finance and credit departments.”

Senior-level credit executives will be invited to attend the Credit Executives Symposium on April 3, the day before CreditScape begins, at the Hyatt Regency Anaheim. The one-day event offers a roundtable discussion of high-level business issues and trends, best-practices and tips on valuable resources, facilitated by veteran credit executives.

CreditScape Summits are offered in the Spring, focusing on different aspects of the Credit Management landscape. It is one in a series of in-person educational opportunities offered by Credit Management Association. To learn more about the other sessions and topics, visit www.creditmanagementassociation.org/events or call 800-541-2622.

About Credit Management Association

Credit Management Association (CMA), which was founded in 1883, is a Glendale, Calif.-headquartered trade association with approximately 1,100 member companies representing over 250 different business categories selling regionally, nationally and internationally. CMA focuses on providing products and services that allow companies to make informed business decisions based on trade credit. CMA is one of the largest affiliates of the National Association of Credit Management (NACM), whose 33 affiliates serve all of North America. For more information, call 800-541-2622, or visit www.creditmanagementassociation.org.

# # #

Media Information:

FOR IMMEDIATE RELEASE
June 27, 2017

Contact: Alan Dicker
323-573-0840
adicker@emailcma.org

Agendas Set for International Best Practices Forums for Second Half of 2017

CMA has hosted several international credit best practices forums, which take place on the third Tuesday every month. As the feedback we’ve received has been overwhelmingly positive, CMA announces the topics and agenda for the rest of 2017, which are listed below. Each meeting will addresses a different international topic, with a 20-to-30 minute discussion led by a thought leader, a question-and-answer session and open forum.

 

The dates (and links to register) are as follows:

These meetings, which are delivered in online webinar format, are subject to special pricing of $20 per meeting for members, while non CMA members will pay $30.

 

For more information about how you can get involved, contact Alan Dicker at adicker@emailcma.org or 323-573-0840.

AG Adjustments Names Patricia Sims as New CMA Rep

Patricia Sims, AG Adjustments

AG Adjustments (AGA), CMA’s partner in commercial debt collections, announced that it has moved its VP of Business Development Patricia Sims out to the west coast to work out of the CMA office in Glendale, CA to help grow its partnership. Sims, who has been with AGA since November of 2015, will be attending group meetings and CMA functions.

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. The company’s professional debt recovery team works diligently to turn past due receivables into cash flow that can be reinvested toward your business growth.

To place an account with AGA, click here.

To contact Patricia, click here.

New Webinar Series Helps Credit Professionals Understand Bankruptcy

As a risk manager, you know that bankruptcy by your customers is one of the biggest threats to try to avoid. But what happens when your good customer files bankruptcy? CMA has put together a series of webinars addressing bankruptcy and what you can do to understand the process in order to help your company get paid.

These sessions will guide you to:

  • Understand the difference between the major types of corporate bankruptcy, and what happens to outstanding debts when your customers file.
  • How anti-trust laws can affect a bankruptcy.
  • Learn about your company’s rights when your customer files bankruptcy.

Webinars are:

Sign up for these and other events at http://www.anscers.com/upcomingevents.aspx or contact CMA Member Relations, at 800-541-2622.

Welcome From the New CMA Board of Directors Chair, by Gent Culver, ICCE

Hello fellow credit professionals. As my tenure as CMA Chairman of the Board started on May 1, I would like to say that I am honored to serve you as Chairperson and look forward to this coming year that is going to be filled with challenges and opportunities for all of us. Just so you know a little about me, I have been in the Credit field for more than 40 years. I spent 20 years in commercial banking and the last 25 years as Senior Credit Manager, Global Credit and Collections for International Game Technology (IGT). I am located at our manufacturing facility in Reno, Nevada, and I have been involved with CMA for more than 20 years.

The commercial credit and collection industry has gone through some major changes over the past decade and they continue today. Advancement in technology, consolidations, down-sizing (doing more with less), a new generational workforce, and global expansion within our various industries have created challenges to all of us in being able to perform our job efficiently and effectively and to meet the everyday demands of our employer.

Our primary goal at CMA is to provide to you the resources, tools and training to meet these challenges. The various services/products we provide such as anscers, credit reporting solutions, lien filings, third-party collection services, industry group meetings, webinars, seminars such as CreditScape, and membership in NACM all play a vital role in helping you and your staff to become more proficient in your job. Proficiency will translate into a positive economic return to your employer.

As this year progresses, I encourage each of you to participate in your respective industry group to gain knowledge and to develop contacts that will provide valuable information that will benefit you and your company. Even if you’re in a group but don’t regularly attend meetings, I feel that the three-hour time investment provides me with real-time vital credit information that I can’t get anyplace else, from my peers in companies who share common customers with me. I also appreciate the “best practices” information I get out of the credit groups that have given me the tools to change several processes that my company uses for the better. Don’t stop there, continue to develop your knowledge of the profession by participating in the webinars and seminars offered by CMA and NACM. Knowledge is POWER.

If any of you have questions or ideas that you feel would be beneficial to CMA, please let me know. CMA is about you, our members. I can be reached at 775-448-0130 or via email at gent.culver@igt.com.

Thank you for reading this and I am looking forward to leading CMA’s Board of Directors over the next year and helping create programs that matter to our members.

Best Regards,

Gent Culver

CMA Elects New Board of Directors Members for 2017-2018

Congratulations to new CMA Board of Directors Members, whose term with CMA began on May 1.

The new directors are:

  • Kim Howard, Cemex
  • Mark Speiser, Unified Grocers Inc.
  • Janet King, Joseph T. Ryerson & Sons

Additionally, following is a current list of CMA’s Board of Directors members.

Gent Culver, ICCE (Chair), IGT
Pam Craik, CCE (Vice Chair), McKesson Drug
Matt Johnston (Treasurer), United Site Services
Tracy Rosenbach, CCE (Counselor), Silgan Containers LLC
James M. Bradley, Reliance Steel Company
TJ Nance, Walters Wholesale Electric Co.
Alvin Moreno, MBA, Nestle USA Inc.
Sherry Raposo, VSS International Inc.
Nannette Bringard, Breakthru Beverage Nevada
Tim Cratty, Jackson Family Wines
Kim Howard, Cemex
Mark Speiser, Unified Grocers Inc.
Janet King, Joseph T. Ryerson & Sons
Alternates

Brian Atteberry, BSH
Joe Lucas
Hector Benitez, CBF, Equinix
Advisors

Darrell Horton, CICP, Aristocrat Technologies, Inc.
Melissa Kobus, CCE, Walters Wholesale Electric Co.

Special Advisors

Chuck Schultz, Interface Financial Group
Robert Shultz, Quote to Cash Solutions LLC (Q2C)

Why You Need a Good Credit Application, by Sam Fensterstock

 

As a commercial collection agency, the primary way AG Adjustments (AGA) helps our clients is through the collection of their seriously delinquent debt. One of the ways that our clients can aid in our collection efforts is by having their customers fill out a credit application that provides measures of protection and will increase the ultimate collectability of an account. We cannot emphasize enough how many times we have been successful in the recovery of our client past due monies because of their proactive approach in obtaining a well-drawn up credit application.

As a company working in the B2B space, the credit application is one of the primary tools available for controlling credit risk when extending credit to your customers and protecting your company. A credit application is a contract between the seller and the buyer. A good credit application will benefit the seller, a bad one the buyer. Therefore, it is important that your company be certain that your credit application, whether electronic or in paper form, contains all the safeguards and guarantees available to reduce customer risk. Securing a credit application, while certainly does not guarantee payment, is one of the more significant documents you can obtain in assisting in not only the credit decision but the ultimate collectability of your past due accounts receivable and collection fees. The adage that “the sale is not complete until the money is in the bank’ is as true today as ever. A good credit application will assist in getting your company to that point.

What Do You Need to Know to Control Credit Risk?

The credit application is your first step in gathering information about your potential customer. The more you know about them, the better off you are and the easier it will be to make a good decision and collect the necessary information to determine how much credit to extend them. You can never assume all the information on the application is correct and you will need to do your due diligence to help you verify the information provided you before you grant credit. Therefore, it is important that the sales department make sure that every customer fills out and signs the credit application prior to any goods or services being delivered.

A typical credit application requires that at least the following information be provided:

  • Name and address of the applicant
  • Name and address of any parent company
  • All contact information: I e: phone #’s, e-mail addresses etc.
  • Type of entity (i.e., corporation, partnership, proprietorship, etc.)
  • Names of principals/directors/officers
  • Bank references
  • Trade references -at least three
  • Tax ID and DUNS number
  • Availability of financial statements
  • Credit limit requested
  • Applicant’s agreement to payment terms
  • Applicant’s agreement to interest on past-due amounts
  • Applicant’s agreement to pay for legal and collection costs
  • Applicant’s personal guaranty(s) with spouses if possible and authorization to pull personal credit report with SS#.
  • Right to verify data on application from external sources (banks, trade references, credit bureaus, etc.)
  • Signer(s) is an officer or authorized to bind the buyer

The Most Important Things to Consider

A credit application serves two purposes: It is a data gathering tool and it is a contract. As a contract, it specifies the rights and obligations of both the customer and creditor. As you are writing the application, bear in mind that it’s a request for credit to be extended and should be written so that it provides your company an advantage if your business relationship fails, since we all know that “credit is not a right but a privilege.” The most important things to consider are:

  • The signer(s) must be able to legally bind the company. If the signer is not authorized to accept the terms and conditions of the credit application, they can’t sign the application.
  • If possible, make a personal guarantee part of your credit application. We would recommend that when extending credit to SMB’s that you get the owners and their spouses to sign a personal guarantee. While many personal guarantees have no value, it’s better to have one than to not and if a SMB owner is not willing to sign a personal guarantee, that might tell you something as well. You also want the social security number of the individual signing the personal guarantee so that if you must enforce it, you will have an easier time tracking them down in the event they abscond.
  • You want a stipulation that the customer will pay interest on past-due amounts and will pay any collection, legal fees and court costs that are incurred because of non-payment. If you do not have this detailed in your credit application, you will NOT be able to collect fees on your debt if placed with a collection agency. In the event of litigation, it is up to the local courts jurisdiction if collection fees, attorney fees and interest will be awarded
  • You want assurance that only the disputed portion of a past due amount will be withheld.
  • If you file suit over non-payment, you want it to be as convenient as possible. The choice of venue must be yours. While many creditors will request suit in their local jurisdiction, this is not necessarily in a creditors best interest. The customer’s assets are normally local to their whereabouts. Therefore, in the event post judgment remedies are needed the judgment must be recorded in a debtor’s local jurisdiction to attach assets.
  • You want authorization to obtain information from credit bureaus, banks and trade references both before authorizing credit and ongoing once they are a customer.
  • You want current financials and the ability to obtain financials in the future once they are a customer.

Verifying the Credit Application

Once you have the credit application in hand, you need to verify the information it contains. At least three trade creditor references should be contacted as well as their banks to verify the existence of their checking account. You should be sure that all their references are legitimate. If for some reason you can’t contact one, be sure at least that they exist. Any false information on the credit application is a valid reason for not doing business. If the buyer is looking for a substantial credit line, make sure you review their financials, especially a statement of cash flow. If they are operating in a negative cash position you need to be sure that they will have enough cash available to pay you. Limit their credit line or at the very least change their terms if it looks that they may have a cash flow problem.

Once They Are a Customer

Periodic credit reviews are a necessity. Major account defaults can come from existing long-term customers as well as the new ones. Customer credit limits should be reviewed periodically, at a minimum once a year. Get current financials from your accounts annually if possible. Make sure their cash position can support their business. CMA offers many solutions to help you check credit, from bureau reports to credit group meetings, trade references and more. Additionally, obtaining current credit bureau reports on your largest customers, annually, is a good idea. Stay on top of your accounts receivable aging. If a customer is always 60 to 90 days past-due on some part of their balance, they are only one period away from being a problem.

A sample credit application can be found by following the link below:

https://images.template.net/wp-content/uploads/2016/05/07061009/Sample-Credit-Application.jpg

 

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.

My Take on Spring CreditScape (And a Big Thank You!!), by Tracy Rosenbach, CCE

I attended CMA’s Spring CreditScape at the Hyatt Regency in Garden Grove on April 12. Wow, what a great conference, which featured some amazing sessions and speakers. The day started off with the incomparable Wanda Borges, Esq., who led a discussion in hot legal topics in business credit. Ms. Borges answered questions from attendees covering such topics as bankruptcy, preference and credit card surcharges, all topics that clearly hit home with the attendees. Keynote speaker Dan Goldes showed us how to use influence to increase efficiency with influence skills. His interactive session really encouraged all of us to take a step back and practice different styles of influencing people on our fellow attendees before we bring them back to our offices to use them on both our coworkers and customers. The session was educational as well as fun. Next, Kim Howard, Director of Credit Western Region for Cemex, and Wanda Borges, discussed how to automate credit applications and customer onboarding, and the legal implications of doing so. During lunch, CMA had its Annual Meeting and Installation of Officers (which was my last “official” duty as chair of CMA to preside over).

In the afternoon attendees had the opportunity to meet with the vendors to help them learn how to improve efficiencies and reduce internal costs, by using services such as credit card transaction processing, UCCs, credit reporting, customer onboarding, cash application and more. The last session for the conference was a panel discussion (Alvin Moreno, Harold Fraizer, Brian Gausman, Claudia Lozano and Rohit Patel) on implementing efficiencies in the Cash-to-Cash cycle. I personally took several pages of notes that I plan to revisit and consider implementing some of the processes in my own credit department. The event was well worth my day out of the office to learn from the experiences of other credit professionals.

As I wind up my last blog as CMA Chairperson, I have to say that I can’t believe that a year has passed since I was introducing myself to you as chair in this blog last year. Time has just zipped by. I would like to take a moment to thank the very special people on the CMA staff including Diana Escobar, Alan Dicker, Terry Campos and Juliet Churchill for all of your assistance. These people have helped me tremendously through the past three years as Treasurer, Vice-Chair and Chairperson. Also, thank you to my great Executive Committee team (Melissa Kobus, Gent Culver and Pam Craik) for being engaged, interested and available, sometimes at a moment’s notice. And last but not least a big thank you to my boss, Brett Garnett, who has supported me through this journey.

I encourage all of you to get involved in CMA at whatever level you can do, whether it’s participating in an industry credit group, attending a webinar or seminar in person, or volunteering on the CMA Board of Directors. Your participation will only make the association stronger and benefit you (and your company) at the same time.

Best wishes to you all, and thanks again for everything,

Tracy Rosenbach
CMA Chairperson 2016/2017

CreditScape Spring Summit Helps Identify Ways to Create Efficiency in Credit

The CreditScape Spring Summit, Powered by United TranzActions, an interactive learning seminar and workshop took place April 12 at the Hyatt Regency Orange County. The event helped uncover areas in a company’s credit operations where they could improve efficiency, providing attendees with dozens of ideas to bring back to the office, according to preliminary survey results that were tabulated after the event.

With the common theme of “creating efficiency and reducing costs in the credit department,” attendees commented that the sessions gave them insights on the latest in legal issues affecting the credit department, improving efficiency in new customer onboarding, efficiency in the cash-to-cash cycle, plus services that could help companies realize these efficiencies. Also a hit were the panel discussions where attendees heard from their peers how they have successfully implemented these processes.

Additionally, for the attendees overwhelmingly said they’d recommend CreditScape to a colleague.

Here are some photos from the event:

Plans are forthcoming for CMA’s next CreditScape, which will take place next Spring at the same venue in Garden Grove, CA, April 4-5, 2018. More details will be announced as soon as possible.

Thanks again to our event sponsors United TranzActions, HighRadius, CreditPoint Software, Bectran, Credit 2 B, IAB, Ansonia Credit Data, AG Adjustments, NCS, Dun & Bradstreet, Skyminder and Esker, and to all who attended the event!

Thanks to CreditScape Spring Sponsors!

 

CMA wishes to recognize our event sponsors for CreditScape. Without their help, this event would not have been possible.

Thanks to these leading companies in the credit community.

 

AGA Adjustments
Contact: Sam Fensterstock
www.agaltd.com
888-496-1600
Services: Commercial Collections

Ansonia Credit Data
Contact: Bill Weiss, Kathleen Dasal
www.AnsoniaCreditData.com
855-ANSONIA (267-6642)
Services: Portfolio Monitoring, Credit Reports

Bectran
Contact: Eric Lee
www.bectran.com
888-791-6620
Services: Online Credit Applications, Document Management

Credit2B
Contact: Joe Chin
www.credit2b.com
212-279-3300
Services: Customer Onboarding, Risk Protection, Analytics, Benchmarks

CreditPoint Software
Contact: Charlie Pilkington
https://creditpointsoftware.com
918-376-9440
Services: Credit Risk Analysis Software, Online Credit Applications, Commercial Collections Software

Dade Systems
Contact: Bill Zayas
www.dadesystems.com
855-418-2786
Services: Virtual Payment Processing Solutions

Dun & Bradstreet
Contact: Bob O’Brien
www.dnb.com
973-921-6370
Services: Credit Reports

Esker
Contact: Dan Caple
www.esker.com
800-368-5283
Services: Accounts Receivable Software

HighRadius
Contact: Sally Huynh
www.highradius.com
281-968-4473
Services: Accounts Receivable Software

IAB
Contact: Diana Crowe
www.iabllc.com
630-537-0840
Services: Deduction Management Services

NCS
Contact: Jerry Bailey
www.ncscredit.com
800-826-5256
Services: UCC Filing Services

Skyminder
Contact: Mike Lindenmuth
www.skyminder.com
813-636-0981
Services: International Credit Reports

United TranzActions
Contact: Michael Williams, Dean Middleton
www.UnitedTranzActions.com
800-858-5256
Services: Payment Processing, Credit Card
Processing, Virtual Lockbox

Vantiv
Contact: Matt Fluegge
www.vantiv.com
608-834-2539
Services: Payment Services

CMA Industry Credit Groups, Your Best Search Engine, by Larry Convoy

Larry Convoy, lead group facilitator

My kids find it hard to believe that when I was in school, the place you went to find answers to your homework or to gather information for a paper was the Encyclopedia Britannica. This was several thick books with information on anything you needed, although the accuracy depended on what edition you had. My edition claimed the US had only 48 states.

The current generation has it much easier since Google came along, just enter, click and multiple results appeared with everything you needed.

Your membership in CMA and an Industry Credit Group makes it just as easy. Have a question on Chapter 11 BK; call the CMA Adjustment Bureau. Need an effective Demand Letter, go to the Encyclopedia of Credit. If it is the most current trade information on a customer, draw an anscers report or enter an RFI. Looking for accounts receivable software that is credit friendly, poll your group. Need to further your credit education, CMA has that covered.

If you utilize CMA and the Industry Credit Group as your primary search engine for all credit related issues, the results will reduce your time and expenses.

It will not be necessary to pay your corporate attorney an hourly fee for researching Bankruptcy questions that CMA can answer for free. Whose recommendation means more, salesmen trying to sell you a $100K computer system or someone in your group performing the same job as you using the system? Need to file Lien, get a D&B, place an account for collection, take a financial statement class, start your search with CMA.

You have the support of a Business Association that has been around for over 130 years. Behind each tab on the anscers home page are people waiting to assist you.

Whether you have been in credit for 30 years or 30 days, there are laws and procedures that are changing daily. CMA membership guarantees you the most current edition.

Spring CreditScape Panelists Announced

.

Panelists from leading companies such as Nestle USA, Consolidated Electrical Distributors (CED), Velocity Vehicles, Reliance Steel, Cemex and ResMed will take part in the discussion at CreditScape about how to create efficiency and reduce costs in the credit department.

A complete schedule of sessions and workshops for the CreditScape Spring Summit has also been posted. Keynote speaker Dan Goldes will present “The Influence Edge: Increasing Efficiency with Influence Skills” in an interactive keynote workshop at CreditScape, April 12, 2017 at the Hyatt Regency Hotel, Garden Grove, CA.

Bankruptcy expert Wanda Borges, esq., will talk about electronic credit applications during the panel discussions, while Alvin Moreno of Nestle will discuss the elements of a lean office that he’s brought into his company to help make his credit operations run more efficiently. Other panels and the return of CMA’s popular “Speed Networking” event will also take place at CreditScape.

The CreditScape Spring Summit, powered by United TranzActions, features one packed day of workshop training, expert practical and legal advice, and networking with other credit professionals, designed to give you insight on areas where you can make improvements in your company’s credit operations.

To view the complete schedule, click here.

From Policy to Profit: The Value of Having an International Credit Policy and Procedures, by Eddy Sumar


Many believe that having a credit policy is very restrictive, while others say it is not needed because the world is constantly changing and it is difficult to keep up the pace. Yet a third group touts its value in a changing world. From these samplings of answers and beliefs, we can say that credit policies need to be put in the proper perspective and place.

What Policies and Procedures Are and Are Not

Policies and procedures are not a straightjacket. And if they are to be restrictive, it should be with a compelling reason and cause. In fact, they should act as a seat belt that can be expanded or contracted depending on the situation and circumstances. They should not be used as a platform to penalize and punish. They are not meant to be rigid, capricious and inflexible. Though they convey permanency, they are not permanent. Policies and procedures are set to facilitate, not debilitate, the business process. They are set to empower, not to enslave. Policies and procedures are dynamic and they should serve the company as well as the customer. They should be reviewed periodically to ensure that they reflect up-to-date requirements and the real business climate and environment.

When we look at credit policies and procedures from a wider perspective, we can clearly see that they serve an important purpose and a vital role in the health of the organization. They act as strategic guides that point to the direction and path that need to be followed. They spell the tactics that need to be employed, on a daily basis, to ensure control and compliance.

Policies and procedures should be used as guidelines and a platform to facilitate the company’s operations. They create a map that every member of the business enterprise can use to ensure the smooth handling of the tactical and day-to-day operations, as well as to gain insight into the strategic intent of Company. Policies and procedures, if conveyed properly to the sales team and the customer, could help all understand the why, why things happen in a certain fashion. Educating all stakeholders on the Company’s policies and procedures will ensure not only excellence in performance but will result in a more satisfied customer.

In short, policies and procedures are a NEED. Companies need them to safeguard their financial stability and prosperity.

The Five Cs

When a company constructs its policies and procedures, they need to build them on the Five C’s:

1. Compliance
2. Communication
3. Coaching
4. Consistency
5. Cashflow

Compliance: We live in a highly-regulated environment. And companies, both domestic and international, act and interact in this environment. Thus, they need to be aware and compliant with the demands and requirements that the environment presents. No company can afford to be found lacking and non-compliant. International Credit Managers perform strict due diligence on country and client. They ask their prospects and clients to fill out a credit application. They verify, inquire, investigate, obtain credit reports, perform non-financial and financial analysis, employ the AW Matrix, and they cross-check every C of credit before they make a credit-decision. In fact, credit decision makers must be well informed and up-to-date on every development in the environment.

Communication: Credit policies and procedures are a communication tool. Thus, they need to be clear, concise, relevant, and timely. They communicate the vision and mission of the organization and its departments. They are used to communicate with internal and external customers. They communicate goals, expectations, and KPIs. They explain processes and procedures step-by-step. In fact, credit decision makers should use their policies as a vehicle to communicate and build understanding, collaboration, and buy-ins.

Coaching: Because of the detailed nature of policies and procedures, credit professionals should use them as a coaching and training vehicle. They should use them as a tool for coaching and developing employees and clients. When used for coaching, they become easy to adopt and implement. Policies and procedures should be used as a vital component of training manuals and new hire orientation training. In fact, a credit policy and procedure manual should be a book that codifies the existing body of functional, technical, and experiential knowledge to preserve it and later transmit it when needed.

Consistency: A Credit policy, when shared with all stakeholders, pursued zealously, and followed closely should result in consistency and stability. A credit policy spells the path and the steps to be taken as well as provide the guides for well-informed decisions and common sense, intuitive decisions. When all follow the policy with common sense empowerment, then consistency will reign and goodwill will expand.

Cashflow: As the title of this article conveys, policies should lead to profit and expansion of profit. When a company follows its policy, and ensures compliance, it will protect itself from lawsuits and penalties. When a company follows its policy, and ensures that its communication is clear, concise, relevant and timely, then it can save time, efforts, and money in dealing with complaints and internal and external customer issues. When a company follows its policy, and uses it as a coaching tool, then it can save time and money in looking for new personnel and even new clients. Coaching helps training and retaining of employees and clients. When a company follows its policy, and ensures consistency, then it can save enormous amount of resources on reworks, defects, low morale, employee turn-over and loss of customers. And when a company follows its policy, and ensures it cashflow, it has indeed not only protected its profit, but actually realized it when cash was collected and deposited.

I know of a company that has a policy of reviewing its key accounts daily. Every member of the credit department as well as their sales team is daily involved in a debriefing on these key accounts. The consistent application of this policy helped the company reduce its bad debt account and expedite its collection results. Consistent application of policies and procedures PAYS!

In short, a credit policy is not a want or a desire, it is a need that can protect cashflow, realize profit, and create expansion.

Eddy A. Sumar is the President & Founder of ERS Consulting Services. He is a frequent contributor for CMA, and a longtime speaker and educator on international credit related issues. He spoke at a recent International Best Practices Forum meeting, the recording of which is available on demand. He can be reached at 909-481-9869 or ealberto@aol.com.

Why do Businesses Need Third-Party Collection Agencies to Maximize Cash Flow and their Bottom Line

by Sam Fensterstock, AGA
“Cash is King,” and if you are not maximizing your cash flow, it can have serious repercussions on your operations and bottom line. Most companies, in particular SMBs, wait too long to aggressively go after their slow-paying accounts. It costs four times as much to bring on a new customer as it does to keep an existing one, so no one wants to lose a customer over collection tactics. However, once a customer on credit goes 90 to 120 days past due and is no longer ordering and paying down the old balance, it is going to become more and more difficult to collect these accounts with only internal resources. The effect of your customers owing your company money for too long can be significant.

HOW IMPORTANT IS CASH FLOW?

The difference between the beginning cash position and the ending cash position of a given period is called cash flow. If you take in more than you spend you have a positive cash flow, the reverse is a negative cash flow. Cash flow is one of the major indicators financial institutions use to evaluate financial health. Banks and financial institutions are not going to loan you money if they don’t think you can pay it back. Remember, when you borrow money for any purpose, you are going to pay it back with future cash flow. You can’t pay it back if you have a negative cash flow.

HOW CAN YOU DETERMINE IF YOUR CASH FLOW CAN BE IMPROVED?

Collecting your accounts receivable as quickly as possible is a major factor in having enough money to cover current operating needs and pay off your debt commitments. There are several credit and collection performance measures that can tell you whether you are collecting your accounts efficiently, or if you need some outside help to improve your cash flow. We will discuss two of the most popular ones:

Days Sales Outstanding (DSO)

DSO is a measure of the average time in days that receivables are outstanding. It can be used to compare your company to other organizations for identifying whether your company is converting receivables to cash efficiently. In most instances a DSO under 40 days is good assuming you are giving 30 day terms. A DSO from 34 to 38 indicates very good operating performance and a DSO over 45 indicates that you are not converting your receivables efficiently and that some outside help may be necessary. The formula for computing DSO is:

(Ending Total Receivables x Number of Days in Period)/(Credit Sales for Period Analyzed)

A sample calculation is:
Ending Receivables = 1,000,000
Credit Sales for Period = 750,000
Number of Days in Period = 31

DSO =(1,000,000 x 31)/(750,000) = 41.3 days

Collection Effectiveness Index (CEI)

This measure was developed by the Credit Research Foundation (CRF) and is thought to be a far better measure of collection effectiveness than DSO. It produces a percentage that measures the effectiveness of collection efforts over time. The maximum value is 100% and the closer you are to 100% the more effective you are. A CEI under 75% needs to be improved or your cash flow will eventually be negatively affected. The formula for computing CEI is:

(Beginning Receivables+(Credit Sales/N ) -Ending Total Receivables)/(Beginning Receivables+(Credit Sales/N )- Ending Current Receivables) x 100

N = Number of Months
A sample calculation is:
Beginning Receivables = 800,000
Credit Sales = 750,000
Ending Total Receivables = 1,000,000
Ending Current Receivables (all invoices not yet due) = 700,000
N = 1

CEI =(800,000+(750,000/1)-1,000,000)/(800,000+(750,000/1)-700,000) x 100 = 64.7%

Notice the difference in the results of the two calculations. The DSO is acceptable, but the CEI is not.
Realistically, whichever measure you use, it should be computed frequently (monthly if possible) and reviewed over time. If it’s trending downward, even if it is not yet unacceptable, you should consider bringing in outside help to stop the downward trend before your cash flow is seriously affected.

WHY USE A THIRD-PARTY COLLECTION AGENCY?

Any receivable not collected represents a loss and affects your bottom line. You have laid out money for goods produced or services rendered and not collected the money due your company. Your cost of sales has gone up, but your revenues haven’t. That’s a net loss and your bottom line has been reduced accordingly. For example, suppose your profit margin is 10%. In other words, on a $5,000 sale you make $500, or your cost of sales is $4,500. If you have to write off $50,000 of receivables in a year, you need an additional $450,000 in sales to make up for it. Sometimes not such an easy task.

There are at least three good reasons to use a collection agency to help collect past due accounts:

A collection agency will collect from accounts that you could not. Your past due accounts won’t talk to you but they will talk to an agency or the collection agency’s attorney. The agency knows that to collect they must make contact with the account and they won’t stop trying until they do. A good collection agency will make 10-15 attempts to reach your former customer in the first 30-45 days they have the file, typically about three times the number of attempts your internal staff will make. As their fee is based on what they collect and agency will be more persistent and assertive than your internal collectors are at this stage of the customer lifecycle. Just remember this, collection agencies don’t get paid unless they collect your money and collection agencies do not want to work for free.

Using an agency frees up the time and resources needed to manage your current active business. Collecting money is very time consuming. You need to send letters, emails, possibly make customer visits and make phone calls, lots of phone calls. This takes time away from the things you and your employees need to do to manage and run your business on a day to day basis.

A collection agency utilizes technology that you do not have. This makes them far more proficient at collecting money than their clients. They possess advanced tools that help them find and make contact with debtors. This technology is costly and unless you are in the collection business you won’t have it. Additionally, their personnel are professional debt collectors. That is what they do and they do it well.

CONCLUSION

According to Commercial Law League of America, the amount of money you are likely to collect from a past due account is directly correlated to the age of the account. Once the account is 90 days past due you will most likely collect only about 70% of the amount due, and after 6 months only about 50%, and the amount likely to be collected continues to go down rapidly from there.

If your customer has not paid you and they are more than 90 days past due, there are no new orders coming in the door and they are not responding to your request for payment you are probably not going to get paid on your own. For these types of accounts, it makes business sense to place them with a 3rd party collection agency now and at least get 30-40% of your money back. This will allow you to maximize your cash flow and minimize the negative effect on your bottom line.
About AGA

For over 40 years, AGA has been the most respected commercial collection agency in the nation. We assist corporations with improving cash flow, while preserving a positive image with customers. We accomplish this by employing the best and brightest talent in the industry, with low turnover and unparalleled tenure.

Why Are There No Pictures of Credit Managers, by Larry Convoy

As I travel around making visits at member companies, I am constantly amazed how many of the lobbies are shrines to the Salesperson of the Month or Regional or District Team of the Quarter, or some like group. Being in sales, I know how difficult it is to achieve and maintain some of these goals, so I certainly do not harbor any ill feelings for this recognition.

My question is, where are the pictures and accolades for those who open, investigate, monitor and routinely babysit the account so that the customer continues reordering and the sales team earns their plaques on the wall? Is management aware of the contribution you are making to this effort?

Do they know that information from CMA’s Group alerts prompted you to put the account on COD months before the BK, thus saving the company major dollars? Are they aware that knowledge picked up at a CMA Lien webinar or protection you gained by placing a lien through CMA’s lien services department showed you how to protect your rights and receive payment when others did not? Do they know that by analyzing credit reports, you were able to raise the credit limit and therefore assist the sales team in making their numbers?

It is not a violation of group confidentiality to inform senior management that their investment in CMA and the group has resulted in major savings or increased revenue. By informing them routinely how THEIR decision has benefitted the organization, you will have an easier sell at renewal time or when you wish to attend an educational event or possibly at your annual review. If you are not going to tell them, who will?

I look forward to seeing your picture prominently displayed as a valued member of the team.

Why You Shouldn’t Leave Managing Credit Risk to the “Luck of the Irish,” by Tracy Rosenbach, CCE

Being a good credit professional has nothing to do with luck. A solid credit professional is one who has invested in him or herself by taking classes and/or receiving an NACM certification; attending industry credit groups; and networking. The key in all of the above activities is getting as much information as possible. An effective credit manager should always strive to learn everything they can about one’s industry and profession, networking with as many credit professionals as possible to understand industry best practices, trends and tactics they can use to make their department run more smoothly (this is another under-rated and often overlooked benefit I get out of attending Group meetings as well).

On April 12, credit professionals will have the opportunity to attend CMA’s Spring CreditScape in Garden Grove, California. The goal of CreditScape is to provide an opportunity for credit practitioners with all levels of experience and expertise to come together to determine ways to reduce costs and create efficiencies in their credit departments. Some of the topics for the conference include:

  • The Influence Edge: Increasing Efficiency with Influence Skills
  • Where can you Increase Efficiencies in the Cash-to-Cash Cycle?
  • Creating efficiencies and cost-savings in the customer onboarding process; credit applications; credit information and portfolio management

Credit practitioners from companies such as Nestle, CED, Reliance Steel and Cemex, among others, will be talking about how they’ve seen process improvements in their businesses, and how they realized those improvements. In addition to the sessions, there will be Speed Networking: Tools to help Create Efficiency and Reduce Costs with CMA’s sponsors and a networking event so you can get to know other credit professionals, along with workshop opportunities to keep you participating in the event as a participant, not just a bystander.

I strongly encourage you to attend this CMA event as a way to increase your knowledge base so that your methods of credit management aren’t as random as trying to find a four-leaf clover in a large field. Happy St. Patrick’s Day!

Best regards,

Tracy Rosenbach
CMA Chairperson 2016/2017

How Accepting Credit Cards Can Make Your Credit Department More Efficient, by Michael Williams

For personal finance, credit cards are clearly the preferred payment method for most every qualified consumer. However, in the B2B marketplace, many companies have either limited acceptance or even shied completely away from accepting credit cards due to high service fees and integration costs. Even with the relatively high cost of processing, credit cards do offer some advantages to your company that will help bring efficiency and shift risk to the credit card company. How can your company gain efficiency by accepting credit cards and what’s in it for you?

  • LOWER YOUR CREDIT CARD OVERALL COSTS: Credit and treasury managers must understand all the options available for price reduction and how to make sure that you are both minimizing risk and taking advantage of every available option.
  • RECOUP YOUR CREDIT CARD FEES THROUGH SURCHARGE AND CONVENIENCE FEES: The Network Surcharge Rules are loaded with twists and variables, so it is imperative to have qualified individuals to guide you through that minefield.
  • ELIMINATE CREDIT CARD FEES WITH A CREDIT CARD ALTERNATIVE: There is a viable alternative to credit cards which has proven its value time and again over the years. This alternative is one third the cost of a credit card and a much more secure transaction with no chargebacks.

As an exclusive NACM partner for over 20 years, United TranzActions has been successful in advising members on how to process credit cards more efficiently, how to save dollars, and how to maximize the value of their use of their credit card usage. UTA will be one of the featured companies attending the upcoming CreditScape Summit, powered by UTA, in Garden Grove, California on April 12, 2017. More information on the conference is available at www.CreditScapeConference.com. I’d love to speak with you at CreditScape and see how we might help you in the credit card arena. And if you are unable to make it, feel free to reach out to me anytime for any advice on your payment processing needs.

Michael Williams is VP NACM Relations at United TranzActions. He can be reached at 305-606-6703, or mwilliams@unitedtranzactions.com

How to Use Influence Skills to Increase Efficiency and Gets Results, by Dan Goldes

How do you move people to action in order to increase efficiency? How do you get results from others without destroying relationships? These are burning questions in most organizations.

One thing is clear: the ability to influence people is not something you must be born with, but something you can learn.

Think about the best influencers in your life: clients, or people you’ve worked for, worked with, or even supervised. What made them great influencers? Was it their ability to ask questions and really listen to your answers? Did they paint a picture of the future that you found appealing and wanted to be part of? Were they able to convey their thoughts on a topic efficiently and directly and then invite your input as well?

Effectively using influence skills means learning some new behaviors – or, in some cases, refocusing behaviors your already use in order to be more efficient. Influence behaviors fall into three categories: push behaviors, pull behaviors, and push/pull behaviors.

Many people are well-versed in push behaviors, which have to do with stating your needs directly. Others are more comfortable with pull behaviors, with which you draw information out of the other party. Far fewer effectively use push/pull behaviors, which both increase commitment and move people toward action.

Most people have a default: a set of behaviors they use over and over because they work (or, often, because that’s all they know). The most effective influencer, though, is one who can pick and choose the best behavior for that moment, much as an artist decides which brush to use for each section of a painting. Using influence skills well, then, means being able to assess a situation in advance, think about the appropriate behaviors, try them, and pivot as necessary.

Planning for influence can’t be overlooked. While spur-of-the-moment opportunities to use influence skills do come up, far more often we know we’re heading into a meeting or making a phone call during which we want to influence the outcome. The investment in spending a few minutes thinking about what you want to get out of the situation, what you think the other party wants, and which of the influence behaviors you’ll use is well worth the effort. Does it take a little more time? Yes. Does it require you to change how you approach these situations? Probably. But the confidence that comes from having a plan – even if it changes mid-stream – can’t be overstated. Confident influencers are effective influencers.

Learning new behaviors often makes people anxious. But the payoff in developing influence skills is increased efficiency and better relationships, which will serve you now and in the future.

I will go into much greater detail about this during my interactive keynote presentation at the upcoming CreditScape Summit, April 12 in Garden Grove, CA.

Dan Goldes is a facilitator, trainer, and speaker based in San Francisco. He will speak on Influence Skills at CMA’s Spring CreditScape Summit on April 12. For more information about the event, visit www.CreditScapeConference.com

Coming Soon: How to Create a More Efficient Credit Department (and Ultimately Cut Costs)

Stop us if you’ve heard this one before. Your boss comes to you and tells you that you need to cut costs in the credit department, or that one of your resources (i.e., employees) now needs to split their time between credit and something else not related to credit. You’re already short-handed in your department. What’s a credit professional to do?

We work in a “do more with less” world. Practitioners in the credit department are impacted more than most. Dedication to process improvement is the only way to achieve high-performance results in the face of diminishing resources.

At CMA, late last year we conducted a research study where we spoke with more than a quarter of CMA’s members who told us that their biggest concern in 2017 is related to doing more with less. Whether it’s cutting costs or maximizing their efficiency, or a combination of both, CMA members are always looking for ways to streamline their credit operations. As a response to those conversations, CMA has tailored its CreditScape event to help credit managers with all levels of experience and expertise to leverage the knowledge and experiences of practitioners who have implemented new efficiency-maximizing processes in their credit departments.

The 2017 CreditScape Spring Summit, powered by United TranzActions, will feature a full day workshop that includes a keynote address on persuading internal and external customers, training sessions, expert practical and legal advice, and networking with other credit professionals. The goal of CreditScape is to provide an opportunity for credit practitioners at all levels of experience and expertise to come together to solve problems and provide solutions for their real-world issues they face at work.

Over the next few days, several participants in the event will be guest blogging about the power of persuasion and areas in your credit operations where you could be more efficient.

We invite you to join our guest bloggers at the Spring CreditScape Summit, powered by UTA, April 12, 2017 at the Hyatt Regency Orange County (or view the website at www.creditscapeconference.com), and to read their blogs, as the information you’ll receive can help you save time and resources in the long run.

What areas of your credit department do you think you could use efficiency to cut costs that you the most interested in learning about? We welcome your feedback.

A Member Success Story, by Mike Mitchell

At CMA, we often hear stories about how credit group membership can save your company THOUSANDS of dollars by providing critical information that helps you avoid extending too much credit on high-risk accounts. Here’s a real example of how a multi-national company avoided a costly disruption when a long-standing critical supplier filed for bankruptcy.

CMA President and CEO Mike Mitchell

The member regularly attends credit group meetings, and at a recent meeting, he was surprised to learn that one of his company’s critical suppliers had recently filed for bankruptcy. He was surprised by the news because his company subscribes to various monitoring services that should have alerted him and his department to the bankruptcy filing. When he contacted his procurement department, he was further surprised to learn that the department responsible for the relationship with the supplier was not even aware of the bankruptcy filing. The member had sufficient time take the necessary steps to source the critical supplies from a different supplier so that production was not interrupted. Supply chain disruptions potentially can cause more damage to a company’s business model and reputation than the failure of customers to pay their bills, so this was a big deal.

Once the member had mitigated the risks of the potential supply chain disruption for his company, he contacted his supervisor, the Director of Corporate Credit, and let him know that the critical piece of information came from a discussion at a CMA credit group meeting. He gave CMA credit for providing the information that potentially saved his company millions of dollars in lost production time and goods.

We hear these stories all the time at credit group meetings. The real value of regular participation in credit groups is the money and time you save in getting the critical information you need in order to get out in front of situations that could cause significant losses to your company. The member whose story I highlighted above feels confident that the time and money his company spends to have him participate in credit groups is well worth the investment.

Opportunity For Senior Level Credit Execs to Learn From Other Credit Execs

CMA has created an opportunity for top credit executives among different vertical markets to get together to learn from the successes (and failures) of other top credit executives at the CMA Credit Executive Symposium.  This unique event allows senior-level credit executives to gather for a full day roundtable facilitated by 30-year credit veteran Robert Shultz. At the event, you’ll discuss high-level business issues and trends with your peers in many industries, compare best practices, and get tips on valuable resources to help you improve your credit operations.

The agenda for the Credit Executive Symposium is highly personalized and built from input from all participants so the issues are timely and relevant to all attending. Attendees of the event will engage in round-table discussions, thought-provoking breakout sessions, and guest presenters.

Past discussions have included collections, supply chain risk, shared services centers, international risk mitigation, performance metrics, hiring & retaining staff, fraud, and cyber security.

The event takes place on April 11, in Garden Grove, CA, the day before the 2017 Spring CreditScape Summit.

Our facilitator, Bob Shultz, is managing partner at Cutting Edge Business Resources & Solutions (CEBRS). Bob will incorporate trending issues with topic requests from attendees to challenge the group in an intimate, dynamic think-tank environment that is heavy on interaction, low on PowerPoints. You will explore questions that matter most in your career and to your organization in roundtable discussions with seasoned credit peers from many industries. For more information about the event, contact info@emailcma.org or download the event flyer here.

Why it’s Important to Participate in CMA (and How You Should Participate), by Larry Convoy

Larry Convoy, lead group facilitator

If your Industry Credit Group is anything like some of our other groups, your participation has never been more vital to your company.

We are seeing the super stores (Costco, Home Depot, Walmart, etc.) taking a very substantial market share from the small- to medium-sized businesses. Amazon and other internet-based sites are making it easy for anyone to order any product regardless of where they are located. The days of neighborhood stores and reliable customer service are being replaced by free shipping and easy return policies.

The best way to stay ahead of this trend to protect your company is by participating daily in your industry credit group.

By posting alerts, you not only send out a warning, but it might trigger another member to look at their aging and see the same customer slowing and now a pattern develops. This is exactly the scenario that saved members of the Underwater Sports group from large losses when two major sporting goods companies filed BK in 2016. Post your alert at the first sign of slowness.

By requesting and responding to RFIs, you get a complete picture of the customer you are dealing with. Can the customer handle the total outstanding balance on the report? How is he paying his other suppliers?

The third advantage you have is the monthly meeting/ conference call. There is no other profession where companies share trade and Best Practices with their competitors for their mutual well-being. The meeting is about 90 minutes including lunch, the calls are usually half that time. There is no task that can be performed in that time span that could have a greater financial effect on your company.

There are some extraordinary people in CMA’s groups that know that if they pick up one piece of information at a meeting, on the call or through an alert/RFI, it is time well spent.

The date or call in number is located on your group home page on www.anscers.com. Plan on participating at your next meeting and throughout the year.

What’s New at Credit Management Association?

CMA Logo

Greetings from CMA!

Now that the holidays are over, Credit Management Association is back with full steam ahead into projects that can help your company manage risk.

Here are a few of the projects we’re working on that you should be aware of:

– CMA recently announced our CreditScape Spring Summit, which will focus on process improvements in the credit department and cutting costs. The one-day event takes place April 12 in Garden Grove, CA. More info: www.creditscapeconference.com

– CMA and AG Adjustments are proud to announce a new collections-related webinar series that is must-attend material for anyone who works in that field. The webinars feature three of our most popular speakers: Bart Frankel, Dave Osburn and Greg Powelson. http://creditmanagementassociation.org/2017/01/31/cma-announces-new-collections-webinar-series/

– Future dates have been set for CMA’s new International Credit Best Practices Forum. For U.S. companies that sell abroad, this group can help you navigate some of the hurdles you might experience when selling overseas. More info is here.

– With all of the bankruptcies in the news last year from longtime strong companies, when is the last time you evaluated your credit information sources? CMA has a great resource who handles reports from all of the major bureaus and can get you the best solution for your company, not just the best solution from one bureau if you went direct. Learn more here.

– Several new advanced lien law webinars have been announced. If your company does construction-related business in Texas, California or Nevada, you should attend these sessions, which can be found on our education calendar. Details: http://www.creditmanagementassociation.org/events

– Speaking of construction-related business, CMA’s fast and accurate construction lien filing services can help protect your receivables to ensure you get paid on those projects. More: http://creditmanagementassociation.org/construction-forms-filing/

 

Are you getting CMA’s updates, including news and updates from around the credit and collections profession? If not, subscribe to our newsletter here: http://conta.cc/1tA5pOE
If there are any other services you need to help your credit operations run smoother, we’d love to talk to you about ways we can help. You can reach us at 818-972-5300 or at www.creditmanagementassociation.org.

Thanks for reading!

Chairman’s Blog: Sharing is Caring, by Tracy Rosenbach, CCE

With Valentine’s Day coming up, I can’t help but think of how we teach our children the concept that “sharing is caring” as they are growing up. We hope over time this lesson fosters acts of generosity and kindness, and it turns our kids into quality adults. In our profession, sharing information is crucial to our success. Attending industry credit group meetings gives us that bit of real-time information that often we cannot get from a credit reporting service or the internet.

There is nothing like being able to speak with another credit professional in your industry to find out about a mutual customer. Of course, there are guidelines which we need to follow when discussing customers (past activity only).

The group my company belongs to has an attorney present during all discussions and social activities as a precaution. In addition to obtaining customer information, Industry Credit Groups encourage networking, which is an important aspect of growing in a profession. By talking to others, we find out more about our particular industry, educational opportunities and ways in which we can expand our own knowledge base and ultimately better help our companies make sound credit decisions.

If you are not already a member of a Credit Group, I strongly encourage you to contact CMA to find out about an industry credit group that would be appropriate for your company. If you are a member of an Industry Credit Group, fully participate and help it to grow. Look out for other companies that would benefit from being a member of your group. There is a real strength to an industry group that has high participation, plenty of members and solid leadership.

And while we’re in the giving spirit, I encourage you to nominate individuals who you believe are moving the credit function forward with one of the honors and awards categories that CMA will be recognizing at its Annual Meeting in April. It’s really easy to nominate someone, and it’s a great way to show your appreciation for a fellow credit professional who constantly leads positive discussions at your Group meetings or consistently helps other credit managers. CMA is an association made up of an amazing group of people like you who are dedicated to helping the other credit professionals in our areas.

Thanks for reading!

Best regards,

Tracy Rosenbach
CMA Chairperson 2016/2017

CMA Announces New Collections Webinar Series

CMA is proud to announce a new series of three webinars that will focus on tips and tricks you can use in your business to improve your collections results. The webinars, which are sponsored by CMA’s collections partner AG Adjustments will feature practical advice from a few of CMA’s most popular speakers: Bart Frankel, Dave Osburn and Greg Powelson.

Dates (and session descriptions) can be accessed under the links below:

The webinars are highly interactive, and are geared towards credit professionals with all levels of skills. We hope you’ll participate.

For more information about CMA’s education program, and a complete schedule of events, click here.

Dan Goldes to Deliver Keynote Address at Spring CreditScape

Keynote speaker Dan Goldes will present “The Influence Edge: Increasing Efficiency with Influence Skills” in an interactive keynote workshop at the upcoming CreditScape Spring Summit, April 12, 2017 at the Hyatt Regency Hotel, Garden Grove, CA. The keynote discussion will fit in well with the event’s theme of how to create efficiency and reduce costs in the credit department.

 

The CreditScape Spring Summit, powered by United TranzActions, features one packed day of workshop training, expert practical and legal advice, and networking with other credit professionals, designed to give you insight on areas where you can make improvements in your company’s credit operations.

 

More information about the event, including a complete schedule, will be available soon.

 

To register, click here.

Future Dates Set for International Credit Best Practices Forum Meetings

The inaugural international credit best practices forum, which took place in January, was an overwhelming success amongst CMA members, as dozens listened in on the conversation led by international trade expert Gary Mendell of Meridian Finance. Based on the success of the meeting, CMA has scheduled the subsequent monthly meetings, which are listed below. Each meeting will address a to-be-determined different international topic, with a 20-to-30 minute discussion led by a thought leader, a question-and-answer session and open forum.

 

The dates (and links to register) are as follows:

These meetings, which are delivered in online webinar format, are subject to special pricing of $20 per meeting for members, while non CMA members will pay $30.

 

For more information about how you can get involved, contact Alan Dicker at adicker@emailcma.org or 323-573-0840.

CMA January Member of the Month: Regina Howe, State Restaurant Equipment

The January CMA Member of the Month is a good reminder of how a Group dynamic (and the information exchanged in a Group) can be so different from month to month, and why it is important to try to attend as many Group meetings as you can.

Regina Howe of State Restaurant Equipment is a 27-year Credit industry veteran who has participated in several industry credit groups throughout her career. She’s used CMA’s collection services (when she worked in the construction industry) and has recommended CMA’s services to other companies because of the success that she had with collections, information, prelims and liens.

A new member of the Food Group in Nevada, she came to a Group meeting in October (which provided some good conversation but not a lot of actionable items she could bring back to her company), and then again in December. “In December, I was very impressed with the increased number of members in attendance, the information shared, and the conversations that we shared besides past due info. I do realize that membership, attendance and participation are very important to the success of the group, and I am very interested in participating regularly, seeing what I can bring to the group as well take away from the meetings,” she said.

We appreciate her positive attitude and enthusiasm towards making her company better, the Group better, and  using her membership to its fullest capabilities by participating in CMA.

Thanks again for being part of CMA!

CMA President’s Blog: The Influence Edge: Management Training at CreditScape, by Mike Mitchell

CMA President and CEO Mike Mitchell

During the holidays, CMA staff called and emailed most of our members to help us determine their goals and objectives for 2017, and what they thought their biggest obstacles would be. Thanks to all of our members who took the time to speak with CMA staff to share those goals, as we learned a great deal from the process, to help us shape what we’re doing to help our members. Many of you told us that (not surprisingly) that you want to reduce DSO, keep your A/R balances current, reduce late payments and bad debt write-offs, and keep customers paying on terms. Obstacles cited were customers requesting extended payment terms, reduced staffs, and bankruptcies. We also heard throughout that many of you need to overcome these obstacles and achieve your goals more efficiently and for less cost.

The upcoming CreditScape Spring Summit, which takes place in April, speaks to your concerns, as it will feature presentations and discussions that focus on helping you streamline operations and create efficiencies that will reduce the cost of doing business.

Kicking off the Summit is Dan Goldes’ presentation, “The Influence Edge: How to Get What You Want.” Why are influence skills important for credit managers? Credit roles are by their nature cross-functional – internally, you work for a senior finance executive, but you work with sales, order entry, billing, customer service, legal, shipping, and maybe even procurement. Goldes says that, “with the horizontal structure of today’s progressive organizations, it is increasingly important to ask for and receive the support you need to accomplish your goals. The most effective way to do this is through the strategic use of influence skills.”

Creating efficiencies that will reduce costs will require change, and change requires buy in. You will likely have to get approval from senior management to implement those changes (and the costs associated with them), and you will have to convince staff to adopt those changes. Both tasks require influence skills – without them, process improvements may not be successful, and indeed may not happen at all. When you attend CreditScape and learn about process improvements and tools that can create efficiencies and cost savings, we want you to feel empowered to take that knowledge back to your office and get things done. Dan says, “By using influence skills strategically, others will be more willing to help move organizational processes along without resistance.”

Additional programming at CreditScape will include a panel discussion from real-world credit practitioners explaining areas in their businesses where they’ve achieved process improvement, CMA’s version of “Speed Networking,” and other interactive events geared towards helping members create efficiencies and reduce costs in their credit operations.

At CMA, we are dedicated to helping develop educational programs that speak directly to your real-world credit needs and concerns. I encourage you to reach out to my team at CMA (or respond to this blog) if there are other topics that you think could help your business. I really hope to see you at CreditScape in April.

How CMA Group Members Helped Conquer Hurdles Associated With Payment Portals

 

Over the years, we have sat in on numerous Industry Credit Group meetings, each with a unique membership structure, and almost all have the same challenges. Recently, during one of the meetings I attended, the members communicated that they were having a harder time collecting their money since their customers recently introduced a new “payment portal” for them to submit their invoices for payment.

For many credit & collection professionals, payment portals are nothing new, but for some these portals can be confusing. Here are just a few problems that were identified:

  • invoices weren’t compatible with customer portal
  • invoices are being skipped
  • capacity issues, as some portals cannot handle large volumes of invoices
  • invoice status are not always up to date
  • fees are being charged to process invoices
  • there is nobody to speak to when you can to follow up on an invoice that was short paid or skipped

Many credit professionals do realize that there are benefits to both sides when we leverage technology to expedite things. However, they also know there must be good communication and reasonable expectations on both sides for these programs to work.

This is just one example of how belong to an Industry Credit Group can help you navigate these various cash flow challenges. During the meeting, Group members shared their experiences and have given examples of how they have effectively navigated these payment channels to get paid.

Does your company belong to an Industry Credit Group? If you don’t, please give us a call to see if there is one that will help your company get paid faster.

Seven Signs That Your Customer Has a Problem and May Need to be Placed for Collection, by Sam Fensterstock

This is a common-sense approach to the problem of determining whether a customer is about to become a collection problem. Companies that have a cash flow problem must choose which vendors they will continue to satisfy and which vendors they will not. If a company has insufficient cash on hand to pay all of their vendors on a timely basis, some of their vendors are not going to get paid on time. This can be a one-time problem and things could get back to normal fairly soon, or it can be an endemic problem and if you don’t act promptly it may cost you.

When you first spot a problem, you are not going to know whether it’s a short-term thing or the customer is in financial difficulty. It behooves you to make a determination and act as quickly as possible. Some of the signs to look for are discussed below. Essentially, they represent behavioral changes in the account. The chances are that if the account is having financial problems more than one of them will be evident, but the occurrence of only one may still signify a real problem. In any event, once you make your determination, the quicker you turn the account over for collection, the more likely you are to realize a significant cash return. Here are the things to look for:

The Account is Over 90 Days Past Due

The customer has been a solid citizen and almost always paid on a timely basis. Now they are 90 days past due, and it seems they are struggling to not go to 120. They answer your calls, but promises to accelerate their payments and clean up the past due balance are not met. They may also be evidencing some of the behavior discussed below. The chances are you have a problem and turning them over for collection may save you some money and in many instances, save you a customer.

The Account is Not Returning Your Calls

This is a sure sign of a problem. They are past due and ducking you. If they won’t talk to you after repeated attempts to reach them, your collection agency may be your only solution. Collection agencies have trained recovery professionals that focus on working with these types of accounts and experience this problem as a normal course of their daily activity. They will get your customer to the table because it’s what they do for a living.

The Account Has Started Purchasing Erratically

Over time, the customer has always bought, even if it’s seasonal, a reasonably predictable amount of product. Your salesperson on the account can’t understand what’s going on. There are several possible reasons for erratic purchasing. It is possible that the demand for your product(s) has become highly variable and the customer is purchasing accordingly, or your customer is having financial trouble and is having difficulty staying current. If other customers are still purchasing the same products on a consistent basis than the chance that there is a demand problem is small. So, a financial problem may be the reason. This is something that needs to be checked out before it costs you money.

The Account Has Stopped Buying

If the account has stopped buying and owes you money, even if it’s not past due, you need to be on the alert. For whatever reason, if the account no longer needs you, they don’t have a reason to be prompt. If they go 90 days past due, you are probably going to need outside help to collect your money.

The Account Changes Bank Accounts Too Frequently

Good banking relations are vital to a company’s health. If your account is suddenly paying you from a different bank it may not signify a problem, but if they pay you from a different bank every time they send you a check, something’s wrong. This needs to be checked out. An updated credit check is called for, and if it doesn’t come out clean, you need to pay extra attention to the account because, if they are not overdue yet, the chances are great that they soon may be.

You Receive Negative Trade Information on an Account

As of now, the account is not past due, but you receive some negative trade information on the account at a recent credit group meeting or from a credit report. This needs to be checked carefully. When an account gets into trouble, they start allocating their available cash. The more important vendors may not see a problem, but the secondary vendors find the account is falling behind. For example, if the account is a supermarket, to be in the soda business they need Coke and Pepsi. The alternative soda brands will see a problem, but Coke and Pepsi will not until the company is ready to go belly-up.

The Account Has Several Unresolved Disputes

There are always disputes with customers. They received the wrong items, or the items were received damaged, or they were entitled to a discount are some of the reasons an account will not pay an invoice in-full. However, these types of disputes are easily settled if both parties are willing to compromise. But when an account refuses to settle and the dispute grows old, and additionally more invoices are disputed and they too age, you have a problem and it has nothing to do with the disputes. The account is holding on to cash and the disputes are a way of justifying their non-payment.
Final Thoughts

We recommend having a strategy in place to determine when to pull the trigger and place a customer with your collection partner. The warning signs listed above are usually evident during your internal collection efforts and the sooner you recognize them the better. We recommend being proactive with your internal efforts as soon as your customer is past due. If the customer is more than 90 days past due, you obviously have a problem and the account should be turned over for collection to maximize your cash flow.

But even if your customer is not 90 days past due, you may be about to have a problem. When an account evidences any of the behavior discussed above you need to get on their case sooner rather than later. Prompt action will save you money. If the account is behaving erratically you should turn them over as soon as they trigger the 90 days past due signal because in all probability things are not going to get better, only worse.
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.

D&B’s Ken Bonitz to be Special Guest Speaker at CMA Supplier Risk Group Meeting

If one of your responsibilities is to vet your company’s vendors, CMA recommends that you participate in the upcoming Supplier Risk Credit Group on January 25.

The January meeting of this group will feature special guest speaker Ken Bonitz. Bonitz is the Supply Management Solutions Advisor with Dun & Bradstreet, and over the past 15 years his primary focus has been with Fortune 500 companies; he’s had great success in all industry verticals.

Ken Bonitz is a 35-year supply-chain professional who has more than 20 years’ experience in high tech, developing supply chain solutions that focus on operational efficiencies, cost savings, profitability, risk and product support. He also has 15 years supply chain consulting experience, helping customers identify supply chain financial risk, operational risk, country risk, leverage opportunities and ERP/MDM improvements.

The meeting will take place at the CMA Glendale offices, or you may participate via teleconference.

Among the items on the agenda: D&B Overview; D&B Segment Overview; D&B Supply Management Overview; Supplier Predictive Scores; Supplier Predictive Risk Tools; and a Questions-and-Answers session.

For more information about how you can get involved, contact Larry Convoy at lconvoy@emailcma.org or 818-972-5323. We look forward to your participation in what is sure to be a lively discussion.

Nomination Forms Now Available for CMA Board of Directors

The CMA Nominating Committee is now accepting nominations and applications for service on the 2017-2018 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 February 1, 2017.

Click here to download the forms and for more information.

CMA Adds Commercial Real Estate Sales to Liquidation Services

By Molly Froschauer

Credit Management Association (CMA) Adjustments exists to help serve the creditors in the bankruptcy process by ethically handling assets and distributions in a cost-effective manner. As many businesses know, once a company files bankruptcy, the process can be so costly that the creditors lose out. As CMA Adjustments prides itself on being a full-service solution to companies looking to maximize their assets for their creditors in an alternative to bankruptcy, it has added real estate to its capabilities.

Once a company is out of business, the rules for payments, collections and distributions all transform and often require a third party to handle assets to ensure fairness to creditors. Often these third parties are attorneys or financial analysts whose services cost an enormous amount due to the expertise required. At CMA, we have handled all kinds of commercial assets for more than 130 years, and we have been cognizant that many times, recovery will come from the sale of real estate. We believe that the creditors will benefit by adding these assets to the liquidation processes.

Whether the funds come from collecting rents, managing properties or liquidating buildings, CMA manages the funds of insolvent estates with the creditors in mind. CMA is also available as a resource for companies to ask questions about any part of this process. For example, many creditor managers run property records as part of the credit application and have questions about real estate’s impact on the creditors’ right to recovery. With this new expertise, CMA has expanded its ability to help companies drill down on any asset that affects their recovery.

I’d love to talk to you in more detail about this program if you have any questions. Please feel free to call me at 818-972-5300 or email me at molly@cmaadjustments.com.

About CMA Adjustments

Frequently, a company suffering from the effects of diminished cash flow seeks relief from its debts through a bankruptcy proceeding. CMA Adjustments offers effective alternatives to bankruptcy. CMA’s fully developed and tested programs reorganize debt and rehabilitate insolvent companies at a fraction of the costs and none of notoriety that bankruptcy carries.

Through CMA’s out-of-court workouts management can work informally with creditors to reorganize debt or position a company for merger, acquisition or new investment. If liquidation is appropriate, CMA has extensive experience as assignee under an assignment for the benefit of creditors for most types of businesses.

Molly Froschauer is the General Manager of CMA Adjustments. She received her J.D. cum laude from Pepperdine University and her Bachelors from Claremont McKenna College. Before joining CMA, her practice was centered around bankruptcy and other out-of-court debt issues. She’s a member of the Bankruptcy Inn of Court, Los Angeles Bankruptcy Forum, and the Turnaround Management Association.

A Time to Reflect at New Year, by Tracy Rosenbach

Happy New Year’s everyone!

January is a natural time for reflection and goal setting. Professionally, this is the time when I like to take a look back at the previous year to see how I can improve on what we accomplished last year. From there, I begin to develop goals for myself and the department. I am always looking for ways in which to make the flow of work go more smoothly, payments especially at year end to be made on time, etc… I find that communication and organization are two of the most important keys to success.

Nothing can replace the personal touch when it comes to working with high-risk and key customers, one of my goals each year involves developing a list of customers to visit. Normally the list has no more than 10 – 15 names on it to keep the focus on those customers which can materially impact my company. Some of these customers are within driving distance, which minimizes the expense. Some I will have to fly to, but I try to combine it with a conference/seminar/meeting in order to get the most out of the trip. Making that personal contact with the customer can open up the lines of communication in many ways. When I am visiting a customer, I try to meet as many key personnel as possible from the CFO and/or controller to the Purchasing Manager. I always represent myself as yet another point of contact/resource for our customers. Years ago, I had a customer call to ask me a freight question involving a delivery. Normally I don’t handle this type of question, but I took down the information and rather than transfer the customer around the company I found out who could answer the question and put the two parties in touch. The personal touch is invaluable.

I also look for ways to better streamline our credit operations, making sure that our processes are as efficient as possible with the technology that’s available, and that we’re using the correct reporting resources to meet our needs and provide data to make effective credit decisions. When’s the last time you evaluated your credit reporting solutions? If it’s been more than a year, I suggest you do it again soon.

As you head into the New Year take a moment to reflect about 2016 – the successes and the failures – and how you and your department can improve. You are not alone by any means. CMA provides the means for networking (industry groups, the annual meeting, etc.), information exchange (the type of credit reports you need and the information exchanged through RFIs, alerts and credit groups), collection of tough accounts (collection services), etc… Please reach out to the CMA staff for any assistance you may need to ensure that your company’s credit operations run as smoothly as possible in 2017 and going forward. Remember, CMA exists as a partner to help your credit department accomplish its goals. Don’t forget to include CMA in your success plans for 2017 and beyond.

Have a happy and healthy 2017! I’ll touch base in February.

Tracy Rosenbach

CMA Chairperson 2016/2017

The Twelve Days of Credit

Though Christmas is now over, we thought you might want to see the imagination of credit professionals, as a group of them rewrote the holiday classic “12 Days of Christmas” to apply to credit.

You can watch the video of them singing it at their recent holiday party here, or read the lyrics below.

Happy holidays from CMA and we wish you a prosperous new year!

 

1st day – A Large Check for H&E
2nd day- 2 Returned Checks
3rd day- 3 Phony Excuses
4th day- 4 Calling Sales Reps
5th day- 5 Bankruptcies
6th day- 6 Lost Invoices
7th day- 7 Liens a Filing
8th day- 8 Customers Complaining
9th day- 9 Collectors Dancing
10th day- 10 Late Payments
11th day- 11 Dancing Divas
12th day- 12 Cards Declining

Avoiding Traps for the Unwary: What Nevada Claimants Must Know about Mechanic’s Liens in Bankruptcy

By: Tracy M. O’Steen and James Patrick Shea

This article assumes that the debtor is the owner of the real property where the services and/or materials were provided. Different issues may arise if the debtor is not the owner, but rather the general contractor with respect to the construction project. This article does not address such issues.

Nevada state law provides a fairly straightforward process for perfecting mechanic’s liens. Under Chapter 108 of the Nevada Revised Statutes (“NRS”), there are specific steps to follow. In its most simplified version, in Nevada a claimant must (1) record its notice of lien[1], (2) properly serve the notice of lien[2], and (3) foreclose on the mechanic’s lien through court action[3]. However, when a bankruptcy comes into play, there are some traps that may befall the unwary. Understanding how the perfection and foreclosure of a mechanic’s lien is altered by the Bankruptcy Code requires a basic understanding of both Nevada construction law and bankruptcy law. Certain provisions of the Bankruptcy Code modify some of the basic concepts generally understood to be true in the area of mechanic’s lien law.

Perfecting a Mechanic’s Lien Post-Petition:

What happens when a claimant has provided goods and/ or services for a construction project, but before the claimant has either been paid or perfected its mechanic’s lien, the owner of the project files for protection under the Bankruptcy Code? Typically, once a bankruptcy petition has been filed, the “automatic stay” under 11 U.S.C. § 362(a)(4)[4] prohibits “any act to create, perfect or enforce a lien against the property of the estate.” This would seem to be a straightforward prohibition against taking any action to file and perfect a mechanic’s lien covering pre-petition goods and/or services. An unwary claimant may then stop all efforts to perfect and enforce its mechanic’s lien once a bankruptcy has been filed, and then lose those lien rights as a result. However, Bankruptcy Code Section 362(b)(3) specifically carves out an exception for perfecting a mechanic’s lien post-petition. This section states that the automatic stay does not apply to “any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee’s rights and powers are subject to perfection under § 546(b) of [the Bankruptcy Code].[5]

Section 546(b)(1), in turn, limits the Trustee’s powers to avoid liens by providing that those powers are subject to any “generally applicable law” that would permit “perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection.” In other words, most bankruptcy courts agree that state mechanic’s lien statutes that allow a supplier of labor and materials to assert a lien relating back to the time such labor or materials were first provided fall within the scope of § 546(b)(1). Under Nevada law, a mechanic’s lien may relate back to a pre-petition date if that date is when the labor and materials were originally supplied[6]; therefore, the act of recording and perfecting a mechanic’s lien under such circumstances is not subject to the automatic stay. That being said, the claimant may still want to seek a comfort order from the bankruptcy court prior to taking such an action and is encouraged to file a proof of claim regarding its lien as well.

Impact of the Automatic Stay on Actions to Foreclose a Mechanic’s Lien:

Even if a mechanic’s lien is perfected, whether that perfection occurred pre-bankruptcy or post-bankruptcy, the automatic stay will impact a claimant’s ability to either initiate or continue a suit to foreclose on the mechanic’s lien. The Bankruptcy Appellate Panel for the Ninth Circuit Court of Appeals has specifically concluded that the commencement of a foreclosure suit by the claimant post-petition violates the automatic stay.[7] This creates a major problem in Nevada since the procedure to enforce a properly perfected mechanic’s lien is the commencement of a foreclosure lawsuit within six months from the date the lien is recorded. Of course, a claimant may always seek relief from the automatic stay to commence or continue an action to enforce its lien. However, as an alternative, the Bankruptcy Code allows a claimant to preserve its rights by taking the substitute action of giving notice of its right to enforce the mechanic’s lien. It is recommended that this notice be filed in the bankruptcy case within the same time frame the claimant would be required to commence its action to foreclose the mechanic’s lien under Nevada state law. In Nevada, that time frame is six months from the date the Mechanic’s Lien is originally recorded.[8]

The Notice Required by § 546(b)(2):

Unfortunately, although the Bankruptcy Code requires the claimant to file a notice in the bankruptcy court to preserve its state law lien rights, the Bankruptcy Code fails to provide specific guidance as to what constitutes the requisite notice. The notice requirements under § 546(b)(2) differ from jurisdiction to jurisdiction, and unfortunately, there are no reported cases in Nevada dealing with the sufficiency of the § 546(b)(2) notice. However, the Ninth Circuit has concluded that the filing of a secured Proof of Claim is not sufficient to satisfy the § 546(b)(2) notice to maintain the mechanic’s lien nor is the recording of the lien itself.[9] Something more must be done to maintain the perfection of the mechanic’s lien or it will expire within the statutory six month period.[10] The guiding principle seems to be that the notice should inform the court and debtor that the creditor would have commenced the foreclosure action had bankruptcy not intervened. Despite some courts holding that oral notice or out-of-court action evidencing an intent to assert and enforce a lien can be sufficient, most courts conclude that § 546(b)(2) requires that something in writing be filed in the bankruptcy case.[11] A claimant should, at a minimum, file a pleading in the bankruptcy case that expressly provides that (1) the claimant has a right to assert a mechanic’s lien under applicable state law; (2) it intends to assert and enforce such a lien; and (3) it is authorized to do so under Bankruptcy Code provisions. The filing of this notice should preserve the claimant’s lien rights through the duration of the bankruptcy case.

Tolling of the Foreclosure Deadline:

Assuming the claimant has taken all the proper steps to preserve the lien, a majority of courts, including the Ninth Circuit Court of Appeals, agree that § 108(c) of the Bankruptcy Code tolls the deadline for commencing a foreclosure action to enforce a mechanic’s lien.[12] A claimant who timely records a mechanic’s lien under Nevada law and files the required notice under § 546(b)(2) in lieu of commencing a foreclosure action, has at least 30 days after the termination of the automatic stay (which may occur upon dismissal of the case or abandonment or surrender of property) to commence or continue its foreclosure action.[13] It is important to note that § 108(c) of the Bankruptcy Code only operates to toll the time period for commencing or continuing a civil action to foreclose the mechanic’s lien, and cannot be used to extend the time period for filing the original lien or the § 546(b)(2) notice discussed above.

Conclusion:

Claimants are cautioned to seek counsel if they have provided labor and materials with respect to a construction project and the property owner files for bankruptcy protection. In order to assert, perfect and maintain their lien during the bankruptcy case and avoid traps for the unwary, careful attention should be paid to the requirements of Nevada’s mechanic’s lien statute and the Bankruptcy Code. Otherwise, claimants risk waiving their mechanic’s lien rights.

Tracy O’Steen is an attorney in Armstrong Teasdale’s Financial and Real Estate Services practice group. She counsels clients on bankruptcy matters, distressed loans, commercial loan transactions, receiverships, landlord tenant disputes and other related commercial litigation. Mr. O’Steen can be reached by phone at 702.678.5070 or by email to tosteen@armstrongteasdale.com.

James Patrick Shea is a partner in Armstrong Teasdale’s Financial and Real Estate Services practice group and the immediate past president of the American Bankruptcy Institute. He has more than 30 years of experience advising financial institutions, landlords, vendors and other creditors in business bankruptcy proceedings. Currently, he serves as Special Counsel to the Chapter 7 Trustee in the Fountainebleau mechanic’s lien litigation. Mr. Shea can be reached by phone at 702.678.5070 or by email to jshea@armstrongteasdale.com.

====

Footnotes:

1 NRS 108.226.
2 NRS 108.227.
3 NRS 108.223; NRS 108.239.
4 Unless otherwise stated, all section references in this article refer to sections of the United States Bankruptcy Code.
5 In re Orndorff Construction, Inc., 394 B.R. 372 (Bankr. Ct. M.D.N.C. 2008) (“An action to perfect a materialman’s lien is excepted from the automatic stay by Section 362(b)(3)”). See also In re Richardson Builders, Inc., 123 B.R. 736, 738 (Bankr. W.D. Va. 1990); In re Victoria Grain Co. of Minneapolis, 45 B.R. 2, 6 (Bankr. Minn. 1984).
6 NRS 108.222 (amount of lien); NRS 108.225 (a lien under this chapter is preferred to any lien recorded after the commencement of construction of a work of improvement).
7 In re Baldwin Builders, 232 B.R. 406 (9th Cir. B.A.P. 1999).
8 NRS 108.223.
9 In re Baldwin Builders, 232 B.R. at 413-14 (9th Cir. B.A.P. 1999).
10 NRS 108.223; In re In re Baldwin Builders, 232 B.R. at 413-14.
11 See In re Baldwin Builders, 232 B.R. at 413-14 (collecting cases).

 

Does Your Company Sell Software as a Service Solutions & Products ? We Have a Group for That!

CMA is currently recruiting companies for its new Software as a Service (SaaS) Industry Credit Group. The group will be comprised of interconnected companies that provide cloud computing models in which a third-party provider hosts applications and make them available to customers via the internet, and have a common customer base.

The initial meeting will be a networking event on Feb. 2, 2017 in Livermore, CA. If you’re interested in attending the networking event, please RSVP by January 17, 2017 with Amber Jackson ((702) 636-4323, ajackson@emailcma.org) or Ann Westpy ((702) 903-2643, awestpy@emailcma.org ).

We look forward to a great turnout, and hope to see you there!

CMA President’s Blog: Join CMA’s New International Credit Best Practices Group, by Mike Mitchell

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

We live in a global economy where many of the trading lines that used to go from state to state now stretch from country to country. Our businesses sell to places in the world where the political climate is volatile and it is the credit professional’s job to protect their company’s A/R and ensure they get paid on the deals they accept.

More and more, I have credit professionals asking me how CMA can help them assess the risk involved in selling to different countries, where they can find information and reports about companies in their particular country, and which resources they can access to help sell abroad. In our ongoing effort to help members with mitigating risk, we recently surveyed our members for input on the best ways for CMA to help members sell internationally.

Based on the results of the survey, I am pleased to announce the formation of a new International Credit Best Practices Group, a monthly virtual meeting for credit professionals from different industries to exchange best practices in international credit sales. Each meeting will feature an expert in one of the many areas of international credit, including credit reporting, credit insurance and international business consulting. Each meeting will allow time for participants to share their own knowledge, and get advice from the rest of the group to help address their own specific issues.

If you manage international credit sales for your company, please join us for the FREE inaugural meeting of the International Credit Best Practices Group on January 23, 2017 from 10 am – 11 am PST. We will be joined by several experts, including Gary Mendell and Robina Peanh of Meridian Finance, and Eddy Sumar of ERS Consulting, who will share expertise about getting started in international business and where to find information about assessing country risk. The event will be held via web conference, and you can sign up on the anscers.com Education page.

The Group is an excellent place for companies who sell internationally (or plan to in the future) to hear from experts who will share best practices, tips and tricks to help companies minimize the risk associated with selling overseas. During the initial meeting, your input will help the group determine topics for upcoming meetings, allowing CMA to build a series of agendas for topics that will help your business.

We hope that this new Group will provide you with the knowledge and tools you need to help your company compete in the global marketplace. I look forward to participating with you early next year.

How to Survive Year-End, by Tracy Rosenbach, CCE

tracy_rosenbach_7975ef

Happy Holidays!

It’s calendar year end and for many of us it is fiscal year end. It is the time of year when we take one last look at 2016 before the year ends. The last-minute dash begins. Calling customers to ensure large/crucial payments arrive on time. Working with the sales team to finalize or confirm any new customer arrangements or existing customer deals that might impact the bottom line. Speaking with management to confirm what the year-end expectations are. Sending accounts who aren’t communicating anymore to a third-party collections agency for their assistance.

Here’s a friendly reminder to please reach out to the folks at CMA if you need assistance. If you need an extra credit report, a last-minute clearance from your industry credit group, help filing preliminary notices or liens, etc., CMA is there to help you get through this last-minute crunch.

As we reflect back on 2016, though there is a lot to do during this time of year, don’t forget to recognize those people around you who help you make it happen. CMA will soon be asking for nominations for several awards including the CBA, CBF and CCE Designation of Excellence, Member of the Year, Member Company of the Year, Mentor of the Year, Instructor of the Year and so on. When the call for nominations comes out, please consider nominating someone you work with, an associate you network with, or one of your personal credit mentors for a CMA award. These awards will be handed out at the CMA Annual Meeting this Spring. If you have any questions about the awards, how to nominate, etc., please reach out to me or the CMA staff.

Lastly, but most importantly, I wanted to thank you for your continued support of CMA through your membership, industry group participation, volunteering, and use of CMA’s services. Your contributions make a difference.

Best wishes to you and your family for a very Happy Holiday season! I’ll touch base in January.

Tracy Rosenbach, CCE

CMA Chairperson 2016/2017

Why a good credit manager should have regular meetings with the CFO

Many credit professionals would agree that the credit management position is often overlooked and undervalued After thinking about the many areas that a credit manager is involved with on a daily basis, many would believe that a good credit manager can directly impact the company’s bottom line. This is why your company’s CFO should make a point to have regular meetings with the credit manager.

These are a few areas to help make this point:

  • Quote to Cash: A good credit manager will help create visibility and reports to identify potential forecasting problems.
  • Compliance: The credit manager often has unique information about the suitability of a prospective customer that may impact the bottom line of the company.
  • Contract process: An experienced credit manager can help identify Terms & Conditions language, verify true corporate structure of the customer and their related entities, and they can help create profitable financing options that are often overlooked especially with repeat customers.
  • Shipping: By partnering with the Shipping department, the credit manager can make sure the credit policy is effectively being followed, cash deposits have been collected, and change orders have been properly identified prior to shipping. Without the credit manager’s insight, possible serious disputes, invoicing problems, and audit issues may appear downstream that may impact cash flow or revenue recognition.
  • Receiving-returned merchandise issues may also over-inflate A/R if credits are not processed in a timely manner.
  • Collections: The credit manager has a major role in the rhythm of the Cash Cycle. They are the drummer in the band; they help manage A/R to Finance relationships; they manage collections, disputes, and workout agreements with customers on a daily basis; all while being customer-centric to make sure the customer is satisfied and will be a repeat customer.
  • Miscellaneous: a seasoned credit manager can help identify best practice resources and quality assurance issues in many areas since they are required to see the BIG picture of the company’s sales objectives.

As the person at your company in charge of assigning credit, do you regularly meet with the CFO? If so, are those meetings useful? We’d love to get your feedback. Thanks for reading!

President’s Blog: CMA Membership Budget Guide for 2017, by Mike Mitchell, CAE

 

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

All too often, our members tell us that they want to take advantage of all of CMA’s benefits but they say they do not have the budget to do so. For companies on a calendar fiscal year, here’s your opportunity to begin planning for those budget worthy benefits for 2017. Even if your next fiscal year extends well into 2017, it’s never too early to start your wish list.

If your company is one of the 600+ members that participate in one of CMA’s 51 Industry Credit Groups, then you know how valuable it can be to have unlimited access to anscers Credit Reports, RFIs, Credit Alerts, and the knowledge and experience of other credit professionals in your industry. In the past year, CMA group members have submitted more than 45,000 RFIs, warned other group members with more than 6,800 Credit Alerts (which included NSF and bankruptcy information), and shared countless stories about best practices in credit. Many credit group members have reported that they still find their credit groups and the shared trade payment experience the fastest and most economical way to conduct timely due diligence on prospective customers and effectively manage existing customer accounts. The unique combination of industry trade data, insider knowledge about common customers and industry best practices often recoups your dues many times over in helping group members minimize risk and grow revenue.

Before you budget, consider whether you are getting the best value possible for your credit information needs. Let CMA’s experts help you analyze your current credit reporting product mix – we might be able to save you money (and help you get better results) by suggesting a different report or mix of products that better meet your company’s risk assessment requirements while staying within budget. In addition to credit bureau contracts, CMA has several transactional credit report products priced to deliver maximum value at minimum cost. We have also seen usage for the NACM NTCR increase significantly over last year. Only CMA members have access to the millions of tradelines in the NACM National Trade Database (many of which are only available in this report), and at only $14.95 each, the NTCR reports are a great value for an initial credit check. CMA’s anscersX multi-bureau report combines proprietary scores and data elements from all three major credit bureaus (Dun & Bradstreet, Experian, Equifax) to give you a comprehensive look at the payment history of your customer or prospect ($69 per report). Be sure to budget for some anscersX reports to supplement your existing credit reports.

If you are a construction supplier, consider how using CMA’s Lien Filing Service can save you time and money. With more than 30 years of experience providing services ranging from preliminary notices to lien warning notices, mechanics liens, bond claims and stop notices, CMA has hundreds of clients across the United States who value the personalized, unlimited support from CMA’s caring and knowledgeable staff. You might be interested in CMA’s new Construction Credit Report, providing title data, public record data, active trade lines, credit analysis and scores, collection agency activity and links to state contractor information. The report, which is the only all-inclusive report of its type, runs $29.95 per report.

CMA’s collections partner, AG Adjustments, offers third-party collection services at competitive rates on a contingency basis.

If you’re looking for professional development help for your staff, CMA is again offering NACM Certification Courses for the CBA (Credit Business Associate) and CBF (Credit Business Fellow) designations starting in January. These will only be offered once next year, unless there is sufficient participation for additional classes. If you plan to get certified in 2017 or early 2018, you’ll need to register for the Certification Courses now and budget accordingly ($899-$995 per course). Information for all professional development events can be found on CMA’s website and on anscers.com under the Education tab.

CMA will continue to offer its standard webinar program, which includes several series on topics such as collections, advanced lien law and credit reporting. Our webinars typically cost $49 for CMA members and $69 for non-members, but some may be free to CMA members, depending on the topic.

We hope this list is helpful as you consider your needs for 2017.

Are there other credit-related services that you’re looking for that we currently don’t offer? Feel free to reach out to me by responding to this blog. Thank you for reading, and we look forward to your increased participation with CMA in 2017!

Two Billion Reasons Why You Need to Know the anscersX Multibureau Trade Credit Report, by Bob Shultz

anscersX Report

Do you have to make tough credit decisions quickly? How would you like to have the power of over two billion trade credit experiences available to you from the three most reliable sources on the planet? What about having credit scores and valuable facts on a company’s history at your fingertips immediately when the credit request lands on your desk?

In today’s competitive environment, informed credit decisions must be made quickly to get product out the door. Your company expects credit to support Sales and drive revenue. At the same time, credit decisions must be within your company’s risk tolerance with a likelihood of prompt payment.

This was the thought behind CMA’s anscersX Multi-Bureau Trade Credit Report. anscersX provides all the above and more from Dun and Bradstreet, Experian, Equifax, Ansonia and international data from CreditSafe International. You choose which bureaus you want to see. You pay only for what you get. The report is online and delivered to your workstation within seconds of ordering it.

anscersX provides all of the information you need to make most credit decisions. A Paydex Score from Dun and Bradstreet, Intelliscore from Experian and a Business Risk Score from Equifax, along with over two billion current trade lines, trends, details about the company and public records of suits, liens or judgments.

There is a side benefit to those of us in credit who must defend our decisions. Using powerful information such as the anscersX report will help justify any decision you make. If there are questions or push-back, you are locked and loaded to illustrate why you came to the conclusions you did.

Consider the anscersX report if any of the following are true:

  • Your monthly requirements do not justify a costly contract with one or more of the bureaus.
  • You are looking for a more efficient and cost effective way to order reports from multiple bureaus.
  • You have a contract with one of the major bureaus but want reports from additional sources.
  • You have a limit on the number of reports you can order from a bureau, anscersX can conserve usage.
  • A multi-bureau report will give additional insight into a higher risk prospect or customer.

The best thing you can do for yourself today is to go to anscers.com and check out anscersX, or read information about it here (including sample reports). It is brought to you by Credit Management Association for the benefit of the credit management community.

Robert S. Shultz is a Partner at Quote to Cash Solutions (Q2C) LLC, and a frequent speaker at CMA-sponsored and other credit events.

Buy Once, Pay Twice? No! The Purpose of Lien Waivers

Homeowners sometimes get blindsided when it turns out the GC they hired hasn’t paid his subs or materials suppliers. The lien waiver in your contract protects homeowners against this.

BY JIM CORY

If you live in Tampa and own a house, count your blessings that you never hired John Iacovino and Ike’s Roofing to replace your roof. If you had, you may have ended up like John Pfaff who paid Iacovino $8,800 to re-roof his home. The roof got replaced, only Iacovino, owner of Ike’s Roofing, never paid for the roofing materials he obtained on credit from Suncoast Roofing Supply. And because, after first sending a Notice to Owner, Suncoast Roofing Supply filed for a mechanic’s lien on the property, Pfaff is now obligated to pay for the $3,700 worth of materials the supplier furnished to do the job. According to the local sheriff’s office, Suncoast Roofing Supply is out about $150,000 and there are now 70 properties with liens on them, thanks to Iacovino, who has a history of drug and DUI arrests.

Secure the Receivable

What that lien could potentially mean for Pfaff is that Suncoast Roofing Supply can force the sale of his home at auction—foreclose on it—to satisfy the $3,700 it is owed.

More likely, however, is that when he goes to sell his property, or if he attempts to refinance it, the amount owed to Suncoast Roofing Supply will be paid from the proceeds of the transaction. A mechanics lien, in legalese, is designed to “secure the receivable.” Goods or services were rendered in good faith, and the lien, to ensure payment, becomes an encumbrance to the sale or transfer of the property.

The mechanics’ lien (standard usage is now ‘Mechanics Lien’) has been around since 1791 and was first conceived in modern form by Thomas Jefferson as a way to encourage construction on the nation’s capital. The concept owes its existence to the economics of the construction business. Mechanics liens were created as a unique legal remedy to protect contractors and those who supply them with labor (subcontractors), materials (supply yards), or specialized services, such as design (architects, etc.), from being stiffed. Wikipedia.com defines the mechanics lien as “a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property.”

On one level, a mechanics lien entitles a contractor to come after a homeowner who refuses to pay. But it also entitles subcontractors or suppliers to come after that homeowner, and specifically the property, should the general contractor fail to pay either party as agreed. Under the law—every state has one and every state’s will differ—the improved property becomes collateral for payment. “A mechanic’s lien has nothing to do with mechanics in the usual sense,” notes legal website Nolo.com. “It’s a legal claim against property being improved, and it can be filed by anyone who provides materials or does work on the project and doesn’t get paid. The property itself becomes responsible for the debt, and the people who are owed money can force its sale at auction if something isn’t worked out.” That is, the lien holder (say Suncoast Roofing Supply, in the example above) could sue for foreclosure to satisfy the debt. Even if sale of the house at auction is not in the picture, “you cannot sell or refinance your home without dealing with the mechanics lien,” notes Colorado law firm Robinson & Henry, P.C.

“Thus when a creditor is owed a few thousand dollars he may record a Mechanics’ Lien against real property which may have a value of hundreds of thousands of dollars. You can see the leverage he has in collecting this debt! This is a great tool for mechanics, tradesmen, subcontractors, labor providers, and material providers. But it must be used properly or the Mechanics’ Lien may be found invalid and thus unenforceable.”

Not That Complicated

If you’re a contractor who’s been stiffed, or a supplier left holding the bag, the idea of taking legal action around the concept of a mechanics lien might sound complicated and expensive. Actually, it isn’t at all hard to file a mechanics lien. In Pennsylvania, for instance, you could simply go to anscers.com, fill out the online forms, submit them, and allow the lien service to file for you. The cost: $290, though the price goes to $850 for a New Jersey residential lien. Generally, counties charge a filing fee of less than $50, but the cost of preparing a lien, which would require a lien service or a lawyer, would be anywhere from $250 to $500.

The key is to move quickly and not let the situation drag on. You snooze, you lose. In New York, for instance, “you must file your mechanic’s lien within four months of the time that you last provided labor or materials to the project,” according to the website for New York Mechanic’s Lien. The time frame will differ in every state. So, similarly, is the requirement that preliminary notice—Notice of Intent to File a Lien—must be given, or, in some states, you as a subcontractor or supplier forfeit your right to file a lien. (Click here for a state-by-state breakdown of requirements for preliminary notice.) So, for example, in Florida, to collect for the materials it supplied to John Iacovino and Ike’s Roofing, Suncoast Roofing Supply would have to have served John Pfaff with a Notice to Owner (NTO)—preferably by registered, Global Express Guaranteed, or certified mail— “within 45 days from first furnishing services or materials.” That’s not a huge amount of time. Note that, according to the site: “Failure to
provide the notice within the statutorily mandated time frame is fatal to the lien claim in Florida.” The lien itself would need to be filed with 90 days of the date the materials were supplied and must be notarized to be valid.

In the state of California, mechanic’s liens are a constitutional right guaranteed to contractors by the California Constitution. This right has been implemented in detail by statutes enacted by the California State Legislature.

Lien Waivers

What Pfaff could have done to save himself the aggravation and expense of the mechanics lien filed by Suncoast Roofing Supply was to demand a waiver of liens, or a subcontractor lien waiver, in the contract he signed with Ike’s Roofing, if in fact he signed one. “With a lien waiver, when the project is successfully completed, both parties sign off and state that the contract obligations have been met, including the general contractor [in this case, Iacovino] making all necessary payments to materials suppliers, subcontractors or vendors,” advises the Angie’s List review site. “If the general contractor doesn’t agree to sign off on the subcontractor lien waiver, you can withhold payment until he or she has proved they’ve paid their suppliers or subcontractors.”

As for Pfaff, he can take some small amount of comfort in knowing that mechanics lien claims … very rarely result in a piece of property getting put up for auction and sold. As in, almost never. According to the source, and based on a survey of mechanics lien filings from 2011, 64 percent of lien claims were paid within three months, “without any additional legal or collection efforts whatsoever.” Which means that the mechanics lien functioned as Jefferson intended. So Pfaff will almost certainly keep his house. But unfortunately for him, he paid 50 percent more for that home’s roof than he ever thought he would have to.

 

ABOUT THE AUTHOR

Philadelphia-based freelance writer Jim Cory is a senior contributing editor to Professional Remodeler who specializes in covering the remodeling and home improvement industry. Reach him at coryjim@earthlink.net.

 

This article originally appeared on Professional Remodeler’s website. To read the original story, click here.

 

Giving Thanks, by Tracy Rosenbach, CCE

tracy_rosenbach_7975ef

Happy November everyone! I am still trying to get used to the concept that it is Fall here in Southern California. Many days I feel like it is still just summer, extending out a few more weeks. Regardless, it’s at this time of year that I take time to think about life professionally and personally.

To do this task right, I often list out why I am thankful. I include on my list the educational opportunities that I did throughout the year which help me to do my job (this year, it was attending Credit Congress and Fall Creditscape), the personal and professional friendships I’ve been fortunate enough to have, the customers I enjoy working with, the great boss I work for and my family. I think it is extremely important to take a look at the positive.

In addition to taking a retrospective look, I try to thank those who help me. In my communications with our customers, I make sure to thank them for the opportunity to do business together. Internally, I thank those who provide me guidance, information, etc…

I am also thankful that we have CMA to help us in our professional lives. CMA is an amazing organization in all the services they offer credit professionals to help manage risk, such as getting advice on the best credit report for your organization and circumstance, filing your construction lien forms, safely facilitating the industry credit group you participate in, etc…

I encourage you to contact CMA for any questions you have regarding their services, or to try them out for the first time. They are great listeners too!

Best wishes to you for a very Happy Thanksgiving! Have a wonderful holiday, and thanks for reading.

Tracy Rosenbach
CMA Chairperson 2016/2017

CMA Hosts Joint Construction Meeting in Los Angeles

20161013_105403

On October 13, CMA held its first ever joint construction credit meeting, allowing CMA member companies from different vertical industries who sell to the construction industry to get together to talk about common job accounts. In addition, Chris Ng, Esq., spoke to the group on a series of construction law related topics, including the legalities related to job accounts. Amongst the activities at the event included a discussion of best and worst practices, which really hit home with many of the companies who participated. Thanks to all who attended.

Upcoming November and December Networking Opportunities in Nevada, Northern and Southern California

CMA members are welcome at several upcoming networking opportunities in Northern California, Southern California, Las Vegas and Northern Nevada. These events will provide several great opportunities to network with credit and financial professionals from other industries in those geographical areas.

The dates and locations (as well as more information) can be found by clicking on the links below.

For more information about other related events where CMA will have a presence, visit www.creditmanagementassociation.org/events.

 

President’s Blog: UCLA Anderson Forecast predicts the outcome of the 2016 Presidential Election

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

Every quarter the UCLA Anderson School of Management hosts the highly reputable (and influential) UCLA Anderson Forecast, an economic forecast for the U.S. and California. As an Advisory Board member of UCLA Extension’s Credit Analysis and Management Certificate Program, I was invited to attend the September 2016 Economic Outlook, a live presentation by the economists and economics professors who contribute to the UCLA Anderson Forecast. You can read more about the event on the official UCLA Anderson Forecast blog, but here are some highlights.

 

The theme this quarter was the impact of the economy on the Presidential Election. David Shulman, Senior Economist for UCLA Anderson Forecast, opened the session with a non-partisan breakdown of the major economic policies of both major party candidates for President. For me, it was nice to see policy differences in black and white without the political spin of the candidates and their campaigns. Bottom line, Shulman concluded that no matter who wins, Hillary Clinton’s approach (increased taxes and increased government spending) and Trump’s approach (massive tax cuts, changes in trade policy, less regulation, and yes, increased government spending) would BOTH increase the deficit. The reason – both plans assume a national GDP growth rate north of 2%, but Shulman argued that without improvement in productivity (maybe) and significant growth in innovation (unlikely), GDP will remain on a growth path of 2%.

 

Jerry Nickelsburg, Adjunct Professor of Economics at the Anderson Business School, gave his forecast for California. While still one of the fastest growing states in the U.S., growth of California’s $2.5 trillion economy is slowing because the state is close to reaching full employment. Declining manufacturing coupled with historically slow population growth will continue to restrain economic growth. Nickelsburg also warned that a trade war would have a greater negative impact on California than most states.

 

Nickelsburg also presented some interesting stats on small business. I didn’t realize that the proportion of small businesses (defined as enterprises with 10 or fewer employees) in Los Angeles County is much greater than the proportion in the U.S. and 26% of employment is L.A. County. To me, that means that small business is (and has been) a significant part of our local economy which CMA has not been able to reach. Perhaps CMA’s strategic partnership with the local SBA will provide more opportunities to reach those business owners who may not fully understand how to leverage business credit for the benefit of their businesses.

 

Shifting from local to global trade, I learned more about the controversy surrounding the broad-ranging free trade agreement known as the Trans-Pacific Partnership (TPP). Given that much of California’s economy is dependent upon international business flowing through the Ports of Los Angeles (L.A. is the #1 export district in the U.S.), Long Beach and San Francisco, why wouldn’t a free trade agreement that represents 40% of the global market be good for our local and national economy? The panel of experts argued that intense opposition to TPP is grounded in a retreat into protectionism, a general reaction to insecurity and uncertainty. Most interestingly, they claim that TPP is not as much about free trade as it is about anti-free trade because of all the exceptions in the agreement for goods like drugs, intellectual property, and dairy, just to name a few. I suppose that’s the fine print.

 

Economist William Yu concluded the morning session with a presentation of an economic model that puts a weight of 51% on each state’s real median household growth to predict the outcome of Presidential elections. A 10% weight is put on economic performance factors, GDP growth, Misery index, and state median income growth; demography, religion, and “other” factors such as candidates’ character, leadership, trustworthiness, campaign messages and strategies are weighted 13%, 3%, and 20% respectively. Since the election in 1972, the model has correctly predicted the outcome of 8 out of the last 11 Presidential elections. The model incorrectly predicted the elections of 1976 (Carter v. Ford), 2000 (Bush v. Gore), and 2012 (Obama v. Romney). Yu stated that the model currently gives Hillary Clinton a very slight edge over Donald Trump, but he was quick to say that it is within the margin of error and with 20% of the prediction weighted on factors like character, leadership, and trustworthiness, there is no predicting the public’s taste.

 

So why am I writing about this? There are several reasons. For one, it proves that economic data can be used to predict a lot of things, including the outcome of a presidential election (or how liberal your company might be in assigning trade credit). It also nicely demonstrated the whole “cash to cash” cycle that was discussed at length at CreditScape and in various blogs throughout the year. Finally, in the glut of credit-related content that we’ve been talking about all year here, I’m interested to gauge member interest in hearing more about topics like this. As we’re putting our education calendar together for 2017, I’d love to know what topics you’re interested in learning more about, including economic forecasts like this one. Feel free to leave comments below.

Detecting Fraud: Basic Checks You Should Do Before Extending Business Credit

With the recent rise in bankruptcies, it is more important than ever before to have a handle on business to business (B2B) risk management. More and more fraudulent companies are emerging, as business lines are being blurred from start-up manufacturers operating from a garage, e-commerce “e-tailers” businesses that may or may not be legitimate. Because of this, it’s tough for credit managers and risk management professionals to tell the good companies from the “bad” ones.

So what’s a credit professional to do? Here are several activities you can do before you decide to extend B2B credit.

  • Validate their address. With Google maps, you can tell more about the location of a business than ever before. Does their address come up on Google maps? Does the satellite view (photo) show that they’re a residence or a business? Are they located in an area where it would be impossible to do business (i.e., a forest)? Answering these location questions ahead of time could alert you to red flags of fraud before you take them on as a client.
  • Make them fill out a credit application and check and confirm their credit references. When you call their list of references, are they companies who’ve done businesses with them recently? Are the phone numbers of their references valid? Are the numbers for all companies mobile phone numbers, leading to the conclusion that these are individual numbers not businesses? Are the references related to the potential client? If any of this data they provide sounds fishy, it could be another red flag.
  • Visit the customer’s website. There are many red flags that can be gained by visiting the site, including poor design, phone numbers not matching those given in the references, broken image links and other items that can cause you to question the validity of the business.
  • Utilize your Industry Credit Groups. Utilize the knowledge of your fellow industry credit managers by bringing up any suspicious companies during your Industry Credit Group meetings. As we see repeatedly in Credit Group meetings, fraudulent companies tend to go to multiple companies in a particular industry until they get what they need. Additionally, anscers RFIs and alerts can help you on an as-needed basis, and CMA members get unlimited access to these alerts and RFIs.
  • Use credit reports and decisioning data to help. CMA provides access to reports from the major reporting agencies and also offers the NACM National Trade Credit Report, which aggregates information submitted to all of the NACM affiliates that is not typically provided to the major credit reporting bureaus. And better yet, CMA members who contribute their A/R information receive 25 free NACM reports per year.
  • If you’re in the construction industry, consider using THE Construction Credit Report, providing access to public record data; title search (with live links to actual documents) on mechanics lien filing/release; notice of completion; notice of Lis Pendens (action/discharge); tax lien or judgment; active trade lines; credit analysis and score; collection agency and factoring company activities; and links to state Registrars Of Contractors. For more information on this unique report, click here.

If you consider doing these tasks before deciding to extend credit, you’ll help eliminate obvious fraud from occurring, protecting your company’s most valuable resource, its accounts receivable.

What processes does your company have in place to help protect from fraud? We’d love to get your input!

The U.S. Supreme Court to Rule on Whether States May Bar Credit Card Surcharging: What it Means to a Supplier’s Right to Surcharge in the B2B Space?, by Scott Blakeley, Esq.

Abstract:
Credit cards are the fastest growing payment form. But the payment form is the most expensive for suppliers, leading many to rollout surcharge programs to offset the majority of the card costs. The Supreme Court’s recent decision will settle the constitutionality of state no‐surcharge laws.

For many suppliers, credit cards have not only become the preferred payment form for customers, but one of the most significant operating costs for suppliers. A mandate from the finance team is to make cards cost competitive with other payment forms. The way to offset rising costs is through a surcharge, passing the interchange fee (approximately 85% of the card charge) to the customer.

As part of a class action settlement with retailers in 2013, Visa and Mastercard amended the network rules to allow merchants, including suppliers, to surcharge. With the card networks allowing surcharging, suppliers considered as part of their nationwide surcharge rollout, whether 10 states that enacted nosurcharge laws limit the suppliers’ surcharge strategy.

The constitutionality of the state no‐surcharge laws has been vigorously challenged, with the litigation focused on whether the no‐surcharge laws violate the First Amendment and commercial speech on pricing, or instead whether they regulate economic conduct. No‐surcharge states allow merchants to provide discounts to cash and check payers, but not add a surcharge to credit cards. The Supreme Court has agreed to hear an appeal from the Second Circuit Court of Appeals that involves the constitutionality of no‐surcharge laws. The Supreme Court is expected to rule not later than June, 2017. How will the Supreme Court’s ruling affect suppliers’ right to surcharge? Are there steps suppliers should take during the pendency of the Supreme Court’s review, whether a surcharge has been rolled out or is about to be?

States No‐Surcharge Law Overlay

In 1976, the U.S. Congress enacted a federal law prohibiting surcharging. The credit card networks enacted contractual provisions in their merchant agreements barring surcharging. In 1983, the federal law barring surcharging expired. With the sunset of the federal law, the credit card networks lobbied state legislatures to enact no‐surcharge legislation to discourage retailers from surcharging consumers. Those 10 states that enacted no‐surcharge laws are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

The uniform theme of the states enacting no‐surcharge laws is to protect consumers within their states from retailers adding a charge to cards, therefore acting as a form of tax on those consumers choosing cards to pay for their goods or services.

The no‐surcharge laws allow merchants to charge higher prices when a customer pays with a credit card, provided they disclose that the price difference is a cash discount and not a card surcharge. While surcharging is a more accurate disclosure the costs the merchant incurs with accepting cards rather than a cash discount, the card networks were concerned in lobbying for no‐surcharge legislation that surcharging may discourage card use.

Litigation Challenges to No‐Surcharge Laws

Of the ten states that have enacted no‐surcharge laws, four have had their laws challenged as unconstitutional. In 2013, the first litigation challenge was brought in New York, where five New York businesses sued New York, challenging the law on free speech grounds. The District Court found the nosurcharge law unconstitutional and overturned the law, but was reversed on appeal to the Second Circuit Court of Appeals. The Second Circuit determined that prices set by retailers was not “speech”, and therefore, the First Amendment was not relevant. The Second Circuit focused more on how surcharging was labelled, rather than the implications of the fee or its cost to merchants and consumers. Similar litigation challenges were brought in California and Texas. In March 2015, a federal court in California found its no‐surcharge law unconstitutional and unenforceable, which the state attorney general has appealed to the Ninth Circuit Court of Appeals. On the other hand, in Texas the no‐surcharge law was upheld, and that decision was affirmed by the Fifth Circuit Court of Appeals. By contrast, the Florida no‐surcharge law was upheld, but reversed on appeal by the 11th Circuit Court of Appeals. The card networks are not directly involved in the litigation challenges, but deferring to the states’ nosurcharge defense.

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The Topic for the Supreme Court to Decide

The U.S. Supreme Court granted review of the Second Circuit Court of Appeals, where the court dismissed the free speech arguments and found the New York law only regulated economic conduct. The Supreme Court is the highest federal court and has the final ruling on constitutional law, which is at issue with the no‐surcharge laws.

The businesses challenging the state no‐surcharge laws contend the surcharge bar violates their free speech rights because it prevents them from freely disclosing their pricing alternatives. Merchants are
not allowed to say they charge card customers a higher price for cards, although a surcharge is a more accurate description of the costs of cards. An example: a product is priced at $1,000, plus $20 if a credit
card is used. This is a surcharge and impermissible under the no‐surcharge laws. But if the product is priced at $1,020, with a $20 discount for cash, is permissible.

More States Enacting No‐Surcharge Laws?

During the pendency of the Supreme Court’s consideration of the no‐surcharge laws, is there an effort by other states to adopt no‐surcharge laws? The answer is no. The chart below summarizes recent states’ efforts to consider enacting no‐surcharge laws. Not one state has adopted anti‐surcharge legislation since Visa and Mastercard settled their class action litigation and amended their rules to allow suppliers to surcharge customers in 2013.

chart-2

Retail/Consumer vs. Supplier/Business Customer and No‐Surcharge Litigation

The focus of the no‐surcharge litigation is retailers complaining about pricing disclosures with point of sale payments by consumers. A number of national retailers filed amicus briefs in support of the plaintiff retailers requesting the Supreme Court to rule on the issue. While the Circuit Court rulings have not expressly carved out suppliers and their business customers from the reach of no‐surcharge laws, the entire focus of the no‐surcharge litigation challenge relates to the facts of retailers and consumers.

What It Means to the Supplier and a Surcharge Rollout

What is a supplier’s surcharge strategy in light of the Supreme Court agreeing to weigh in on the nosurcharge laws? Whether the supplier has rolled out a nationwide surcharge program, or is in the process of doing so, the focus is on the customer base. If the supplier is selling to B2B customers, as opposed to selling directly to consumers, the supplier’s best practice is to condition card acceptance on the customer and cardholder agreeing to a card payment agreement form, that includes a contractual waiver and governing law provision. That provision provides that customers consent to waive the application of the surcharge prohibition when paying by credit card. That language may read:

All credit card commerce between [Applicant] and
[Vendor] shall be governed by and interpreted in
accordance with the laws of the State of [ ] without
regard to conflict of law provisions thereof, and all actions,
disputes, and proceedings arising from, relating to or in
connection with credit card commerce between [Applicant]
and [Vendor] shall be subject to the exclusive jurisdiction of
the federal district courts for [State] or, in the event the district
court lacks subject matter jurisdiction, the [State] state courts
located in [County]. For the avoidance of doubt, the
foregoing is intended to be a mandatory forum selection
clause divesting all other courts of jurisdiction to hear any
actions, disputes, and proceedings arising from, relating to
or in connection with credit card commerce between
[Applicant] and [Vendor].

The contractual surcharge waiver for B2B customers would be enforced during the pendency of the Supreme Court’s consideration of the no‐surcharge ruling, and after the ruling if the Supreme Court upholds the enforceability of the no‐surcharge laws.

The takeaway for the credit team is that a conclusive ruling on the constitutionality of the no‐surcharge laws will be forthcoming by Q2 of 2017. Having said that, suppliers selling in the B2B space may contract around the no‐surcharge laws through a card payment agreement with customers containing a contractual waiver and choice of law provision.

Scott Blakeley is a principal at Blakeley LLP, where he practices creditors’ rights and bankruptcy law. His email is seb@blakeleyllp.com

CMA Member of the Month, October 2016: Dave Boudreau, Pacific Seafood

Dave Boudreau of Pacific Seafood
Dave Boudreau of Pacific Seafood

There’s an old proverb that there’s no substitute for experience. When dealing with an Industry Credit Group, as you may know, just because someone has experience doesn’t mean that they’re willing to share it for the overall good of the Group. However, if you’ve been to a Las Vegas Commercial Credit Group meeting over the past 8 years, you may know our October CMA Member of the Month, Dave Boudreau of Pacific Seafood of Las Vegas, an active participant in the group who is always willing to share his knowledge and best practices with them.

In addition to simply attending CMA Credit Group meetings for more than 50 years across several industries, Dave provides excellent contributions to the Group, especially on the topics of how to get paid, navigating internal customer channels and payment portals. He has always been one of the first members to show up for CMA meetings, he is always prepared with his reports and he always adds valuable comments to the Group discussions. He’s also a proud veteran of the U.S. Army.

An active CMA member since March 2008 with Pacific Seafood (and he’s been active with CMA with other companies before that), we commend Dave for participating, and we look forward to his continued support.

Members of the Month are nominated by CMA members, Group members, volunteers and CMA staff to highlight those members (or member companies) whose engagement with CMA has helped improve the overall credit profession for others.

For more information on how you can participate in any of the areas mentioned within this article, or to nominate any members for this honor, contact Diana Escobar at descobar@emailcma.org or 818-972-5300.

Extending Your Credit Information Reach, by Larry Convoy

One of the benefits of group membership is being able to access the anscers databank anytime and not only receive information from members of your group, but information from members outside of your group. Many groups share common customers, and being able to pull up an anscers.com report and see a trade line or alert from someone in another group could be the difference in opening the account or not. After all, the information in anscers comes from past-due reports, meeting review reports, RFI’s, alerts and companies contributing their aging each month. More current information does not exist.

What reports are right for you? View our unique credit reporting assessment at www.CreditManagementAssociation.org

We hope you like what you see.

 

What Can You Expect When You Instruct Your Collection Agency to ‘Go Legal’ Against Your Former Customer, by Sam Fensterstock

Let’s say that you have placed your former customer for collection and your agency demands, as well as the local attorney, demands have not been successful. Your agency along with your attorney believe that litigation is your only option in hopes of being paid, provided that the amount due falls above your suit parameters. Had the former customer filed for bankruptcy, you can forget about a lawsuit and write off the receivable. In this situation, if you want to have any chance of collecting, your agency along with your attorney will review all documentation supplied along with a review of their internal efforts and investigation and make a recommendation to you regarding the filing of a lawsuit in the debtor’s locale.

SOME THINGS TO CONSIDER BEFORE FILING

Upon agreeing to litigate, your agency will then provide your attorney all of the information they have on your claim including amount due, principal and interest; debtor’s contact and phone number; nature of your business; details of any dispute and creditor’s response with copies of memos and correspondence. Additionally, they will provide the attorney with any documentation they have including: credit agreement; contracts, leases, personal guarantees, promissory notes, and NSF checks; purchase orders, delivery receipts, invoices, and statements of account; etc. The attorney will use this information during the legal demand process to try to bring the debtor to the table as well as use to substantiate their pleadings if suit is filed.

If the attorney has exhausted all their demands with no positive result, the next step is to consider a lawsuit. Before bringing a lawsuit, you want to be very sure that you have a good chance of winning. It is going to cost you some upfront money to file a lawsuit, and it would be silly to spend it if the debtor is out of business and you have no personal guarantee or if it is a highly contested debt and debtor has a good chance of successfully defending it. If you are going to file a lawsuit, you need to determine whether any of the following debtor defenses are possible:

• Could the debtor claim a prior payment?
• Is the amount due an offset?
• Does the debtor have a basis for a counterclaim?
• Is the debtor disputing the balance and has documentation to back it up?
• Is payment barred by the statute of limitations?
• Were the goods and/or services provided deemed inferior by the debtor?

If any of these defenses, and there are more, is possible then you may want to think twice before filing a lawsuit, because if you have to go to court the suit may become expensive, and there is a chance you might lose, thereby increasing your cost with no reward. Also remember, having a personal guarantee always helps. Furthermore, if a defense is expected, can you supply a witness at trial? Keep in mind the expense of travel as well as time your witness may need to be deposed or attend and testify at trial.

Many times a lawsuit will bring your debtor to the table to negotiate a payout or settlement. Also, keep in mind that at any time during the process, the debtor can file bankruptcy, which will immediately halt any legal proceedings or they can simply go out of business.

COURT COSTS AND FEES

Your agency will provide you with the attorney’s contingent fee requirement as well as any non-contingent fee requirement.

Court Costs

Filing a lawsuit costs money. Included in the suit costs will be:

• The cost of filing a summons and complaint

• The cost of serving the debtor

• Costs for various required attorney actions during the course of the lawsuit.

The attorney will require, in advance, their estimated costs for filing a suit and obtaining a judgment. The amount required will vary based upon jurisdiction and the venue where the lawsuit is filed. In addition, these fees are not negotiable as these costs are set by the courts.

These costs, however, most times are non-contingent and may not be lost. If you win, the court costs in connection with the lawsuit may be recovered from the debtor and you are entitled to a full return of the costs advanced if the debtor is required to pay costs as part of the judgment. .

Attorney Suit Fees

Essentially, these fall into two classes –contingent and non-contingent. Contingent suite fees, i.e., a fee based on the amount of the account as well as the amount collected. In addition to the contingency fees already applied to any monies collected, suit fees may also be charged. In essence, the suit fee is an additional fee the attorney earns for filing suit, no matter if you are successful in collecting.

The attorney may require a non-contingent fee to handle the case. This is a portion of the fee which attorney will earn upon the filing of suit. The non-contingent suit fees be applied towards the total suit fee the attorney earns which normally does not exceed a total of 10%.

HOW LONG WILL THE AVERAGE CASE TAKE?

If everything goes the attorney’s way and you get a default or no acceptable defense judgment, you can figure on six to nine months. However, every case is different and if the debtor puts up a fight it could take several years before a resolution is reached. The “wheels of justice move slowly” and creditors right litigation is no different.

COLLECTING A JUDGMENT

You have won your case and received a judgement from the court against your former customer, now all you have to do is collect the money due. If the debtor is located in the jurisdiction that the suit was filed then garnishments, marshal/sheriff levies, i.e., direct action against the debtor is possible. However, collecting a judgement can be a complicated matter. The lawsuit should always be filed in the jurisdiction where the debtors and their assets are located. Using a national agency that has the experience as well as database of local attorneys who specialize in collection litigation is a plus. A national collection agency has highly trained staff members who are familiar with the various laws of each state and their expertise affords them the opportunity to “quarterback” your attorney. Their goal is the same as yours, to conclude the matter as quickly and professionally as possible and maximize the money that is recovered. Some of the benefits of using your agency to handle your lawsuits:

• The agency can employ local attorneys who are bonded and insured to move the case as quickly and expeditiously as the local courts will allow.

• The agency can act as an effective conduit between you and the local attorney, thereby collecting the maximum amount in the shortest possible time while protecting your interests.

• The agency has more expertise, in collecting debtor judgments, in terms of volume of accounts and trained and available staff than any law firm. It is their business and their only business.

CONCLUSION

In the event that an account that you submit to your collection agency winds up with an attorney for litigation, before filing a lawsuit, carefully evaluate your chances of winning before you throw good money after bad. However, many times a lawsuit is your best and only chance of collecting.
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.

What’s a Defective (or Improper) Mechanic’s Lien, and How Does it Impact the Construction Project, by Sergey Garanyants

In certain instances, a mechanic’s lien filed by a contractor, subcontractor or material supplier can become either “improper” or “invalid” under relevant lien statutes, or “defective” on its face. In such cases, the owner is entitled to remove and/or discharge the mechanic’s lien so that the property is no longer burdened by it.

Many states provide for a different process to properly record a lien against a residential property, as compared to a commercial property. Nevertheless, the process of discharging an improper or invalid lien is largely the same.

Some of the most common situations that give rise to a defective lien occur when: 1) the lien claim is without basis, 2) the amount of lien claim is excessive or misstated, 3) filing of the lien claim was not performed in accordance with the relevant lien law statute, or 4) filing of the lien claim was not performed in time prescribed by the relevant lien law statute. In such situations, lien claimants generally forfeit their lien rights, and, in some instances may forfeit additional or subsequent remedies.

Moreover, many states mechanic’s/construction lien statutes punish contractors, subcontractors and suppliers who willfully fail to remove or release such improper lien claims, especially, if the notice of invalid lien was given by a party challenging its validity.

If it has been determined that your lien claim is invalid or improper, you must first provide the appropriate notice to the property owner challenging the validity of your lien and, in some situations, to the general contractor. Once such notice is given, lien claimants generally are allowed some period of time to discharge or release their lien claims by making appropriate filing with the state’s real estate records. The period of time to release an improper lien varies depending on the state. If the improper lien was not released, a property owner may file a complaint with the court in the state where the lien was recorded. Many state statutes will allow property owners, who were forced to pursue court action to remove or release an improper lien, to recover court costs and legal fees incurred in pursuing such action.

Source: “Removing Invalid Construction Lien”, the National Lien law Review, September 15, 2016, http://www.natlawreview.com/article/removing-invalid-construction-lien, Copyright © 2016, Stark & Stark.

Sergey Garanyants runs CMA’s Construction Forms Filing Services, helping CMA members in the construction industry protect their lien rights in all 50 U.S. states. For information about CMA’s construction forms filing services, visit http://creditmanagementassociation.org/services/construction-forms-filing/

My Take on CMA’s Fall CreditScape Conference, by Tracy Rosenbach, CCE

IMG_7974ef

Happy Fall Everyone! I just got back from attending CMA’s Fall CreditScape in Sonoma, California. What a great experience in a beautiful setting. At the Conference, we heard from subject matter experts and practitioners. Here were some of my observations from the event.

CMA President Mike Mitchell started off the conference with a session on maximizing your CMA membership; it is so important that we all know how to get the most for the money our companies pay for us to be members. Even though Mike presents this topic as a webinar (and if you haven’t heard it, you can register for the next one here, which will take place in November), it’s always better to see things like this in person, and to hear the questions that other credit managers have about some of CMA’s products and services, prompting some to consider the approach they take towards their jobs.

The Cash-to-Cash talk led by Bob Shultz gave attendees the big picture impact we as credit managers have on our organizations and the importance in understanding the cash cycle and how we need to get involved. Following the session, Shultz moderated a panel of CFOs who explained what they were looking for from their Credit Departments, including some of the metrics and discussions they wanted to have with their own teams. After lunch, there were a couple of valuable panelist discussions of how parts of the cash cycle can be improved and “how you get to ‘yes’,” which was a discussion of how to mitigate the risky transactions that do not necessarily qualify for the credit through the usual analysis. Options discussed by the panel included using Letters of Credit, filing a UCC, taking out credit insurance, and the software and service providers whose software helps improve their credit processes.

The second day started out with a lively discussion of the collection process by Bart Frankel. Bart went through a detailed six-step process for the attendees which included many good suggestions members could take back to the office. Attendees even practiced collection calls with each other with Bart moderating (and post-event survey responses proved that nearly everyone who attended was going to implement at least one thing Bart spoke about during this session when they got back to the office).

The conference also provided a high-level of networking opportunities. During the conference, members were able to talk to third-party vendors about their respective situations and what services were available so that members could improve their internal processes. Other networking opportunities included a couple of planned activities, a speed networking event and a vendor demo marketplace. In addition, Thursday evening at the hotel was a networking event for attendees, where members were able to get to know each other during a blind wine tasting event, in addition to the great new contacts I met during the event. I felt the event was incredibly useful to me and my business, and I had a great time as well.

I strongly encourage you take advantage of educational opportunities offered by CMA and NACM. By attending conferences, participating in a webinar, attending the CMA Annual Meeting, etc… you have put yourself in a category above your competition. Stay tuned for other upcoming offerings from CMA.

Have a great October. I’ll touch base next month.

Tracy Rosenbach
CMA Chairperson 2016/2017

How CMA Supports Collaborative Learning and Leads Change in Credit Operations, by Mike Mitchell, CAE

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

Thanks to all the credit practitioners, industry experts, and industry partners who participated in the many valuable conversations at CMA’s recent CreditScape Summit. Our goal was to create an interactive, collaborative learning environment, and I was so pleased with the high level of sharing among all participants throughout the two-day event.

 

I was equally pleased with the audience response to facilitator Bob Shultz’s approach to process improvements within what he calls the Cash-to-Cash cycle. Also known as the cash conversion cycle, Shultz emphasized that the role of credit management extends beyond basic credit and collections processes. There is the opportunity to impact the company’s liquidity through good inventory and accounts payable management, in addition to traditional accounts receivable management. Collections trainer Bart Frankel recommended that credit people take responsibility for helping to resolve issues that arise out of these “other” departments, as they ultimately impact the credit department’s effectiveness in granting credit and collecting receivables.

 

Experienced credit practitioners and other credit industry experts shared specific examples of how they successfully influenced and improved processes across the Cash-to-Cash cycle and created more cash flow from operations.

 

Another example of how CMA is advocating for the expansion of the traditional role of credit within the enterprise is the suggestion that credit can support procurement in evaluating the risk of critical suppliers. Recently, I had the unique opportunity to participate as a panelist in the fourth annual Global Supply Chain Management Conference at USC’s Marshall School of Business. As panel moderator, CMA Member Alvin Moreno, Director of Global Supply Chain Credit Risk with Nestle USA, made the case that the credit department is best positioned to help the procurement department assess the financial stability of a company’s suppliers. In the wake of shipper Hanjin’s bankruptcy, supply chain disruption has continued to grow as a concern for companies that rely on critical suppliers, which gives credit the opportunity to add new value to the business.

 

As a panelist, I told the audience of supply chain professionals about how CMA has worked with Alvin, his team at Nestle USA, and other CMA Members to create a special credit group in which credit managers collaborate on processes and best practices in supplier risk evaluations. More information about that collaboration is here.

 

Clearly, we at CMA are big fans of process improvement through collaborative learning. But as I mentioned in my opening remarks at CreditScape last week, credit managers need to step up and become credit leaders if they are to be successful in driving the organizational changes necessary to make those process improvements a reality.

 

How are you leading change in your organization? I welcome your feedback.

Why Are Lien Waivers Important?, by Sergey Garanyants

Lien waivers and releases, which were once just a way for owners and general contractors to make sure they wouldn’t have to pay for the same work or material twice, are now became something much more broader affecting much more than just a mere mechanic’s lien rights.

Mechanic’s liens (a.k.a. construction liens) are designed to provide additional protection and way to ensure payment for contractors, subcontractors or suppliers for the work provided or material supplied. A mechanic’s lien essentially gives the person or company an interest in the property equal to the unpaid amount, affecting the owner’s ability to convey or transfer the property free and clear without paying the amount owed. While such laws aim to protect contractors and subcontractors, it also creates a risk for property owners and real estate developers of paying for the same work or material twice. In an attempt to protect themselves, developers, property owners and contractors are now increasingly insistent on the practice of obtaining a signed waiver or release of lien rights to the extent actually paid, as condition to furnish any payments to contractors and subcontractors working on the project. However, signing such waivers may directly or indirectly cause for contractors and subcontractors to “sign away” many of their rights to dispute contractual and related project issues.

Modern-day construction lien waivers and releases became much broader than simply addressing mechanic’s liens. In some instances, signing a release not only waives the right to file a mechanic’s lien, but also waives the ability to file claims for any other related issues, such as breach of obligations by a party to a contract, delays caused by mismanagement of the project, or additional expenses incurred. Contractors, subcontractors and suppliers should remember to preserve their own rights when executing any construction waivers or releases. For example, if a subcontractor is concerned about underpayment, it could refuse to accept payment until the general contractor has been paid in full, or the subcontractor could accept payment, but note on the release that it was reserving the right to make certain additional claims.

Many projects usually only have one general contractor, and each general contractor knows all of its subcontractors or suppliers, each of whom may be eligible to file a mechanic’s lien. However, many state construction lien laws are now allowing tier 2 and tier 3 subcontractors, including suppliers and others with whom the general contractor has no direct relationship, to file mechanic’s liens, thus creating a much larger and potentially unknown number of parties that are able to create liability on the project. That is why many general contractors require their subcontractors to acquire signed lien releases from all other subcontractors and suppliers on a periodic basis before issuing any payments. One of most common issues challenging the ability to secure signed lien releases on a monthly basis is the struggle of many companies to maintain enough cash flow to make all of their payment obligations in time. It can be easy for companies to find themselves in a difficult situation in which they can’t afford to pay their subcontractors or suppliers right away, and, in the same time, they can’t obtain payment from the general contractor or the owner without first providing a signed release stating in turn that they have already paid everyone.

It is vital that general contractors and subcontractors review the proposed contractual language carefully in order to ensure the appropriate cash flow and lines of credit, so they are able to fulfill their payment obligation when required. Carefully review the exact terms of any release or waiver you are expected to sign. Exercise care before accepting any payment, particularly if the payment is not for the full amount owed. Most importantly, always remember that lien waivers are separate obligations, and no matter how unfair the underlying result may be, courts are very likely to uphold provisions of signed waiver or release.

Source: Joshua R. Lorenz: “Mechanic’s Lien Waivers Place Burden on Contractors and Subcontractors; Construction Law”, the Legal Intelligencer (Online), September 6, 2016; Copyright 2016 ALM Media Properties, LLC.

Sergey Garanyants runs CMA’s Construction Forms Filing Services, helping CMA members in the construction industry protect their lien rights in all 50 U.S. states. For information about CMA’s construction forms filing services, visit http://creditmanagementassociation.org/services/construction-forms-filing/ 

CreditScape Fall Summit Delivers the Elements of a High-Performing Credit Department

The CreditScape Fall Summit, Powered by United TranzActions, an interactive learning seminar and workshop took place September 22-23 at the Doubletree by Hilton Sonoma. The event delivered the elements of a high-performing credit department, providing attendees with dozens of ideas to bring back to the office, according to preliminary survey results that were tabulated after the event.

 

With the common theme of “the elements of high performing credit departments,” attendees commented that the sessions gave them insights on understanding the entire cash-to-cash process, understanding credit from the standpoint of the CFO, getting to “yes” with the sales department, and especially the 6 steps to improving the collections process. Also a hit were the panel discussions where attendees heard from their peers how they have successfully implemented these processes.

 

Additionally, for the second event in a row, every person who submitted a preliminary survey said they’d likely recommend CreditScape to a colleague.

Here are some photos from the event:

bart-frankel-presents-the-6-steps-to-collection-success bob-shultz-addresses-the-crowsd creditscape-crowd-shot-w img_0962 img_4304 sangeeta-janet-and-clark

Plans are forthcoming for CMA’s Spring event and will be announced as soon as possible.

 

Thanks again to our event sponsors United TranzActions, Dade Systems, Vantiv, CreditPoint Software, Bectran, IAB, Emagia / TheCreditApplication.com, Ansonia Credit Data, AG Adjustments, NCS and Dun & Bradstreet, and to all who attended the event!

How Did the Underwater Sports Credit Group Get Started, Keep its Original Objectives and Continue to Thrive?, by Larry Convoy

How does an industry credit group get started, keep its original objectives and thrive? Take the case of 55-year-old CMA Group Underwater Sports.

On July 12, 1961, representatives from Healthways, US Divers, Voit, Swimmaster and Sportsways held the first official meeting of the newly formed Underwater Sports Equipment Credit Group facilitated by Credit Management Association. These pioneers knew that in order for this industry to grow, manufacturers and retailers must establish guidelines for extending credit, investigating and monitoring new and existing accounts and have a governing body to oversee that all state and Federal laws regarding free trade were adhered to.

Fifty five years later, this group is still instrumental in the industry utilizing the most current technology to insure that the original mission statement, which emphasized “looking for the latest methods to expand the business and the sport of diving,” is applied to each transaction.

Over the last twenty to thirty years, we have seen a dramatic change in the industry. The ownership of retail diving stores has transitioned from the businessman to the hobbyist. Manufacturers have expanded their product lines to encompass other sports and seasons and the group has gone from manual and paper reporting to entirely electronic. Information that took days to distribute now is instantaneous through the click of a mouse.

What has not changed is the value of the group to all in the industry. For the manufactures, having an immediate resource to verify a retailers credit worthiness, to the “Good Paying Account,” an opportunity to have more product lines available through positive payment experiences and to the “slow paying account,” the ability to deal with their suppliers to work out any problems or issues in order to maintain the flow of product needed to sustain the business, are all reasons the members keep coming back.

The diving industry suffered a major hit losing two of this nation’s most respected sporting goods retailers in 2016. Through the exchange of information, the members of the Underwater Sports group were able to identify certain trends and reduce their exposure considerably. A look at the list of the 20 largest creditors reveals that many Non-Diving manufacturers were not as fortunate.

As we conclude another diving season, we invite those manufacturers not participating in the group to investigate the benefits. For further information, contact Larry Convoy at lconvoy@emailcma.org or 818-972-5323.

Construction News: Mechanic’s lien on Tenant Improvement and Commercial Leasing Projects, by Sergey Garanyants

A mechanic’s lien (also known as construction lien, laborer’s lien, artisan’s lien, supplier’s lien, materialman’s lien, and professional’s lien) is a special security interest that may be acquired in property by someone who expends material, resources or labor working on that property, and is, generally, effective until the lien holder gets paid for services provided. (Definition from Cornell University Law School, Legal Information Institute as published at https://www.law.cornell.edu/wex/mechanics_lien).

In some instances, tenant improvement work may lead to a mechanic’s lien on the owner’s property. Due to the fact that mechanic’s lien laws are not uniform in each state, there are many factors to consider when your company is getting involved with tenant improvement projects.

In Missouri, a contractor performing work for a tenant may acquire mechanic’s lien rights on a landlord’s property interest if certain factors surrounding the landlord-tenant agreement are present, including (but not limited to) the “mandated nature to perform a complete build-out” of the premises by tenant, and whether such “improvements are required and completed under the control of the owner with the view of improving the property.” See Crafton Contracting Co. v. Swenson Construction Co., No. ED102910 (Mo. App. E.D. April 12, 2016); see also Missouri Revised Statute § 429.010.

In Minnesota, a property owner is not subject to a mechanic’s lien for improvements contracted by another if the owner gives “adequate notice of the owner’s intent not to be bound” by such contract. See Marksman Const. Co., Inc. v. Mall of Am. Co., C0-97-1030, 1997 WL 757392 (Minn. Ct. App. 1997); see also M.S.A. § 514.06. This practice is also known in some states as the “Notice of Non-responsibility” and may require to be properly recorded by the owner with the county land records in order to be enforceable.

In Virginia, generally, a mechanic’s lien in tenant improvement projects extends only to that portion of property on which the laborer or materialman has worked, precluding the lien from extending to the entire building or property. See Elder-Jones, Inc. v. Byers, Inc., 23 Va. Cir. 40 (Va. Cir. Ct. 1990); see also VA Code Ann. § 43-20.

Similarly, Texas laws support the proposition that a lien on real property cannot be established simply by nature of a construction contract between a tenant of the property and the laborer or materialman, and the mechanic’s lien should attach only to the leasehold interest of the tenant, and not to the entire land interest of the owner. See 2811 Associates, Ltd. v. Metroplex Lighting and Elec., 65 S.W.2d 851, 852 (Tex. Ct. App. 1989).

In Maryland, a mathematical formula, estimating the value of improvements made to leased premises as compared to the value of entire building, will be used to determine if a mechanic’s lien is “substantial enough” to be placed on the entire building or property. See MD. Real Prop. Code Ann. § 9-103; see also Hurst v. V & M of Virginia, Inc., 293 Md. 575 (Md. App. 1982).

Given the complexities of the mechanic’s lien laws, it important to obtain all the relevant information on the tenant improvement project in order to better protect your lien rights and avoid becoming subject to various limitations. Please contact CMA’s Forms Filing team if you have questions.

Source: Krista C. McCormack, “Tenant Improvements Lead to Mechanic’s Lien on Owner’s Property”, Commercial Leasing Law and Strategy: Pg. 3, Vol. 29, No. 3, September 1, 2016, Copyright 2016 ALM Media Properties, LLC.

Sergey Garanyants runs CMA’s Construction Forms Filing Services, helping CMA members in the construction industry protect their lien rights in all 50 U.S. states. For information about CMA’s construction forms filing services, visit http://creditmanagementassociation.org/services/construction-forms-filing/

CMA Thanks CreditScape Sponsors

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CMA would like to send special thanks to top credit service providers who are sponsoring the upcoming CreditScape Fall Summit, powered by United TranzActions, September 22-23 at the Doubletree by Hilton Sonoma. Those companies are:

United TranzActions
www.UnitedTranzActions.com
800-858-5256
Services: Payment Processing, Credit Card Processing, Virtual Lockbox

AGA Adjustments
www.agaltd.com
888-496-1600
Services: Commercial collections

Ansonia Credit Data
www.AnsoniaCreditData.com
855-ANSONIA (267-6642)
Services: Portfolio monitoring, Credit Reports

Bectran
www.bectran.com
888-791-6620
Services: Online Credit Applications, Document Management

CreditPoint Software
www.creditpointsoftware.com
918-376-9440
Services: Credit Risk Analysis Software

Dade Systems
www.dadesystems.com
855-418-2786
Services: Virtual Payment Processing Solutions

Dun & Bradstreet
www.dnb.com
973-921-6370
Services: Credit Reporting

eMagia
www.emagia.com
408-654-6575
Services: A/R Management Solutions

IAB LLC
www.iabllc.com
630-537-0840
Services: A/R and Deduction Management Services

NCS
www.ncscredit.com
800-826-5256
Services: UCCs

Vantiv
www.vantiv.com
608-834-2539
Services: Payment Services

Thanks again for helping CMA deliver a quality event!

When a Group Can Safely Say “We Should Do This,” by Larry Convoy

The first word all Industry Credit Group facilitators are taught to listen for at a group meeting is WE, as in WE should all stop selling or WE should all put him on COD. This is the most severe of the Anti-Trust violations, and collusion like this can cost companies millions in lawsuits and fines.

However, there is a circumstance where the group can invoke the WE word as in WE, the members of the CMA Industry Credit Group, would like the CMA Adjustment Bureau to contact our mutual customer to assist them in dealing with creditors during a rough period. In this circumstance, the role of the Adjustment Bureau, group members and other creditors is to keep this business operational while it works on a plan to resolve the issues that caused the problem and propose a repayment schedule.

Under this arrangement, creditors put off any legal demands for payment, agree to keep selling the customer and with a CMA staff member supervising, monitor the affairs of the business to insure that everything possible is being done to satisfy all parties. The cost to the group is ZERO.

Sounds too good to be true? In some cases it is and there is no solution to save the business. CMA’s Adjustment Bureau can provide a service to liquidate the company and make sure that ALL creditors receive their pro-rata share of the proceeds.

Sometimes, through no fault of their own, good companies have rough times. You can choose to deal with them by revoking terms, placing them for collection and if enough do, guarantee that this business will fold and you will receive pennies on the dollar or you can work with CMA and the debtor to save the business, recover all or a significant portion of your old debt and continue to have a customer for years to come.

If you group has a situation like this or if you want further information on this process, call Molly Froschauer at 818-972-5315.

We can make a difference.

To Place or Not to Place, by Tracy Rosenbach, CCE

IMG_7974efHello everyone! I was thinking about an issue recently that affects all Credit and Collections professionals, when is the right time to place an account with a collection agency. Though I won’t be talking about Shakespeare (as the title of my blog suggests), I used the reference because I find myself pondering this question very frequently, and it is at times a tough decision.

Let’s face it: the profession we work in is in many ways a grey area. Our decisions can quickly change depending on the information we receive, even one bit of information can alter our course. What can we do about it? If you haven’t already, I believe that every company should develop a procedure for placing accounts for collection. Your policy should address such issues as timing (how long does your company generally allow an account to be past due), dollar amount (does your company treat an account differently depending on the dollar amount outstanding), account status (does your company view the customer as a key account) and customer cooperation (is the customer willing, but unable or are you getting the silent treatment). If your company already has a policy regarding placing an account in collections I suggest that you review it periodically so that it accurately reflects your company’s culture. Once you have a procedure in place you have a guideline to follow.

Next we look at what information we have. We as credit managers are amazing at gathering, processing and summarizing information. Information in this situation would include: customer payment history, customer financial information (if shared), a third party report (Dun & Bradstreet, Experian, Equifax, etc…), your own experience in handling the customer, your CMA industry credit group experience and perhaps information from sales. We process this information and summarize it. We compare the information we have on hand to our company’s policy and then make our recommendation.

How do you decide when to put an account in collections? How long should you wait? What are things I look for before I submit to collections? We weigh the information in a department discussion, review our guidelines and then make our decision.

CMA’s collection partner AG Adjustments suggests you wait until you have exhausted your internal efforts, the customer is 60-90 days past due, they are not communicating and there are no new orders and the customer is unresponsive before placing for collections. What do you think? I’m interested in your thoughts and methodology. Please leave your comments at the bottom of this blog.

Hope you have a good September. I’ll touch base in next month.

Tracy Rosenbach
CMA Chairperson 2016/2017

Evaluating Your Outside Collection Agency’s Performance, By Sam Fensterstock

At some point you were responsible for selecting a new outside collection agency (OCA) and started providing them with past due accounts for collection. Now, one of the executives in your company’s financial department wants to know how the OCA is doing. He wants you to justify your selection. What factors are you going to consider that will allow you to determine whether the OCA’s overall performance is meeting your expectations or they are falling short?

There Are Two Types of Factors to Consider – Objective and Subjective

In evaluating an OCA’s operation there are many factors that have to be considered. First you have to determine the period of time that you want to evaluate. Most OCA’s would recommend that you us e a minimum of 12 months of placements with the review being done 90 days after the last file is placed. Some can be measured directly, like recovery rate and collection fees. Some cannot, like quality of the paper place due to factors such as age of debt and if it is disputed or not. Other factors like OCA personnel interaction with both you and your accounts. All are vitally important with respect to the OCA’s response to your needs and their results. So, let’s take a look at both types of factors that we need information on, under the assumption that once the information is gathered and evaluated, you will be able to justify about how well the OCA is performing and how your decision to use them has benefited your company.

Objective Factors

The prime objective factor that can be easily measured in the collection industry is the recovery percentage. How much you have turned over vs how much the OCA have collected. How is the OCA doing in collecting the accounts you have given them? What can they tell you about how they are doing it? You want complete transparency. Does your OCA have a web based platform that is available 24/7 that can provide you with detailed information? Can you easily obtain overall gross and net recovery rates? Can you view down to the individual account level all the way up to summary information on your total portfolio, over any period of time you require?

Additionally, is the platform easy to access and navigate for you to get this objective information? The web platform should be easy to use and provide you with all if the information you need to evaluate and track your OCA’s performance. You should also be able to query your data by account, by date, or range of dates, etc. Can you review all collector notes and communications? Do you have the ability to communicate with the collector if you have questions on an account? Can you export the data into any format you want such as Excel or PDF so that you can perform further analysis or use the data for in-house reporting?

What do you need to know?
• What is the quality of the paper that you have been sending to your OCA, how old is the debt and is the customer still open and operating? It’s almost impossible for an OCA to collect from a company that is out of business or in bankruptcy so strong consideration needs to be placed on the accounts being sent to your OCA and are they remotely collectable.

• For the accounts that are collectable, for the total time you have been doing business with the OCA, and by year and by month, and by account, what is their gross and net recovery returns (net is after adjustment for bankruptcies, uncollectable accounts, etc.)? This is an important number as it allows you to compare their results to published national averages as well as industry averages.

• Where does your OCA stand with your accounts today? You need a status report that lets you know how they are doing right now. What does your current portfolio look like, how much has been collected so far, in total, and by account. To the extent status codes and descriptors are used, what is the status of each account and what future activity anticipated.

• You need a payment history that shows the time to recovery from turnover to your receiving a check. Can you compute average recovery time so that you can do some cash forecasting based on the age of your portfolio?

• For auditing purposes, you need a track record of remittances sent to remittances received. You need to be able to verify that all payments the OCA has sent you have been received and deposited.

• All of the information should be exportable and sortable in to multiple formats. Can you sort a report by field from high to low, from low to high, or alphabetically, or by range of dates or by status code or by a combination of fields?

• You might also want your OCAs to provide any of their reports based on a specific subset of your accounts, such as by period of time the OCA has had the claim, by customer type, or by age past due at the time of placement. Any breakdown for a subset of accounts should be possible as long as you can extract accounts from the portfolio by some defined characteristic and then prepare a specific report just from the extracted accounts. Do they have ad-hoc query capability?

• Can you drill down to the individual account level and see in detail, how any individual account is being handled? Are the collector’s notes available and easy to understand? Can you use the account level report to easily access the collector either by email or by phone?

• Can you listen to recording of collectors calls on your files?

This is just some of the objective information you need to properly evaluate an OCA. If they can’t give you most of it, you might want to look for somebody that can.

Subjective Factors

These are qualitative items that can’t be measured with a number, but are just as important as the objective factors in evaluating an OCA’s performance. These are feel good items that measure your comfort level with the OCA, and if you are not comfortable with the objective factors regardless of how good they are, he OCA may not be sufficient for you to want to continue to do business with them.

What Subjective Factors Are Important?

• How they treat your accounts is critical. How does the OCA represent your brand? If they are too aggressive they may be making it impossible for you ever to do business with a customer again. Every once in a while an account may suffer a business downturn, so you don’t want to let an infrequent problem eliminate your chance of ever doing business with the customer again. And you certainly do not want to hear from the account’s lawyer that your OCA may be in violation of fair collection practices.

• Is this a professional outfit? If you do not feel you are being treated with respect, you may have a problem. The OCA needs to respond promptly to your emails or telephone calls. If you need some particular service, do they provide it without a hassle?

• Is the OCA easy to do business with? Are they flexible and do they have the ability to meet your needs, no matter those needs are? Working with and OCA many times is the last thing on your mind, but as you need them to manage a portion of your AR are they easy to work with?

• Do you like doing business with them? Do you like the people at the OCA? After all, collections is a “people business” and personal relationships are very important as they allow for far better communication and it’s easier to work with somebody you like than somebody you don’t. The chances of an OCA meeting your needs are far better if the parties get along than if they do not.

• Can they provide you with professional advice that can improve your in-house operations? An OCA should be able to give you an independent evaluation of your internal operations. While making you more efficient may cost them some short-term cash flow, it should guarantee your relationship for the long-term.

• Can you utilize advice from your OCA and their alliances to assist in your daily routines? Can you maximize your relationship and obtain information provided to protect your company from unexpected loses?

In Summary

As you can see, the review of your OCA’s performance is both objective and subjective. If you place business with your partners, both areas really need to be evaluated and should be on a consistent basis. While write-offs at most companies are insignificant, although expected, every dollar your OCA returns to you puts cash back to the bottom line. This further promotes the fact that the credit department can be more of a profit center, not just a cost center.

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.

President’s Blog: CMA’s International Focus, by Mike Mitchell, CAE

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

As the Olympics wind down this week, I wonder if any of our CMA members did business with companies in Rio before or during the international games? Or more generally, how many members currently export to Brazil? This serves to remind us that international credit sales will continue to grow as global commerce continues to evolve. As the economy becomes more and more globally focused, I wanted to take this opportunity to let our members know about some international tools and resources that are now available or coming soon to a California venue near you:

International trade data now available on the NACM NTCR. Many NACM members report their international trade to the NACM National Trade Database, which is now available to CMA members in the enhanced version of the NTCR launched last week. Additional international trade data is available from Skyminder, Experian, Dun & Bradstreet, and Equifax Canadian.

International credit topics included in upcoming CreditScape Fall Summit. International credit guru Paul Beretz, CICE, will lead a panel discussion about “how to get to YES” which will include many international credit tools, resources, and remedies. If your company exports or is developing export markets for the future, you better call Paul.

Understanding International Credit. In October, Eddy Sumar, MBA, CCE, CICE, and CEW will take you on an exciting journey through the world of international credit. If your company engages in limited exports or none at all, Eddy’s boundless energy and expertise in export trade credit will make you wish it did. His popular and engaging seminar will highlight resources made available through CMA’s partnership with U.S. Department of Commerce and other government agencies.

West Coast Trade and Working Capital Conference. In November, the Global Trade Review (GTR) will host experts from various trade finance sectors to discuss how global markets have impacted trade for both corporations and banks, an update on current capital needs and availability. Gary Mendell, President of credit insurance broker Meridian Finance, and long-time supporter of CMA’s members, has recommended this conference in San Jose because he believes that it is one of the best international forums he attends each year.

Even though most CMA members do not engage in significant exporting, we believe it is important for CMA to remain committed to providing international credit resources to support the growing trend toward global sales.

What are your biggest challenges in international credit? I’d love to hear your feedback.

A Contractor Will Serve 45 Days in Jail for Wrongful Lien Against Residential Property, by Sergey Garanyants

If you supply materials or labor to construction projects, make sure that you protect your company’s lien rights under the law. In doing so, remember that it is crucial to file liens properly and in a timely fashion.

A Wisconsin contractor will serve 45 days in jail and will pay a $3,505.46 fine for wrongfully filing the lien against residential property in Winnebago County, Wisconsin. According to the Oshkosh Northwestern, a 51-year-old owner of the local construction company illegally filed a construction lien on the residential home without giving proper notice to the homeowners as required by Wisconsin Construction Lien Laws. The homeowners discovered the wrongfully recorded lien when they contacted a financial institution in the attempt to refinance their property.

The contractor has been convicted with criminal slander of title after a jury determined he illegally filed a lien against the owners without properly notifying them. Moreover, the Winnebago County Circuit Court ordered the contractor to pay a $3,505.46 fine, and imposed additional restrictions on the contractor’s personal and business affairs, which included such obligations as – to inform potential customers about the conviction; to not have or use alcohol, drugs or paraphernalia; to submit a DNA sample; to not control any bank accounts; and to undergo any additional necessary counseling as may be required.

According to the contractor, he did notify the property owners but later lost the paperwork that would prove the fact that proper notice was given, and subsequently released the lien. “It’s amazing that, as a contractor, I can go to somebody’s house … and they decide they’re not going to pay for 50 percent of it, and then all of a sudden they can be suing me.” – the contractor told USA TODAY NETWORK-Wisconsin.

Source: Nathaniel Shuda – The Oshkosh Northwestern, USA TODAY NETWORK-Wisconsin, as published on November 24, 2015, August 6, 2016 and August 12, 2016.

Sergey Garanyants runs CMA’s Construction Forms Filing Services, helping CMA members in the construction industry protect their lien rights in all 50 U.S. states. For information about CMA’s construction forms filing services, visit http://creditmanagementassociation.org/services/construction-forms-filing/

Southern California Joint Construction Group Meeting Planned for October

construction building 2

Attention Southern California construction-related companies: if you sell on job accounts, CMA has created an opportunity to meet with credit managers from other construction industry credit groups to discuss current jobs and common accounts.

The meeting will take place Thursday, October 13 at 9:00am. Members of the Aluminum Suppliers, Electric, Glass and Metal, Wholesale Roofing, HVAC SoCal, SoCal Building Materials, Building Materials Manufacturers, Steel Warehouse, are invited, but other companies who have common accounts with those industries are also welcome to join. As a bonus, guest speaker Christopher Ng, Esq. of Gibbs Giden will speak on a construction-related topic. The meeting will take the place of the regularly scheduled October group meeting for those groups.

For more information, contact Diana Escobar at 818-972-5300.

How Collections Fits in the “Order-to-Cash” Cycle, by Bart Frankel

Following is an excerpt from my workshop at the upcoming CreditScape Summit and Workshops in Sonoma, CA, Sept. 22-23. I sincerely look forward to meeting many of you at the event to discuss this in much more detail.
First let’s define the Order-to-Cash Cycle (O2CC). It can be defined in an 11-step process as follows:

  • The sales call
  • The credit check
  • Contract payment terms and conditions
  • Order entry
  • Shipping
  • Billing
  • COLLECTIONS
  • Legal action
  • Cash Application
  • Customer Statements
  • Customer payment history

“Collections” is in capital letters because, without it, the majority part of the cash flow process would not be as successful as it should be. The “Sixth Step of the Collection Process” in Phone Power Collections is the nucleus of the other 10 functions of O2CC. If any of these functions go wrong, it would be the responsibility of the Collection Process, not only to fix itself, but to also fix the other 10 steps to make the O2CC process more efficient. No process is perfect, but we all have the responsibility to strive for perfection through best business practices of the O2CC process.
For example:

If the sales department is quoting 45-day payment terms, when in fact your organization’s payment terms are 30 days, then the collections department needs to meet with the sales department to ensure the correct payment terms are quoted to the customer. If the sales department makes a “special deal” with a particular customer for a 60-day payment, then the sales department needs to get prior approval from the finance department and then notify the legal department about the special payment terms for contract purposes.

If order entry is not putting the Purchase Order number on the order sheet for the billing department to put it on the customer invoice, this would be a good excuse for the customer not to pay if this is a customer requirement.

Similarly, if shipping continues to short or over ship items to the customer, this will cause lost revenue or delayed collection. In this case, procedures need to be tightened up in shipping to minimize over and short shipping.

In cash application, if there is a big backlog in unapplied cash, the customer would not receive an accurate customer statement and not pay timely until all unapplied cash to their account is posted. Likewise, all customer statements must be mailed out two days after the month-end closing to ensure timely review, by the customer, for accuracy on their statements.

I look forward to sharing the rest of this presentation with you at the upcoming CreditScape conference in Sonoma this September.

Each of these points and more will be discussed in-depth at the upcoming CreditScape Summit and Workshops in Sonoma, CA on September 22-23, 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Bart Frankel is a professional speaker who was responsible for a $7 billion Order-to-Cash process when he was the Manager of Financial Services for the Pratt & Whitney Division of United Technologies for more than 20 years.

Other related articles:

How to Get to “Yes” by Paul Beretz, CICE

As credit managers in the journey to bring revenue to our organizations while monitoring the accounts receivable investment, we have many “detours” along the way. However, like any trip, there are opportunities that we can either recognize, ignore or perhaps not even realize when they come our way.

Certainly the risk elements that so many of us know – the “C’s” of credit – are critical to getting to “yes.” You probably know the “C’s” of Credit – Character, Capacity, Capital, Conditions and Collateral. These risk characteristics, in some form, will lead us to mitigation tools which can minimize risk. In addition, if you deal in global credit (maybe not today, but perhaps your organization buys/expands into international markets tomorrow), you will also encounter the additional “C’s” of global risk, Country, Culture and Currency.

I have realized in my own treasury and accounts receivable experience an area often under-emphasized: the “soft skills” that are critical components in reaching “yes.” These techniques involve understanding how effectively we communicate, listen, react and reflect before taking action. Do we successfully consider the needs of the “other” person in the path to get us to our goal – not just the customer – but in our organization?

We all know the “Golden Rule:” “Do unto others as you would have them do unto you.” This rule assumes others want to be treated like you. Dr. Tony Alessandra developed the “Platinum Rule:” “Treat others the way they want to be treated.” It’s not so much what I want, but accommodating the feelings and needs of others (and not just customers), but those in our own organization that are in the line of getting to “yes:” sales, marketing, IT, HR, manufacturing, purchasing, to name a few.

At the upcoming CreditScape conference in Sonoma this September, I look forward to your sharing input regarding this approach to “Yes.”

This is just a surface view of the idea of “how to get to yes in your credit decisioning process.. Each of these points and more will be discussed in-depth at the upcoming CreditScape Summit and Workshops in Sonoma, CA on September 22-23, 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Paul Beretz, CICE (Certified International Credit Executive), is Managing Director of Pacific Business Solutions, a company he created in 1999. In addition, he is a founding partner of Q2C (Quote to Cash) Solutions. He brings over 30 years of global, corporate experience in finance and management with industries such as telecommunications, semi-conductors, forest products, chemicals, plastics and consumer products among others. His expertise includes analyzing opportunities and providing resolutions in the order-through-collect cycle for manufacturers, distributors and service companies located worldwide.

Other related links:

Do You Understand the Credit Department’s Role in the Cash to Cash Cycle?, by Robert Shultz

A company’s cash flow is dependent on a lot more than just credit policies and collections.  Every credit professional plays a larger role than just managing these areas.  If you want to add real value to the total operation, you must understand the “Cash-to-Cash Cycle.”  How is the cash conversion cycle measured?  What are the components that drive performance?  What departments or stakeholders are affected by your department’s decisions or delays?  How does your department impact overall company results?

To start, you have to see liquidity management through the eyes of a Treasurer, Chief Financial Officer, CEO or Owner.  They are concerned with how departments work together to meet company strategies and goals.  To them it is critical to balance inflows and outflows, to meet forecasts, and minimize the need for borrowing.  They want to get products out the door to meet or beat competition with excellent service and speed.  To manage effectively, performance tracking and transparency are a must.

At the upcoming CreditScape Summit and Workshops, powered by UTA, we will be exploring how a credit professional impacts each component of the “Cash to Cash Cycle”; Days Inventory Outstanding (DIO), Days Payables Outstanding (DPO) and of course Days Sales Outstanding (DSO).  We will dive into the causes of delays in “cash days” and what you can do about them.

You will be able to share your challenges and ideas with a panel of Chief Financial Officers and your peers.  We will discuss actions you can take to improve performance and demonstrate your value.  Come to CreditScape and better understand cash to cash management.  You will leave with an action plan for improvements you can start immediately.

 

This is just a surface view of the cash-to-cash cycle. Each of these points and more will be discussed in-depth at the upcoming CreditScape Summit and Workshops in Sonoma, CA on September 22-23, 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Robert S. Shultz is a Partner at Quote to Cash Solutions (Q2C) LLC. He will also be moderating several of the panel discussions and workshops at CreditScape.

CMA Announces CreditScape 2016 Fall Summit and Workshops Schedule

For those credit professionals who are interested in implementing process improvements in their credit departments, striving for a high-performing credit operation, you won’t want to miss the CreditScape Fall Summit, powered by UTA, September 22-23, 2016 in Sonoma, CA.

We work in a “do more with less” world. Practitioners in the CreditScape are impacted more than most. Dedication to process improvement is one of the only ways to achieve high-performance results in the face of ever-shrinking budgets. The CreditScape Fall Summit provides a powerful opportunity to hear from highly successful credit experts and share decidedly effective best-practices with credit colleagues from a wide range of companies and industries.

Experience CMA’s unique, highly-rated event that balances a mixture of subject-matter expertise, peer-to-peer experience, and credit industry solution providers in a safe, facilitated workshop setting. CreditScape gives attendees an opportunity to identify problems and formulate solutions that can be taken back to the office. There is no substitute for the value of sharing real-world experiences with peers outside your company and outside your industry.

Following is the schedule of events, speakers and sessions for CreditScape:

Thursday, September 22

8:00 – 9:30 AM Bonus pre-conference Maximize Your Membership session

Instructor: CMA Staff

Learn from CMA staff how you can be sure that you’re maximizing your CMA membership investment by using all of the applicable services that can help your credit department.

10:00 – 10:30 AM: Intro – Cash-to-Cash: What is it and why does it matter?
Facilitator: Bob Shultz

Whether they realize it or not, credit and collection managers have an impact on the entire cash-to-cash cycle. 30-year credit veteran, consultant, and UCLA Extension instructor Bob Shultz will kick off the Fall Summit with an explanation of the cash to cash cycle, then lead attendees through workshop exercises designed to help benchmark their own processes.

10:30 AM-NOON – The Role of the Credit Department from the Viewpoint of a CFO
Facilitator: Bob Shultz
Panelists: CFOs, VP of Finance, Treasurer (TBD)

CFOs will discuss how they see the role of the Credit Manager in the cash-to-cash cycle, the greatest challenges they face, and their expectations of Credit Managers to address those challenges.

NOON-1:00 PM – Lunch

1:00-2:30 PM – What parts of the Cash-to-Cash process can you improve?
Facilitator: Bob Shultz
Panelists: Tim Cratty, CGCE, Director of Customer Financial Services, Jackson Family Wines; Tom Sacher, CCE, Director of Corporate Credit and Collections, Watsco; Kim Howard, West Coast Director of Credit, Cemex

Bob Shultz will lead a panel discussion with credit practitioners about what processes they have successfully improved, how, and report the winning results:
• Pre-checks for the Sales Department
• Automating new customer onboarding
• Metrics and reporting across department lines
• Quote: Pricing and Terms
• Sales Forecast
• Inventory to ship
• Accounts Payable
• Order Management
• Credit and AR management
• Invoice Admin
• Collection and Disputes
• Cash Admin
• Scoring model
• Portfolio analysis

2:45-4:15 PM – How do you get to “Yes”
Facilitator: Paul Beretz, CICE
Panelists: 2 Credit Professionals (TBD); Walter Trask, EVP, Comerica Bank

The Credit Manager’s job is to find a way to say “yes” to every credit sale. Bringing over 30 years of global experience in credit, finance, and management, Paul Beretz, CICE, will lead a panel of practitioners and other experts to discuss how they get to “yes” while protecting the company’s ability to get paid. Discussions will include:
• Payment processing/check guarantee
• UCCs
• Credit insurance
• Letters of Credit
• Spot factoring
• Alternative financing options
• Legal Enhancements/guarantees/escrow agreements

4:30-5:15 PM – Workshop Exercises

5:15-6:00 PM – Demo Marketplace

6:00-7:00 PM – Networking Reception

Friday, September 23

8:00-11:00 AM – Phone Power: 6 Steps to Collection Success
Facilitator: Bart Frankel

Bart Frankel was the highest-rated trainer at last year’s Fall Summit, and now he’s back in an expanded training program that will focus even more time on role-playing the toughest collection calls. As the Manager of Financial Services for the Pratt & Whitney Division of United Technologies for over 20 years, Bart was responsible for a $7 billion Order-to-Cash process. Participants will work with Bart and with each other to learn his highly successful 6-step process for getting paid. Bart’s advice is: improve processes early in the Order-to-Cash cycle to mitigate or even avoid collection efforts on the back end. This presentation is a must attend workshop for credit and collection teams!

11:00-12:30 PM – Using Third-Party Vendors to Create Efficiencies (Speed Networking event)

Meet in small groups with service providers whose offerings could allow your credit department to realize efficiencies in areas such as accounts receivable management, collections, payment processing, workflow management, cash application, and more. Service providers will lead the discussions in their areas of expertise. You choose the meetings and discussion topics around solutions that would help you and your company.

12:30-2:00 PM – Lunch and wrap-up session; share your takeaways!

NOTE: All speakers and contents of this program are subject to change. This schedule last updated August 1, 2016

To learn more about the conference and to register, visit CreditScapeConference.com.  We hope to see you in Sonoma!

Chairman’s Blog: Building Relationships with Customers through Customer Visits, by Tracy Rosenbach, CCE

IMG_7974ef

Greetings CMA members! I can’t believe that we are in the middle of summer. Time sure flies. For this month’s blog I wanted to talk about our customers and techniques I use to build a relationship with them. Some of our customers drive us mad, some of our customers are fabulous and some are somewhere in between. One valuable tool I use as a credit manager is the customer visit. Understanding that each of us works with a budget (both fiscal and time) that determines who we can visit, I strongly encourage you to attempt to visit as many of your customers as possible.

Depending on factors such as your industry, dollar purchase volume, your company’s risk tolerance, etc., I suggest that you make a checklist of those key customers you would like to see and why. The “why” provides the justification to management for you to be out of the office, and it also proves that you’re taking a proactive (instead of reactive) stance towards your job.

The next step is to approach your boss with the list and be prepared to discuss the “why.” I have found over the years that having that initiating a personal connection with a customer pays off in terms of obtaining financial information, and it provides a far better understanding of the customer’s business including its challenges and a relationship with a company that can directly impact your company’s performance. For example, I had a key customer contact me directly with all the pertinent information regarding the removal of a key member of its management team before it went public just so I would know what had really happened. This is the type of relationship I strive for with all our key customers. Is it practical? Perhaps not, but it is important to try. If your budget is tight and an actual visit is not possible, then I suggest that you give your contact a call to see how he/she is doing and how the company is doing. Be sure to get their e-mail address so that you can touch base periodically. Communication is truly the key to success in any business relationship.

What methods do you use to build relationships with your customers? I’d love to hear about them. Please respond to the blog below.

Have a great rest of your summer. I’ll touch base in the Fall.

Tracy Rosenbach
CMA Chairperson 2016/2017

CMA Welcomes Sergey Garanyants to Construction Forms Filing Department

Sergey Garanyants
CMA is proud to announce the hiring of Sergey Garanyants to manage its Construction Forms Filing Services (CFFS) team and offerings in CMA’s North Las Vegas office. Sergey, who obtained his Juris Doctor Degree from Loyola University New Orleans – College of Law, Class of 2015, offers his law background to help companies protect their lien rights under the law.

 

With a background in corporate legal counseling, commercial litigation, corporate governance, contracts & transactional practice, alternative dispute resolution, intellectual property & information technologies, administrative law & compliance, Sergey’s skill set is sure to provide additional value to companies filing preliminary notices, mechanics liens, bond claims, stop notices and other services to ensure they get paid on their construction jobs.

 

Sergey can be reached at 702-259-2622 or sgaranyants@emailcma.org.

Commercial Bankruptcy Filings Climb 29 Percent for the First Half of 2016

According to the American Bankruptcy Institute (ABI) data that was provided by Epiq Systems Inc. , total commercial filings during the first six months of the year (Jan. 1-June 30) increased 29 percent to 19,470 over the 15,071 total commercial filings during the same period in 2015. Commercial Chapter 11 filings also rose during the first half of 2016 as the 3,220 filings represented a 25 percent increase over the 2,575 commercial chapter 11 filings during the first six months of 2015.

“Data like this underscores the importance of regularly attending Industry Credit Group meetings and keeping up on alerts and RFIs on anscers,” said CMA President and CEO Mike Mitchell. “Our members have identified the trouble signs of companies big and small and have taken steps to regularly discuss troubled or slow-paying customers and have repeatedly had the upper hand on some of these accounts months before they filed.”

Fortunately, the members of one of our industry trade groups saw some warning signs several months ago and took action. They made this account a permanent one for meeting review, meaning it showed up as an RFI every month automatically. They monitored newspaper stories and internet reports and had their group facilitator distribute. They made it a regular account clearance on all conference calls, shared any information they received and individually took action to reduce their company’s exposure. A conservative estimate shows them being 3-5 months ahead in identifying trends than non-members.

“The business insolvency world has been slow for awhile, with sporadic, larger bankruptcies affecting our members,” said Molly Froschauer, general manager of CMA’s Adjustment Bureau, which provides innovative alternative solutions to creditors and distressed businesses. “At CMA Adjustments, we’re seeing business pick up but don’t yet know if the historically slow bankruptcy numbers are going to return to the normal level or if it’s a market blip. As we see businesses shutting their doors, our members’ rights should be protected and, whether it’s to put you in touch with an experienced bankruptcy attorney or to give you simple advice, we’re here for our members and to offer guidance should businesses begin to file many more bankruptcies.”

For more information on the study, click here.

CMA Member of the Month, July 2016: Lorie Mohs, American International Supply

lorie mohs
One of the greatest benefits of joining an association is the offering of professional educational opportunities to advance its members’ knowledge. The July CMA Member of the Month is someone who has taken advantage of that knowledge, and in turn received her professional designation.

In this past testing period, Lorie Mohs of American International Supply, was the only CMA member who passed the certification to receive her Credit Business Associate (CBA) designation. In addition, she regularly attends CMA and NACM events, including the recent NACM National Credit Congress in Las Vegas, along with other seminars and webinars offered throughout the year.

She is also a regular and active contributing member of the HVAC and Plumbing Suppliers industry credit group.

“The NACM certification program is a way for credit professionals to demonstrate their skill levels across many different industries,” said CMA President and CEO Mike Mitchell. “After speaking with several hiring managers from prominent companies, they acknowledged that having obtained a professional designation puts a credit professional at an advantage over others who have not done so. We applaud Lorie for her commitment and hope she continues to advance through the entire designation program.”

On behalf of the Credit Management community, congratulations Lorie for this honor, and thanks for being an active member of CMA.

Members of the Month are nominated by CMA members, Group members, volunteers and CMA staff to highlight those members (or member companies) whose engagement with CMA has helped improve the overall credit profession for others.

For more information on how you can participate in any of the areas mentioned within this article, or to nominate any members for this honor, contact Diana Escobar at descobar@emailcma.org or 818-972-5300.

You Want me to Tell My Competitors WHAT?, by Larry Convoy

Finding companies that would fit in your industry credit group is not a difficult task. There are trade publications, mailing lists, associations and websites where you can input a company name and receive a list of that company’s competitors. The challenge is convincing an owner who has never been involved in a group to allow his credit manager to sit down with the competition and discuss their customers’ paying habits. To an “old school” individual, this is against every business principle they know. So how do we (and I am including officers and
current members) communicate the advantages when this would involve working with the enemy?

One method is waiting for the opportune time. Recently, a group approached a company owner that lost a great deal of money by not knowing that a bankruptcy was approaching. His pain was magnified when he learned that his competitors were aware of the problem months before and reduced their exposure. They will join the group if they survive.

Another method is owner-to-owner direct contact. Chances are, some member of the group has an owner or executive who knows the right person at the prospect company. A phone call explaining how the group has saved them $$$, reduced money spent on report contracts, lowered write-offs and improved their credit departments efficiency through the Best Practices exchange, carries a great deal of weight.

Finding, vetting and securing new members is a task requiring group members and the group facilitator working together. Keep in mind the selling points that convinced your company to join and apply them to any potential prospects.

The whole of Group participation is far greater than simply the sum of its parts. In your next Group meeting, let us know who we’re missing.

Thanks so much!

Larry Convoy
Lead Group Facilitator

CMA Las Vegas Office Hosts Town Hall With Congressman Cresent Hardy

House Small Business Committee Chairman Rep. Steve Chabot joined congressman Cresent Hardy for a small business roundtable on Monday, June 20, at the CMA North Las Vegas office. The audience of more than 20 business owners and local chambers of commerce discussed the increased cost of doing business that overreaching regulatory burdens have on our small business owners. They also brainstormed on allowing for a better environment to create jobs in North Las Vegas. Among the topics discussed by the bipartisan crowd of small business owners were the challenges of SBA funding, difficult tax codes, the effects of a minimum wage hike and overtime rules. If you’re located in the Las Vegas area and your business has been affected by over-regulation, please let the congressman’s office know at kelly.espinoza@mail.house.gov.

Here are some images from the town hall meeting.

 

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What I Learned at Credit Congress, by Mike Mitchell, CAE

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

This morning, I delivered my quarterly webinar presentation, “Maximize Your CMA Membership,” which I present to our newest CMA members and credit professionals to help them learn about the myriad of resources a CMA membership has to offer. This morning, I started with an online poll, asking the participants, “What are the reasons you joined CMA?” As always, the two most popular reasons for joining are “networking” and “professional development.” And for good reason – there is a limit to what you can learn and information you can gather by electronic means alone. In keeping with this value we hold so dear at CMA, I attended Credit Congress last week, NACM’s premier educational and networking event. Based on our members’ feedback and my own participation in sessions, I learned that networking with your peers and professional development are alive and well and more vital than ever.

What continues to excite me about in-person conferences is what you learn when the audience engages with the presenters – people ask questions and share their own experiences, and the subject matter experts give practical advice to challenges and issues that are not part of the slide deck. I learned more about what our members are facing in their work environments (doing more with less, shrinking budgets, using more tools and technology) than about the credit topics themselves. Never underestimate the power of good catharsis – I can’t tell you how many people nodded their heads and grinned with relief when they heard someone talk about the same challenges that they face.

I also want to acknowledge the many credit vendors who supported the event with their own knowledge, expertise, and tools. I spent many hours talking with many vendors at the Expo, and I learned that many of these providers have played a vital role in helping the credit function and profession progress and evolve. If it weren’t for these companies (many of them small start-ups) investing their time, treasure and talent in the service of credit, our members would not have the tools and resources they need to compete in an ever-changing and risky business environment. We appreciate that many credit vendors have become as valuable an advocate for the credit profession as the credit associations!

By emphasizing the value of networking, peer-to-peer learning, and vendor support, I don’t want to minimize the contributions of the presenters and quality of their content at Credit Congress, which appeared consistently strong and on-topic. Thanks to NACM for continuing to provide a high quality, high value experience for our members.

A healthy turnout for Credit Congress and positive feedback from our members who attended has shown us that there continues to be good reason to offer these kinds of programs to our credit community. Now I am more excited than ever about CMA’s upcoming CreditScape Fall Summit (September 22-23 in Sonoma County) that will immerse all attendees in a learning environment designed to help them discover ways to improve their credit and collection processes.

So that’s what I learned at Credit Congress — what will you learn at our next event?

Twenty five good reasons to join an Industry Credit Group

AssociatedProduce CMA Party

Why do your competitors know of “high risk” accounts months before your company does? Perhaps they are in an Industry Credit Group!

Credit Management Association’s Industry Credit Groups offer unique opportunities to network with leading credit professionals in your specific industry. Group members exchange valuable trade data and experiences on existing and prospective customers.

CMA offers more than 50 industry credit groups and networks at the local and national level; including food and beverage, construction, health care equipment and many more.

As a former Credit & Collections Manager who was responsible for managing risk, I valued and relied on my Industry Credit Group so much that I decided to share 25 good reasons why credit professionals need to consider joining an Industry Credit Group.

  • Industry Credit Groups mitigate your company’s commercial risk
  • Industry Credit Groups provide immediate resources to check trade references quickly with similar companies in your vertical industry
  • Industry Credit Groups allow like companies to compare customer payment trends and payment methods
  • Industry Credit Groups help similar companies compare customer dispute reasons and trends
  • Industry Credit Groups proactively identify business deterioration and closures
  • Industry Credit Groups facilitate the reduction of bad debt expense (In 2012, Credit Today estimated that ICG participants saved approximately $205,000 per year)
  • Industry Credit Groups proactively identify problematic accounts
  • Industry Credit Groups help uncover industry trends & challenges
  • Industry Credit Groups identify best practices
  • Industry Credit Group members receive bankruptcy alerts and updates via CMA’s interactive website, anscers.com
  • Industry Credit Group members receive change of ownership notifications
  • Industry Credit Group members identify change of key personnel or location
  • Industry Credit Group members receive timely NSF alerts
  • Industry Credit Groups increase the credit manager’s value to your organization
  • Industry Credit Groups identify payment portal issues
  • Industry Credit Groups identify customers who are skipping invoices
  • Industry Credit Groups identify mergers & acquisitions and corporate linkage
  • Industry Credit Groups identify sources of funding
  • Industry Credit Groups identify best-in-class resources (software, credit reports, legal, vendors)
  • Industry Credit Groups offer the opportunity to find a mentor (I found several)
  • Industry Credit Groups offer the opportunity to be a mentor
  • Industry Credit Groups help you expand industry knowledge
  • Industry Credit Groups help you understand your competitors better
  • Industry Credit Groups help you expand professional network
  • Industry Credit Groups help you differentiate yourself as a skilled and much sought after credit professional
  • Industry Credit Groups help expand your company’s brand awareness

CMA professionals facilitate all group meetings and information exchanges in strict compliance with U.S. antitrust laws. Industry Credit Groups give you the proprietary information you need to make fast, accurate credit decisions. If you have any questions please don’t hesitate to contact me (or any of CMA’s other representatives). We look forward to your participation in CMA’s Industry Credit Groups!

CMA Las Vegas Office Hosts Open House

The CMA Las Vegas Office recently hosted an open house and networking event for nearly 50 Las Vegas-area credit managers, CMA Members and Board of Directors members, on May 20. The open house is an annual event with the sole purpose of allowing members to meet and network in an informal setting. Below are some pictures from the event. Thanks to everyone who came out, and we look forward to creating more networking opportunities for Las Vegas-area credit managers in the near future.

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Goodbye to Another Old Friend, by Larry Convoy

It seems that each month, a different industry feels the pain of losing one or more of their big players. It started in the Electronics industry a few years with Circuit City, moved over to the Grocery chains, department stores and last month it hit the Sporting Goods industry with 2 majors closing their doors. Besides having an impact on those who are losing their jobs, the amount of revenue these Big Box dealers generated may have been the only thing keeping some manufacturers profitable.

Fortunately, the members of one of our industry trade groups saw some warning signs several months ago and took action. They made this account a permanent one for meeting review, meaning it showed up as an RFI every month automatically. They monitored newspaper stories and internet reports and had their group facilitator distribute. They made it a regular account clearance on all conference calls, shared any information they received and individually took action to reduce their company’s exposure. A conservative estimate shows them being 3-5 months ahead in identifying trends than non-members.

As a result, they are in a better position to absorb any potential loss, certainly in a better position than some non-group members who have large exposures because they were not involved in the discussions over the last several months.

Many times when we approach a potential group member, their response is: “I only extend credit to Fortune 500 companies.” I am sure that those dealing with A&P, Haggens Food, Circuit City, Sport Chalet, Sports Authority, Blockbuster, Borders and Radio Shack to name a few all felt that they had a good handle on it.

We congratulate our industry group that identified a potential problem and took steps early to reduce their pain. The small financial investment they made in joining and participating in a group has paid off handsomely.

As we start a new “group year” with our new fiscal year beginning May 1, we encourage you to use all the tools CMA has to make sure you have the most current information on your customers, large and small.

Thanks for reading!

Here’s to the Unsung Credit Heroes, by Tracy Rosenbach, CCE

Greetings! I hope everyone is having a good month. I was at an Industry Credit group meeting recently where I was thinking, nowadays everyone is concerned with saving money, minimizing expenses, etc…, so I decided to write this month’s blog on “How you can be a hero to your company.” As credit managers, we have the responsibility of reviewing our credit reporting services periodically for better pricing and enhancements to the products, similar to you obtaining car insurance quotes in your personal life when your insurance comes up for renewal. Whether you decide to change services or not, it’s always a good idea to be aware of what’s available in the marketplace today.

Here are some questions to ask: Do the reports you currently use include the best information you need to make informed credit decisions? Is there additional data that you’d like to see on the reports you’re using?

CMA is here to help. I encourage you to contact Terry Campos at CMA to help guide you through the process. She is a brand-neutral resource, with 44 years of experience working with NACM and the three major commercial credit reporting bureaus. If you are not happy with the service you are currently using, she will work with you to find another solution so that you don’t have to do this on your own.

I also recommend you participate in CMA’s free webinar series on credit reporting, which begins June 9th. You’ll be able to hear from Terry and reps from the credit bureaus as they talk about what’s new and provide an overview of their products. Sign up at www.creditmanagementassociation.org/events, I believe it will be well worth your time.

You can be a hero by saving your company money and making your job easier by being able to access quality credit information that helps you make sound credit decisions.

I look forward to seeing you at Credit Congress in June!

Tracy Rosenbach

Tracy Rosenbach, CCE, is the Financial Services Manager at Silgan Containers LLC and Chairperson of the CMA Board of Directors. She can be reached at 818-710-3729.

CMA Promotes Credit Management to the Next Generation at UCLA Career Fair

In an effort to explain credit management to the next generation, CMA’s partner Quote 2 Cash Solutions LLC, represented by Robert Shultz (Partner) took part in a panel discussion and career fair at the UCLA Extension campus on May 14. Titled “Career Success in Accounting and Finance,” Shultz, one of three Panelists, emphasized the importance of the credit function, fielded questions and later spoke privately to students interested in learning more about opportunities in this field.

“CMA believes it is imperative to attract young talent to the credit management profession. In talking to some of these students at the event, I am encouraged about the future generations of credit managers,” CMA President and CEO Mike Mitchell, who addressed questions at the CMA booth, said. “Our goal is to help ensure that there are plenty of great new credit management candidates for CMA members to hire.”

Shultz commented, “my most interesting take away was the one hand raised, out of the eighty or so attendees, when I asked how many understood the functions of a corporate credit department. This sort of outreach is an invaluable step to increasing interest and awareness of the credit profession.”

Here are a few photos from the event.

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Prevailing Wage…for Material Suppliers???!!!, by Christopher Ng, Esq.

Christopher Ng, esq.Last week, I came back from the American Bar Association Forum on Construction Law Annual Meeting in Nashville, Tennessee. On my last night there, my wife and I went to the Grand Ole Opry. One of the featured country artists that night asked the audience, “You know what happens when you play a country music record backwards? You get your truck back, you get your dog back, you get your wife back…” Well, after discussing California’s new Labor Code section 1720.9 (which goes into effect on July 1, 2016) with some of my colleagues from around the country, I couldn’t help but wonder if we here in California are headed backwards when it comes to making our prevailing wage law less cumbersome and taxpayer-funded construction projects less expensive.

California law has traditionally drawn a distinction between the performance of on-site construction labor and the supply of construction materials. AB 219 added new Labor Code section 1720.9, signaling the extension of a legislative trend adding significant complexity, risk and cost for contractors and material suppliers on public works of improvement.

Specifically, AB 219 abrogates and supersedes conflicting case law and a prior (non-precedential) coverage determination by the California Department of Industrial Relations that the delivery of ready-mix concrete to a public job does not constitute a public work subject to prevailing wage laws. As of July 1, 2016, the hauling and delivery of ready-mix concrete from a commercial plant to a public works job will be subject to California’s prevailing wage law.

The “hauling and delivery of ready-mixed concrete to carry out a public works contract” means the job duties for a ready mixer driver and includes receiving the concrete at the factory or batching plant and the return trip to the factory or batching plant. While AB 219 is specific to concrete suppliers, some believe that this is just the tip of the iceberg and that the co-sponsors of the new law (i.e., The California Teamsters Public Affairs Council, The State Building and Construction Trades Council, The California Labor Federation AFL-CIO) will push for additional legislation that could require prevailing wage for other material suppliers. What logical and legal justification exists for excluding the delivery of steel, lumber, paint, fuel, plumbing supplies, electrical components and even port-a-potties?

In the face of vociferous opposition from Associated General Contractors (AGC) and other industry associations, the labor organizations behind AB 219 convinced the legislature and Governor Brown that the new law was merely a logical expansion of prevailing wage law. Specifically, these advocates argued that concrete delivery was already subject to prevailing wage law if delivered by the project direct contractor or a subcontractor, but just not by a material supplier.

So what’s the big deal and what could possibly go wrong? Here are some highlights of the new law which apply to all public projects awarded after July 1, 2016:

  • The cost of almost every public construction project in California will increase; in fact, according to the AGC of California: (1) ready-mix producers estimate that the cost of concrete for projects under AB 219 would increase by 30 to 40 percent; (2) state agencies indicated that the fiscal impact of the new law will exceed $35,000,000; and (3) Caltrans estimated $1 million annually in administrative costs to administer
    the law.
  • Ready-mix haulers and entities that deliver ready-mixed concrete to public works projects will be considered public works contractors under California Labor Code section 1722.1 and must register with the Department of Industrial Relations as set forth in Labor Code section 1725.5.
  • Ready-mix suppliers must develop an accounting and payroll infrastructure capable of processing, submitting and maintaining certified payroll records.
  • Because the material is perishable, a driver’s routine may last just 90 minutes or less (i.e., take load from the plant to the job, wait for truck to be unloaded and return to the plant) and a typical work day will often include deliveries to both public and private works of improvement; therefore, companies must implement a system that can divvy up each driver’s records on an hourly basis to separate private and public work pay records.
  • Before furnishing concrete to a public works job, a ready-mix supplier must enter into a written agreement with its contractor customers, which specifically requires compliance with prevailing wage law (can a standard credit agreement and subsequent exchange of a written quotation, purchase order and/or invoice ever suffice???).
  • Within three working days after their drivers have been paid for the prevailing wage work, ready-mix suppliers must submit certified payroll records to their contractor customers and each project’s direct contractor (if that’s a different entity), accompanied by a written time record certified by the individual driver(s).
  • As with other subcontractors subject to prevailing wage laws, contractors are ultimately responsible for unpaid prevailing wages and unpaid penalties resulting from improper wage payment or improper certified payroll record submission; as such, public works contractors assume more risk as their ready-mix supply “subcontractors” attempt to abide by these new requirements after July 1, 2016.

Without a doubt, California has further complicated its already cumbersome regulatory scheme for public works. Ready-mix suppliers must now gear up to navigate the complexities California prevailing wage law and contractors should double-check their standard form contracts to ensure they contemplate and properly allocated the new risks imposed by AB 219. For additional information and for F.A.Q., see the AB 219 Fact Sheet at http://www.calcima.org/pdf/AB219FactSheet.pdf

For more information contact: Christopher, E. Ng, esq., (310)552.3400 or cng@gibbsgiden.com

The content contained herein is published online by Gibbs Giden Locher Turner Senet & Wittbrodt LLP (“Gibbs Giden”) for informational purposes only, may not reflect the most current legal developments, verdicts or settlements, and does not constitute legal advice. Do not act on the information contained herein without seeking the advice of licensed counsel. Copyright 2016 Gibbs Giden Locher Turner Senet & Wittbrodt LLP ©
www.gibbsgiden.com 

CMA President’s Blog: The Survey Results Are In, by Mike Mitchell

Here is a follow up from my column last month, when I mentioned a survey to determine which core skills members feel are the most important to credit managers. First, I want to thank all of the 133 members who took the time to respond to the survey. Second, I wanted to share the results and let you know how we will use the information to guide our development of skills training programs this year.

As a reminder, we asked members to rate 15 functional areas of the credit and collections cycle as “Very Important,” “Somewhat Important,” or “Not Important.” From the nearly 13% of CMA members who responded, “Communications Skills (verbal/written)” was rated most important (119 very important), followed by “Credit Basics” (116 very important), “Collection Techniques” (112 very important), “Customer Service Skills” (107 very important), and “Negotiation Skills” (105 very important). All other areas received ratings under 80 for very important (the complete list of results appears below).

survey skillset aggregate

To keep things interesting, the dozen in-depth interviews with CMA’s Board of Directors reflected some of the results above, also placing high value on Communications Skills, Collection Techniques, and Negotiation Skills. However, the group of CMA leaders rated Financial Skills (analysis and forecasting) much higher than the larger member sample, and appear to place a higher value on Leadership and Management Skills. Interestingly, Legal and Compliance issues received average ratings of importance, but we live in a nation of laws and operate in a business environment that is prone to legal risk and liability, so we’re going prescribe legal and compliance training anyway for the overall health of our members.

So what does this tell us about the training needs of our members’ credit operations? We believe that an online credit training program that initially addresses six core disciplines will benefit the vast majority of members who are charged with creating and conducting credit training programs without having the often significant time, resources, and expertise that are required to take on that responsibility. The CMA Credit Training Program will offer skills training in 1) written and verbal communications, 2) credit fundamentals (customer investigations, credit decisionmaking, setting credit lines), 3) collection techniques, 4) negotiations, 5) financial analysis, and 6) legal and compliance.

Look for more details later this summer, but in the meantime, I have a request. Part of the success of our recent CreditScape events was the contributions that experienced credit practitioners made to the workshop discussions. Sharing success stories and career-long best practices have added significant and unique value to our in person education sessions, and I would like to bring that same dynamic to our online credit training courses. If anyone reading this message feels that they have valuable experiences related to one of the core disciplines listed below, and you would be willing to work with me and other members to share those experiences and best practices with CMA members through this new program, please reach out to me so we can discuss a possible contribution.

I want to thank you again for your participation, as I look forward to helping evolve our education program into one that provides members with the topics they value most.

CMA Partners to Show Off anscersX Multibureau Trade Credit Report at Credit Congress

If you’re planning to attend the 2016 NACM Credit Congress in Las Vegas, June 12-15, one common product you’ll see at top vendor booths is CMA’s anscersX multibureau trade credit report, a single report that contains all the key elements about your customers’ paying habits needed to make most credit decisions.

Some of the credit industry’s top software companies soon will offer or have launched the anscersX report on their platforms , including TermSync, CreditPoint Software, Bectran, Credit & Management Systems Inc. (CMS), and eMagia/TheCreditApplication.com. Many will be demonstrating how anscersX can be accessed directly through their software at Credit Congress.

These leading software vendors will help their clients join the hundreds of companies who have already benefited from having instant access to this single report that contains all the key elements about your customers’ paying habits needed to make most credit decisions.

The anscersX multi-bureau trade credit report combines key factors from the three largest trade credit reporting agencies (Dun & Bradstreet, Experian and Equifax), giving credit managers the most complete payment story available. “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 payment 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 provide only a piece of the payment habit story. I am thrilled that leading-edge software providers feel as strongly as we do that there is a real need for bringing this unique resource to the credit community, and I’m grateful that they are helping us introduce their clients to the power that the three largest credit bureaus can bring to credit decision-makers with limited time and budgets.”

The report, which is also available at www.anscers.com, ranges in price from $32.35 to $69.95, depending on the number of reporting agencies the user requests. Users control which reporting agencies are accessed for the report.

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

About Credit Management Association
Credit Management Association (CMA), which was founded in 1883, is a Glendale, Calif.-headquartered trade association with approximately 1,300 member companies representing over 250 different business categories selling regionally, nationally and internationally. CMA focuses on providing products and services that allow companies to make informed business decisions based on trade credit. CMA is one of the largest affiliates of the National Association of Credit Management (NACM), whose 45 affiliates serve all of North America. For more information, call 800-541-2622, or visit www.creditmanagementassociation.org.

New AnscersX Enhancements Give Credit Managers a Better Understanding of Their Customers, by Teresa Campos

anscersxIt’s been more than a year since the launch of the anscersX multibureau trade credit report, which offers credit managers a one-click look at credit scores of their customers from the three major credit reporting bureaus. Since the report was launched, we’ve listened to our users and are proud to announce some valuable additions to the report aimed at helping you make quick and well-informed credit decisions.

The improved report includes more flexibility for you to choose the data you need and the price you will pay. It is now up to you to select data from one, two, or all three of the bureaus included in the anscersX Report (Dun and Bradstreet, Equifax and Experian).

We have added valuable information from Equifax including:

  • The Ultimate Parent
  • Headquarters Site information
  • Alternate Company Names & DBA’s
  • Owner/Guarantor
  • An easy to read Average Days Beyond Terms graph
  • Additional Report Highlights (# of accounts, # of delinquencies, charge offs and more

We have added valuable information from Experian including:

  • Years in File
  • The Date of Incorporation
  • SIC Code
  • An Industry Risk Comparison

anscersX pricing, which ranges from $32.35 to $69.95 depending on the combination of bureaus you choose, is a truly unique product that paints a true picture of your customers to help you better manage risk.

For those who would like to learn more about anscersX, I invite you to participate in an upcoming webinar exploring the anscersX report citing specific examples from the report. You can register here.

To download a sample report, visit www.anscers.com or contact me directly if you have any questions at 818-972-5361.

CMA Introduces Board of Directors for 2016-2017

On May 1, 2016, CMA announced its new Board of Directors for the 2016-2017 fiscal year. The Board is comprised of the following CMA members: Tracy Rosenbach, CCE (Chair), Silgan Containers LLC; Gent Culver, ICCE (Chair-Elect), IGT; Pamela Craik, CCE (Treasurer), McKesson; TJ (Tom) Nance, Walters Wholesale Electric; Joe Lucas, SRS; Hector Benitez, Equinix Inc.; Nannette Bringard, Breakthru Beverage Nevada; Matt Johnston; Tim Cratty, Jackson Enterprises; Jim Bradley, Reliance Steel Company; Sherry Raposo, VSS International Inc.; Alvin Moreno, Nestle USA Inc.; Melissa Kobus, CCE (Advisor), Anixter Inc.; Darrell Horton, CICP (Advisor), Aristocrat Technologies, Inc.; Bob Shultz (Special Advisor), Q 2 C Inc.; Chuck Schultz (Special Advisor), Interface Financial Group; and Michael Fenner, CBA (Counselor), Beacon Sales Acquisition, Inc.

 

2016 CMA Board of Directors

We wish to congratulate these super volunteers and thank them for their service to the CMA members and the credit management industry.

How to Explore Different Credit Reporting Services

Credit Reporting can be the lifeblood of a credit manager’s decisioning process, but not all credit reports are created equally. Different reports have different strengths, and it’s to your company’s advantage to use the right information to protect your company’s receivables.

To educate you on these strengths, CMA is offering several webinars to help members learn about the basics features of major credit reports.

The sessions are:

We hope that these sessions will guide you to understand which reports are best for managing risk for small and large businesses; explain new features and upgrades you may not have been aware of; and help you assess whether you’re using the right credit reporting solutions for your needs.

Best of all, these sessions are free to CMA Members.

To sign up for these and other events, visit http://www.anscers.com/upcomingevents.aspx or contact CMA Member Relations, at 800-541-2622.

Opt-Out Litigation Settlement Against Visa and MasterCard: Clarity for a Supplier’s Right to Surcharge?, by Scott Blakeley, esq.

Customers using credit cards to pay suppliers’ invoices continue to increase, whether driven by principal’s self-interest in points miles, corporate customer’s interest in improving cash flow through additional float, or card networks pressuring customers to use cards to pay suppliers.

But credit cards are the most expensive payment channel because the interchange fees imposed by card companies erode the profitability of the sale.

While the strategy of surcharging is attractive for suppliers to offset the majority of this expense, suppliers are challenged to adopt the recently minted right-to-surcharge given the uncertainty surrounding all of the credit card litigation, especially the litigation pursued by national retailers against the card networks. The recent settlement between CVS and Visa and MasterCard may provide further clarity and comfort that card litigation will not bar supplier’s rolling out a surcharge.

Historically, the credit card networks (Visa, MasterCard and AmEx) have prohibited suppliers from surcharging customers. In 2004, several national retailers and trade associations (including the national drug store chain CVS Pharmacy) filed multiple lawsuits against Visa and MasterCard, accusing the card companies of conspiring to fix artificially-high interchange fees in violation of the Sherman Antitrust Act. The suits were consolidated and certified as a class in the U.S. District Court. After eight years of litigation, a federal judge in New York gave final approval of the Visa/MasterCard class action settlement. Under the class action rules, class claimants, primarily retailers, were given the option to either opt in or opt out of the class and the corresponding settlement with the card companies.

A number of retailers, including CVS Pharmacy, opted out of settlement, complaining it was not adequate. In particular, the retailers noted they would not surcharge their customers, consumers, as they would lose business.

In early 2014, CVS, and several other retailers, filed suit against Visa and MasterCard asserting similar accusations as the previous suit. CVS and Visa and MasterCard have settled their litigation.

What Does the CVS Settlement Mean for Suppliers’ Ability to Surcharge?

For suppliers seeking indicators that their right to surcharge is cemented, given all of the retailer litigation against Visa and MasterCard challenging their interchange pricing, the CVS settlement provides some certainty and guidance. It is expected that CVS is the first of many national retailers that will settle with Visa and MasterCard. These settlements reaffirm that Visa and MasterCard are determined to resolve the interchange pricing litigation which ensures that the supplier’s newly minted right to surcharge sticks.

Scott Blakeley, Esq., is a founder of BlakeleyLLP, where he advises companies around the United States and Canada regarding creditors’ rights, commercial law, e-commerce and bankruptcy law. He can be reached at seb@blakeleyllp.com.

Chairman’s Newsletter: Greetings from the New Chairperson!, by Tracy Rosenbach

Greetings! I am excited and honored to serve as your new CMA Chairperson. For those of you who don’t know me I’ve been a credit manager for 20+ years and a CMA member since December 1995. The challenges I face at work are likely the same ones you do: trying to manage credit risk; doing more with less; and trying to stay current with the latest trends in credit management in a changing industry.

Speaking of change our Credit Management Association (CMA) has begun a new chapter in its history with the move to the new office in Glendale. The association is working hard toward positioning itself for the future. We as credit managers need to be a part of that transition. We are fortunate to have CMA as a professional resource in turn we have the responsibility to give back to the association through volunteering. By volunteering we help to strengthen the association and shape it to the current needs of local credit managers. I encourage you to reach out in your local industry groups as well as call CMA to see how you can be a part of a much storied institution. Volunteer opportunities can include, but are not limited to, being an industry group leader, serving on a CMA committee or serving on the CMA board. We encourage your participation and need your input.

What’s Coming Up

To stay current in the credit management profession, there are a couple of wonderful opportunities for education coming up. In June we have the NACM Credit Congress in Las Vegas at Caesar’s Palace and in September CMA will be hosting Fall CreditScape in Sonoma. I have always felt that education is an important component to progressing in our profession which is why I worked toward and obtained my CCE designation several years ago. I encourage you to take a look at these offerings and support your association by participating and becoming engaged in its activities.

I look forward to serving you this year. Best regards,

Tracy Rosenbach
CMA Chairperson 2016 – 2017

Tracy Rosenbach, CCE, is the Financial Services Manager at Silgan Containers LLC and Chairperson of the CMA Board of Directors. She can be reached at 818-710-3729.

I Am CMA, by Sherry Raposo

As a veteran credit manager of 30 years, Credit Management Association is an indispensable tool that I use for my career. As a Credit Manager, I believe you must always keep yourself and your staff educated in a constantly changing environment. I personally attend the CreditScape events, as well as other seminars and webinars throughout the year, as investing time in education is very valuable to my company and team.

When I get a new credit application, I immediately go to CMA’s Anscers.com website to obtain RFIs from other CMA members, which in my opinion is the best trade reference you can get. I participate in my industry credit group by reporting past-due accounts, NSF checks or bankruptcies, which is very helpful to all Credit Managers, and I read the reports to see if I recognize any of the late-payers company names from accounts my company may have sold. I submit my full aging data automatically through anscers.com as well so that I don’t have to upload them manually for the Group discussions. The hour a month that I spend attending Group meetings is possibly the best use of my time all month.

Through CMA I also run credit reports designed for my company and volume, and get better rates than I would have if I’d have gone direct.

Finally, as a company whose primary business is in the construction industry, CMA’s construction forms filing service has helped my short-staffed team to verify the information provided as well as produce the preliminary notice, and mail them out, allowing me to spend more time collecting.
CMA allows you to have the most valuable networking a credit professional could ask for, which is why I chose to serve on the Board of Directors, as well as other volunteer opportunities within the association. CMA and its staff are always there for me and have contributed to me being the credit professional that I am today. For that, I AM CMA.

Sherry Raposo
Credit Manager
VSS International & VSS Emultech

CMA President’s Blog: Core skills that drive high-performance credit departments, by Mike Mitchell

CMA’s Mission: Make a difference in credit department performance by helping credit professionals maximize cash flow and manage credit risk.

I am always playing around with CMA’s mission statement. While it is seems impossible to fully capture everything that CMA does to support credit professionals and their teams, the above mission statement is true if not fully comprehensive. One of the ways that CMA can make difference and help credit professionals perform at a higher level is through education and training. For years we have offered credit education on the entire range of credit-related topics in a variety of different formats (seminars, webinars, in-person and online classes, summits, and conferences). In an effort to keep up with the changing (and increasing) demands of the credit function, we surveyed our Board of Directors to find out what core knowledge and skills are required for hiring, performance evaluation, and advancement within the credit department.

What we found was pain.

A dozen in-depth interviews uncovered a dozen core skills that are valued by most of their credit departments. CMA has traditionally focused on providing “education,” meaning general knowledge, on credit topics. The Association has not focused on “training,” which is the practical application of that knowledge to daily credit operations. Training has been left up to the member company to offer. A few Directors we talked with have in-house training resources (often referred to as the Company University), and a few others have support from their human resources departments, but the vast majority of member companies make all credit-specific training the sole responsibility of the credit department management. The pain comes from the often significant time, resources, and expertise that is required to take on that responsibility. Time, resources, and expertise that an already overburdened credit department does not have.

At CMA, we are in the process of trying to ease that pain by developing convenient, cost-effective, standardized training programs that can be used to train credit department personnel at all levels of experience and responsibility. Your volunteer leaders on the Board have given us a really good start, but we want to hear from all of our members about what core skills your company and your credit department values and believes will drive high performance and great results. Please take a few minutes to answer our brief one-page survey so that we can include your input in our program design.

Click here to access the survey.

Thanks in advance for your help.

Tracy Rosenbach Named 2016 CMA Credit Executive of the Year

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Tracy Rosenbach, Financial Services Manager for Silgan Containers, has been named 2016 CMA Credit Executive of the Year, at a ceremony which took place at the recent CreditScape Spring Summit and Annual Meeting, Powered by United TranzActions. This award is given to the credit professional who stands above others, who is willing to help out at any moment, which defines Tracy’s role with CMA.  She has been in credit for over 18 years, has served on the CMA board for 7 years and is the incoming chairperson. Additionally, she is Chair of the Membership Task Force, whose mission is to work with CMA staff to create meaningful services for members, and actively participates for the good of all of CMA’s members.  Professionally, she has also been successful in obtaining her CCE certification and who is engaged in many functions for CMA and NACM.

Congratulations to Tracy Rosenbach, and we look forward to a great year with you as the new Chair.

CMA Chairman’s Blog: My Outgoing Message, by Michael Fenner, CBA

 

What a year it has been and I can’t believe how fast the time went by…

I was so happy to see the turnout to CMA’s Spring CreditScape this past week. Thank you to those people who were able to attend. If you weren’t able to make it in March, please make sure you attend the Fall CreditScape as I believe it will be worth your time.

I have been truly honored and humbled to serve as the Chairman of the Board of Directors this last year for CMA. I would like to personally say “thank you” to the following people…Mike Mitchell, Kim Lamberty of CMA for their trust and guidance. To Tracy Rosenbach, Jim Morrow, Melissa Kobus the Executive Team, thank you for your leadership and support this last year…it was really appreciated. And to the rest of the Board Members, I would like to show my sincere gratitude for your endless efforts, your committee service, and your ideas presented last year. Thank you!

And last but not least…all of the CMA employees for their support to the Board throughout our service.

I would like to take a minute and point out some of CMA’s accomplishments over the past year:

  1. CMA launched the Fall and Spring CreditScapes – Which focused on a 360-degree look at one particular topic to give it a much more interactive and more focused educational program.
  2. CMA launched the Supplier Risk Group – Which looks at how to evaluate your suppliers to help you manage a different type of risk, one that could be more important that if any one customer doesn’t pay.
  3. The Construction Credit Report was launched as a partnership with Ansonia Credit Data. The report provides information needed to make decisions based on a construction project.
  4. CMA Adjustments (formerly CMA Adjustment Bureau) – received new branding and a new logo to better portray its 133 years in business.
  5. CMA recently moved its offices from Burbank to Glendale, modernizing its workspace.
  6. New Designees earned over last year: 5 CBAs, 1 CBF, and 2 CCEs.

It’s been really exciting to help move our Credit Association forward in a positive direction this year. Please continue to support CMA and our incoming Chair Tracy Rosenbach to increase our membership, improve existing services, add new services, and help CMA continue to be the best Association we all deserve. Let me know your thoughts. I’d love to hear your feedback.

Michael W. Fenner, CBA, is the Credit Management Association Chairman and Manager of Corporate Credit Operations for Beacon Roofing Supply, Inc. He can be reached at 714-321-8187, or mfenner@becn.com.

Attendees and Vendors Agree: CreditScape Spring Summit and Annual Meeting Was a Success

The CreditScape Spring Summit and Annual Meeting, Powered by United TranzActions, an interactive learning seminar and workshop which took place March 24-25 at the Island Hotel Newport Beach, was a huge success, according to preliminary survey results that were tabulated after the event.

With the common theme of “the elements of an efficient digital credit department,” attendees commented that the sessions gave them insights on how to approach their superiors to update their credit departments, help with evaluating vendors, and how to take their credit applications digital. They also overwhelmingly liked the panel discussions led by their peers who have implemented the technology, and their success (and failure) stories in implementing it.

Said one sponsor: “The audience at CreditScape was the most intelligent one we’ve seen at an event. Lots of great questions were asked, and we feel the attendees got a lot out of it. I can’t wait to participate in the next one.”

Mike Puccinelli of Equinix addresses the crowd at the opening session of the Spring 2016 CreditScape.
Mike Puccinelli of Equinix addresses the crowd at the opening session of the Spring 2016 CreditScape.

Additionally, every person who submitted a survey said they’d recommend CreditScape to a colleague.

Plans are already underway for a 2016 Fall CreditScape, September 22-23, 2016 in Sonoma, Calif. Details about the event are forthcoming.

Thanks again to our event sponsors United TranzActions, Dade Systems, Vantiv, Bectran, Skyminder, eMagia / TheCreditApplication.com, Ansonia Credit Data, TermSync, AG Adjustments and Dun & Bradstreet, and to all who attended the event!

CMA Member of the Month, March 2016: EMJ Metals

The March CMA Member of the Month is a company which benefits by simply utilizing the services that CMA offers.

EMJ Metals has been an active A/R information contributor, and its staff are genuinely great to work and speak with. EMJ also uses CMA’s reports and other CMA services.

EMJ Metals is one of CMA’s longest standing members, and we appreciate the relationship that CMA has with David Schulten and his team. On behalf of CMA, we thank EMJ for its participation, and we look forward to their continued support.

Companies like EMJ who submit their full aging get 25 free B2B NACM National Trade Credit Reports (and discounts on additional reports), the ability to support their good customers (and report their bad ones), time and money savings by not having to respond online to RFIs or Group worksheets – their trade data is automatically added by anscers, assistance in strengthening the CMA & NACM Databases, and more. The members who tell us that they get the most out of CMA are the ones who actively participate and contribute.

Members of the Month are nominated by CMA members, Group members, volunteers and CMA staff to highlight those members (or member companies) whose engagement with CMA has helped improve the overall credit profession for others.

For more information on how you can participate in any of the areas mentioned within this article, or to nominate any members for this honor, contact Diana Escobar at descobar@emailcma.org or 818-972-5300.

President’s Blog: How do CMA members leverage technology?, by Mike Mitchell

CMA President and CEO Mike Mitchell
CMA President and CEO Mike Mitchell

CMA is proud to host the CreditScape Spring Summit 2016 next week in Newport Beach, with a significant focus on how technology can be leveraged to improve the efficiency and effectiveness of credit operations. Regardless of whether you are attending the event, we’d like to get a baseline for how much automation is being utilized across our member base today.

Click here for a short survey that will ask you about your challenges, where you are with automation and where you’d like to be. We’ve also got several questions about the time spent and value of some of the most common activities in the credit department. By helping us to better understand your challenges regarding automation and technology, we’ll be better able to craft conferences, webinars and presentations, and even alliances with technology providers, throughout the year that help support your goals.

We’ll be asking these same questions on a periodic basis to see how quickly our membership is adopting technology. We’ll also want to understand how else we can support your needs in this area and how well our efforts result in concrete improvements and reduction of manual labor at the member level.

The results of this survey are only available to CreditScape attendees and those who complete it – so please take a few minutes to tell us about your process. We’ll discuss the results at CreditScape next week!

Here is a link to the survey.

See you in Newport Beach!

Mike Mitchell

You Make the Call, by Larry Convoy

We are just barely into the year 2016 and already I am hearing excuses as to why the credit manager cannot attend the industry credit group meetings to which they belong. They range from the receptionist is out to my controller wants me to stay and call customers.

Attending credit meetings provide your best Return on Investment by reducing bad debt loss, identifying slow paying accounts, and lowering your financial dependence on credit reports I contend that blindly calling a number in your system is more time consuming and less efficient.

Calling for dollars requires preparation

  1. Are you calling a specific person or a/p?
  2. Who is the person who controls the checkbook?
  3. Is there a gatekeeper blocking you?
  4. Have you previously left voicemails?
  5. Who does that person report to?
  6. How often do they cut checks?
  7. Are there orders in house or on hold?

A good group can identify numbers 1, 2 and 5 & 6. And supply a direct extension to avoid # 3. Number 4 tells you how important you are to them and you know #7.

I say it every month. Group Meetings are not social events for the credit manager, they are an attempt to maximize your company’s revenue. If you bring the names of past-due accounts that you will be calling for money to a meeting, I guarantee you that the information you receive will increase your percentage of recovery significantly.

You are now ready to call for dollars. You have all the facts you need and this should be resolved in one call. Feel free to contact me at lconvoy@emailcma.org if you’re not in a group and I’ll help you identify one that might be a good fit for you.

CMA Moves its Headquarters to Glendale, CA

Dear CMA Member,

I’d like to share some exciting news with you: CMA is moving its headquarters to Glendale! Our new address will be 111 North Maryland Ave., Ste. 300, Glendale, CA 91206, effective March 16, 2016. Our P.O. Box address (P.O. Box 7740, Burbank CA 91510-7740) and phone number (818-972-5300) will remain the same. Our Las Vegas office remains at 3110 West Cheyenne Ave Suite 100, North Las Vegas, NV 89032, phone: 702-259-2622. Please update your address book accordingly.

We look forward to bringing you the same high standards of customer service and handling of all your risk management needs from our new location later this month.

If you have any questions, please let us know.

 

CMA Chairman’s Blog: Advancing your Career through CMA by Michael W. Fenner, CBA

Year after year, as we go through our careers, we are always looking for ways to improve ourselves and advance in our professions. I know for me, I got complacent with my job and quite frankly I didn’t know where to go and or who to turn to. My luck changed when I ran into Mike Mitchell, CAE President of CMA at the Las Vegas airport in 2008 after attending a Western Region Credit Conference. I mentioned to him that I was looking for more in my career and he said to me, “You are already being considered.” I wasn’t entirely sure what he meant by that at that moment, but shortly thereafter I received a phone call to join CMA’s Board of Directors. I thought it was a great opportunity to be able to volunteer and help our association, understand more about how a business works, as well as work with my peers from all different companies and credit backgrounds. The rest is history…

Let’s take a look at some of the platforms that have assisted me through my career:

  • Professional Credit Certification – It’s never too late to get your designation or move to the next level. Here are the available designations.
    • Certified Credit and Risk Analyst (CCRA) – For analysis and interpretation of financial statements.
    • Credit Business Associate (CBA) – This includes three credit courses basic financial accounting, business credit principles and introduction to financial statement analysis.
    • Credit Business Fellow (CBF) – The lessons include business law and credit law.
    • Certified Credit Executive (CCE) – You must be proficient at accounting, finance, domestic and international credit concepts, management and law.
    • Professional Development Programs – CMA offers a variety of courses in person and online. The anscers.com website (on the education tab) is constantly being updated with the latest information for all of us. As an example some of our options today include (but not limited to) the Spring and Fall CreditScape Summits, NACM’s annual Credit Congress, numerous lien law seminars in many states, a course on alternative for financing the sale of goods, and credit risk and risk mitigation techniques. Please go check them out and see which one can assist you in your career.
  • Board and Committee Service – By volunteering my time on the CMA Board of Directors and serving on board committees it has allowed me to grow as a person and become a more of a diverse credit manager and move up in my career. I have been able to make lifelong friends as well as expand my credit knowledge to move forward in my field just by participating in discussions and working with my associates.
  • Industry Credit Groups (ICG’s) – My ICG helped assist me in my credit decision process to run a more thorough credit department. Currently we have 60 diverse groups. They network with each other, share factual information timely, and you get responses promptly from your group members so you can make educated decisions with your new accounts and or your current A/R. Feel free to contact Diana Escobar directly at (818) 972-5342 for more information about groups that pertain to your industry.

We all know how important it is to stay up-to-date with our education. And finding the time to go to events or take classes can be a challenge. Things won’t change unless we change them. Invest in yourself and your teams, and challenge them to improve and grow.

Make sure you encourage your teams to support CMA which is your association. It is important to always network with your colleagues and make some new friends as you go through this process. Make sure you always bring back your experiences to incorporate them into your jobs.

Let me know your thoughts. I’d love to hear your feedback.

Michael W. Fenner, CBA, is the Credit Management Association Chairman and Manager of Corporate Credit Operations for Beacon Roofing Supply, Inc. He can be reached at 714-321-8187, or mfenner@becn.com.

How CMA Can Help Members Navigate the Global Credit Landscape, by Mike Mitchell

Companies cannot ignore the fact that there is a whole world out there to sell to, and despite thct that current global economic conditions do not favor U.S. exports, there are tremendous opportunities for companies that can and have figured out how to sell to foreign markets on favorable terms. Global commerce is more than a trend – it is a certainty, and because export sales require the support of the credit operation, CMA will continue to include international credit in all education and training programs.

In an effort to determine how far CMA should go to support international credit sales, I have recently attended events that focused on the broader topic of exporting and events that addressed specific credit issues related to international sales. Here are a few things I’ve learned so far.

Most emerging markets are outside the U.S. Middle class growth and urbanization is taking place in China, India, and throughout Asia, not in the U.S. It is estimated that the global middle class will triple in size to 4.9 billion people by 2050, and they will spend an estimated $56 trillion by 2030. Two-thirds of that spending will come from emerging markets. This will create not only a huge opportunity for growth, but may put a demand on U.S. companies to sell into emerging markets just to stay competitive and not get left behind.

A surprising number of exporters are small and medium-sized enterprises (just like most of our members), and new free-trade agreements, like the Trans-Pacific Partnership (TTP), are giving SMEs greater access to emerging markets.

There are a surprising number of Federal and State agencies that provide free and low-cost assistance for exporters. U.S. Department of Commerce Commercial Services, Small Business Administration, Small Business Development Centers, Export Assistance Centers, the newly reauthorized EXIM Bank, and a vast network of partner programs are there to help your company export. The challenge is that there is overlap among these agencies and the overwhelming number of resources can be difficult to navigate. CMA has established strategic partnerships with the International Trade Administration (U.S. DOC), the SBA in Glendale, CA, and the EXIM Bank to better understand how to bring these resources to our members that currently export or plan to in the near future.

Due to the cost of Letters of Credit to foreign buyers, more international sales are shifting to open credit terms, which decreases barriers to sales but increases the risk. At CMA’s upcoming CreditScape Spring Summit and Annual Meeting, a panel of seasoned international credit managers will discuss why overseas customers are demanding more credit in 2016, tools for evaluating the creditworthiness of foreign companies, when to (or not to) extend higher credit limits or longer terms, what are the real risks today of giving payment terms abroad, and companywide credit strategies for growing international sales.

If your company already sells outside the U.S. and your credit department already has a solid process in place for managing trade risk, then much if not all of what I’ve said is not news to you. However, my guess is that many of you have little to no experience exporting, and chances are that if your company produces a product that is marketable to other countries, you will be asked to provide support for international sales. The question is, how can CMA help you find the knowledge, information, services, and professional training to ensure you are ready to take on the challenges of global commerce? As we continue to explore trends in international sales, let us know how CMA can offer assistance to your company to help you win in the global marketplace.

Rich Swanson, USFCS Pacific South Region, and Mike Mitchell, CAE, President & CEO, CMA (Credit Management Association) sign the MOA at the CreditScape Conference at the Palms Hotel, Las Vegas on Thursday, October 16, 2014.
Rich Swanson, USFCS Pacific South Region, and Mike Mitchell, CAE, President & CEO, CMA (Credit Management Association) sign the MOA at the CreditScape Conference at the Palms Hotel, Las Vegas on Thursday, October 16, 2014.

CMA Member of the Month, February 2016: Alexis Scott, CBF, Maltby Electric

Alexis Scott, Maltby Electric
Alexis Scott, Maltby Electric

An active participant in an Industry Credit Group is someone who attends meetings, shares best practices for the good of those in the group, submits their reports and gets useful information out of the meetings that they can take back to the office and make informed business decisions based on that information. Active participation is contagious, and the folks who tell us that they get the most out of the meetings are the ones who actively participate.

The February CMA Member of the Month is someone who personifies the term “ACTIVE PARTICIPANT,” whose involvement inspires others to continue to contribute to the Groups as well as the other educational offerings from CMA.

An active member of the Northern California Electric Group, Alexis Scott, CBF, of Maltby Electric has been active in the Group for more than six years.

She takes it upon herself to mentor others in the group, commonly sharing best practices with the Group whenever appropriate. In fact, several from that group approached CMA staff privately to commend her for doing that.

Alexis uses CMA’s construction forms filing services and other CMA services, and is a strong advocate for CMA’s educational programs and services, as she is a huge supporter of CMA.

On behalf of CMA, we thank Alexis for her participation, and we look forward to her continued support.

Members of the Month are nominated by CMA members, Group members, volunteers and CMA staff to highlight those members (or member companies) whose engagement with CMA has helped improve the overall credit profession for others.

For more information on how you can participate in any of the areas mentioned within this article, or to nominate any members for this honor, contact Diana Escobar at descobar@emailcma.org or 818-972-5300.

Easy-to-Implement Technology That Can Make a Credit Manager’s Job Easier, by Michelle Herman

Yesterday I mentioned that I’d be listing several technologies I use that make my job easier. These are all things that I don’t have to call the I.T. department to install for me. These tech tools are easy to learn, easy to use, super helpful in the credit and collection department, make you look good, and best of all, are FREE!

Free Conference Call/Webinar/Video Chat tool
Free Conference Call.com
www.freeconferencecall.com
Yes – it really is free! You get assigned a phone number and code that is static and is yours to use whenever you need to have a conference call. You can even do free webinars (and record them) with all the standard tools that pricey tools like WebEx offer. Now they even offer video chat!

Free Online Large File Management Tool
Dropbox
www.dropbox.com
Large files are often rejected, or never make it out of your own server. Dropbox solves this issue by allowing you to convert any document into a link that is easily shared and can be password protected. You can store or send pictures, PowerPoint’s, excel files, etc. This product comes with a basic level of storage than can be incrementally increased through a variety of actions.

TheCreditApplication.com
eMagia Software
www.thecreditapplication.com
Another great new product from our friends at Emagia that provides you with an online credit application that you customize – for FREE! You re-create your credit app online, no tech support from your company necessary. You can export data into excel or your ERP, it is integrated with credit sources like the NACM National Trade Credit Report and even Yahoo financials.

Low-to-No-Cost Productivity Tools
Your Nerdy Best Friend
www.yournerdybestfriend.com
If you missed seeing Beth Ziesenis, known as “Your Nerdy Best Friend,” at last year’s Western Region conference in Portland, you don’t want to miss seeing her at Credit Congress. Visit her site to get comprehensive reviews on super productivity tools that touch virtually every area of your department. You are sure to find something that will change your life – personally and professionally.

Multi-Bureau anscersX Commercial Credit Report
CMA
www.anscers.com
Ok, this one isn’t really free, but it is one of the easiest and most cost effective ways to get data from the leading commercial credit bureaus all in one place. The AnscersX report provided by CMA, gives you the greatest hits from D&B, Experian and Equifax all in one easy to read report. No contracts, no minimums, no hassle.

Use anyone of these tools and you’ve got some instant sizzle. You instantly up your professionalism and your image. All of these tools have impressive graphical reporting features to help you share the results with your boss, making you and your team, look great. The key is to take one step at a time, start with simple low- or no-cost options for some of the most basic productivity tools, and generate some good looking reports that tell a story. Just pick one and sign up. Didn’t see one that floats your boat? There are hundreds of these types of tools, and just starting with one and seeing immediate real success – the sizzle- is what you need to keep going. Track me down at CreditScape and I’ll give you a live demo of how easy these tools are and how they may your life easier and make you look sharp.

Ok, we get it. You’re busy, overworked, underpaid. And probably under-valued. If that is your reality, and your perception, it’s time to take action to change it. We know it is hard to get out of the office, but if you’re not viewed by management as you’d really like to be, take the time, learn a few new tricks. Generate some sizzle. See you at CreditScape!

CreditScape
This is just a surface view of one of the topics that will be discussed in detail at the upcoming CreditScape Summit and Annual Meeting in Newport Beach, CA on March 24-25, 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Michelle Herman is a business development manager at NACM. She will also be moderating several of the panel discussions and workshops at CreditScape.

Read the other posts in this series here:

Why is it So Difficult to Implement New Technology Solutions in the Credit Department, by Michelle Herman

Why is it that credit, especially commercial credit, always seems to get the short end of the stick when it comes to resources? Why does it seem just the opposite for sales and marketing? Why do they always get the newest equipment, the coolest gadgets, the fancy business cards, even the latest version of Microsoft office before you? Why? It’s because those folks are externally facing representatives of your company and your company already knows the value of their efforts. Huge marketing campaigns cost huge dollars and are visible inside and outside of the company. Huge sales get noticed and celebrated – and commissioned. These teams may annoy the heck out of you, but they have a few things figured out: get noticed = be valued. They are constantly throwing out the sizzle – and people notice sizzle, all the time.

So why can’t credit sizzle? Why are we always in the back room? Why are our requests and projects always “on the list”? Why doesn’t anyone else get excited that your 90+ bucket just dropped below x percent? At this point, my only conclusion is this: Perception really is reality. If you have everything you need in your department, you can save ten minutes and stop reading this now. If you are still struggling to get basic tools and funding for training and attending conferences, read on.

For every person in your company who has nothing to do with (or knows nothing about) credit or collections, their PERCEPTION about what you and your team do or don’t do, their stereotypes, biases, and assumptions, really is their REALITY. How you and your team are perceived, almost more than how you actually perform, is how you are valued, whether you like it or not. And they will support you only to the extent that they think you are valuable.

We all know, none of us ever planned to get here, it just happened. Many never even heard of commercial credit until we were suddenly knee deep in it. Clearly, as an industry and a profession, we’ve got some work to do, but we’ll save that for another day. The point is, no one really knows what you do, and it is your job to educate them, to prove your value – but take some notes from those flashy sales folks, sometimes you need a little sizzle to do it!

So how do you sizzle? How do you prove your value? How do you get a seat at the table? How do you get to be seen as a strategic player, not just an administrative cost center? How do you really change their perception? You must start by changing your reality, and you can do it starting today, through technology, without spending a dime.

If you are still reading, I’m going to assume that you’d like to improve a few things. Many in our industry have been around a long time, and have heard “no” so often, that they just stop asking, and they stop learning. I’m still amazed at what isn’t being implemented in our member’s offices and even in our own NACM offices, because we haven’t taken time to find out what’s out there. We did a short survey at one of the regional conferences about why technology isn’t adopted more often.
Reason Number 1: No Time. No one takes the time to investigate the technology, because they have no time. They have no time, because they have no technology. It is a vicious and evil cycle. Result: no sizzle, no value, no tools.

Reason Number 2: No Budget. This really shouldn’t be an excuse anymore as so many services are offering their basic tool for free, only charging if you want to upgrade. It is a great business model that lets folks like us actually explore things, test it out, kick the tires – before we commit, or spend a dime. And they are all web-based – nothing to install, no tech involvement needed, just go to a website and register.

Tomorrow, I’ll list a few of my favorite tech tools that are easy to learn, easy to use, super helpful in the credit and collection department, make you look good, and best of all, are FREE!

CreditScape
This is just a surface view of one of the topics that will be discussed in detail at the upcoming CreditScape Summit and Annual Meeting in Newport Beach, CA on March 24-25, 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Michelle Herman is a business development manager at NACM. She will also be moderating several of the panel discussions and workshops at CreditScape.

Read the other posts in this series here:

So Your Software or Automation Initiative Has Been Approved, What Do I Do Now?, by Robert S. Shultz

Define the Project Purpose and Scope? It is Not all about the Technology

Any software or automation improvement addresses defined business objectives that impact multiple areas within the company. In order to pull off these changes effectively all stakeholders affected should be aware of and involved in the coming changes. Depending on the project and the company, the target audience may differ. As an example: You can’t consider changes in credit and collection software without involving such areas as sales, customer service/order administration, project managers, operations and IT, while keeping senior management informed. Every project has a defined mission that requires cross-functional buy in. Realistic objectives and timelines have to be agreed to. Roles have to be defined.

This takes planning and cross-functional communication. If you are heading the implementation team you will need a clear vision on how the changes will support company goals and performance expectations. Processes, policies and procedures may need changes and streamlining to best leverage the new tools.

Ready Fire Aim… Don’t get bogged down with long term major system implementations. They are hopes and dreams.

A solution provider will have to be vetted that meets your company’s requirements. This will involve a well thought out selection process where both you and the provider understand each other’s business needs, strengths and weaknesses. You will need a basis for your selection. Try to make this as objective as possible, looking at each potential provider with the same criteria. A well rounded score card that lists and weights your critical needs. The selection process should provide all the stakeholders involved an opportunity to participate. If you get buy in at this stage, there will be much less push back later.

No system is perfect or addresses all the needs of all the users. Often it is best to reduce expectations in order to actually get the basics in a reasonable time-frame. Credit and collections are tactical issues: The needs are immediate and have to be addressed today. Complex ERP implementations are strategic in nature. By the time the specialized needs of a Credit Manager are addressed, too much time is lost, the department fails to gain efficiency and results have not improved.

Making the Choice Between an ERP and a Specialized Solution

ERP solutions are robust and have many company-wide advantages. They are also complex, expensive and have long implementation cycles. Let’s face facts. Credit Departments typically have fewer headcount that other areas supported by an ERP. The value in spending research and development dollars for a minimal number of users isn’t in the cards.

Companies specializing in credit and collection software, billing automation, document management and cash administration, address the issues you are trying to resolve on a full-time basis. Credit and collections is not an after-thought, it is their market and revenue stream. They continually focus on user needs and spend R&D dollars to improve their product. Many have user groups you can participate in, that have a real impact on the next release. Implementations are easier and of shorter duration. Cloud based solutions require minimal use of your internal IT resources. Costs are surprisingly low.

Many are faced with this obstacle, “Oh we are putting in or upgrading our ERP next year. It will do fine for you. We don’t want to do any other projects in this area until after the ERP is up and running. We are going to implement the ERP straight vanilla. Anything you need will be in Phase 2 (i.e.: Never)” If that is the case, push hard for incremental improvements and results in a relatively short time-frame.

A Credit Manager has a strong position. You should illustrate a good return on the investment. Show how other departments and most importantly, your customers will benefit. An interim fix with a decent ROI will pay for itself before the ERP initiative is complete.

When the day comes and the ERP vs an interim solution is looming, do a gap analysis between the interim solution and the ERP. You are likely to be surprised by what you already have.

At the upcoming CreditScape Summit and Annual Meeting, you will be able to discuss how to choose a solution provider. Expert Panelists will give you insight on their experiences, victories and losses. You will have ample time to ask questions and network with others who are, or who have faced, the same technology challenges you have. This is definitely a good use of your time.

CreditScape
This is just a surface view of what it takes to convince management an automation initiative should be approved. Each of these points and more will be discussed in-depth at the upcoming CreditScape meeting in Newport Beach, CA on March 24-25 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Robert S. Shultz is a Partner at Quote to Cash Solutions (Q2C) LLC. He will also be moderating several of the panel discussions and workshops at CreditScape.

Read the other posts in this series here:

Justifying Credit and Collections Automation to Your Management, by Robert S. Shultz

Today’s Business Reality:

In today’s rough and tumble business environment the need for expense management, working capital and liquidity are key CEO and CFO concerns. Gone are the days of ready access to financing and smooth collection of accounts receivables. Timely management information must be available showing how the business is doing and where the opportunities for improvement are. More than ever companies must increase the productivity of limited order to cash management and staff. All this must be delivered with maximum customer service and satisfaction.

Companies must be able to extend credit intelligently, generate accurate and timely invoices, and quickly identify and correct customer disputes. Management needs to track performance metrics, trends and customer issues. Companies that do these things well are in a position to shorten their overall cash conversion cycle, reduce the need for borrowing and bring a company the liquidity it needs to survive and thrive.

There are many cost effective automation solutions in the marketplace focused on these issues. Many of these are cloud based. This simplifies implementation and few internal IT resources are needed. Even though the costs are relatively low, the functionality is amazing. Credit and other financial managers will find that the first hurdle is to convince management the suggested solution meets the acid test. They have to answer the question, “Show me the Return on Investment” (ROI).

Where to Start
The first step for a credit manager is to determine when volumes and performance challenges justify automation and the expense of a solution. The solution could be developed internally or acquired from a third party provider. The cost and likelihood of success with an internal option really depends on the resources available in the company.

Following are ten things to consider that fit any automation initiative. The following is not intended to be a complete list. It covers the key points you may include in a recommendation to senior management.

How would you answer the following question: What are the Compelling Needs for Automation?

In order to convince management to invest in any automation you must demonstrate the need in clear, real world and understandable terms. Here are ten things to consider:

  1. Is excessive overtime a routine in the department? Are you using temps to supplement permanent staff?
  2. If you benchmark Full Time Equivalents (FTEs) transaction volume is yours is low by comparison?
  3. Is your company growing, merging or acquiring but you are not able to hire additional staff for your department?
  4. Is Sales continually upset that credit reviews take too long? Is business lost as a result?
  5. Are collection results below expectations?
  6. Is your department stuck in a morass of unworked deductions?
  7. Are invoices often inaccurate or go out late?
  8. Are Sales and Customers impacted by order hold and release delays?
  9. Is management unsatisfied with performance measurements, reporting and the ability to status Customer balances?
  10. Is it impossible to accurately forecast cash flow?

As you can see if any or all of these factors are in play you will get the attention of your management with opportunities for significant improvements.

Where is the Money!
Soft savings such as process efficiency or improved customer service can help justify expenditures for automation. Actual hard cost savings will enable you to calculate the “ROI” and how long it will take to get there.

You should consider such things as:

  1. An increase in transactions per FTE will reduce the need for overtime, temps or permanent staff.
  2. Based on forecasted company and transaction growth automation will reduce the need to add staff.
  3. Automation of the credit approval and review process will speed decisions, avoid lost business and could reduce past dues and write-offs.
  4. Increased collection efficiency will bring in cash earlier, reducing borrowing costs, enabling the company to take all Accounts Payable discounts, provide working capital to invest in profitable opportunities.
  5. Timely or self-service invoicing will reduce invoicing delays, identify errors earlier and optimize the payment cycle.
  6. Cash administration/application improvements will identify customer payments earlier, avoiding unnecessary collection expense and speeding up the order hold release process, improving revenue and profits.

 

This is just a surface view of what it takes to convince management an automation initiative should be approved. Each of these points and more will be discussed in-depth at the upcoming CreditScape Summit and Annual meeting in Newport Beach, CA on March 24-25 2016. Come to CreditScape, learn from experts and peers who have done this, share you own experiences with others. For more information, visit www.CreditScapeConference.com.

Robert S. Shultz is a Partner at Quote to Cash Solutions (Q2C) LLC. He will also be moderating several of the panel discussions and workshops at CreditScape.

Read the other posts in this series here:

Coming Soon: How to Know That Your Credit Department Processes Are Efficient

These are interesting and challenging times. With the digital revolution, many process improvements have completely changed the way business is done. There is so much more information available now than ever before in assigning business credit that it is difficult to stay up on the latest trends and best practices to make sure that your department (and you!) are doing things as efficiently as possible with the available tools.

At CMA, we’ve had numerous conversations and phone calls from members who tell us that they are trying to do more with less, or that their departments have been downsized. As a response to those conversations, CMA has created an event that is designed to help credit managers with all levels of experience and expertise to leverage the knowledge and experiences of practitioners who have implemented elements of an efficient digital credit department, with a complete 360-degree overview of why, when and how to implement those elements to make your department run more efficiently.

The 2016 CreditScape Spring Summit and Annual Meeting, powered by United TranzActions, will feature two days of workshop training, expert practical and legal advice, and networking with other credit professionals. The goal of CreditScape is to provide an opportunity for credit practitioners at all levels of experience and expertise to come together to solve problems and provide solutions for their real-world issues they face at work.

Next week, two of our panel moderators for the event, Robert Shultz and Michelle Herman, will be guest blogging about the reasons why you need to at least consider implementing the elements of the digital credit department, but specifically the WHY, WHEN and HOW to implement, including how to justify the need to your management, select a third-party vendor, the types of problems that digital applications can solve, and more.

We invite you to join Robert and Michelle at the Spring CreditScape Summit and Annual Meeting, March 24-25, 2016 at the Island Hotel in Newport Beach (or view the website at www.creditscapeconference.com) , and to read their blogs, as the information you’ll receive can help you save time and resources in the long run.

What elements of the digital credit department are you the most interested in learning about? We welcome your feedback.

Read the other posts in this series here:

Why You Need to Attend the CreditScape Spring Summit, by Michael W. Fenner, CBA

Now that we have all made our “New Years resolutions,” make sure you don’t drop the ball on your professional goals. Maybe you would like to improve your own personal skill set in your organization. Or perhaps you want your team to get up-to-date with the latest credit training / information in the market place. For me, as I move through this New Year, I look at budget planning and ideas on how to improve our credit department. I urge you to please take some time to review the latest CMA CreditScape Spring Summit information. By attending the two days of workshop training, I believe that it will propel you and your department to the next level.

What will be covered this spring…“The Efficient Digital Credit Department”.

Let’s take a look at some of the items that stood out to me:

  • All Levels of Expertise Welcome – Good for beginners to experts in your departments.
  • The discussions are led by practitioners, not marketing people – Get a 360-degree look into the elements of an efficient digital credit department, focusing on best practices and real-world case studies with the best and brightest practitioners in credit and collections, including top credit executives from companies such as Sony Entertainment, Sysco Foods, Ganahl Lumber, Kendall-Jackson, Walters Wholesale, UTA/United TranzActions, the U.S. Department of Commerce and Watsco.
  • Focusing on your Departments Efficiencies – Such as why should your department go digital…You’ve decided to “Go Digital” Now What?…Automating your customer onboarding process…Vetting your customers…Automating your A/R management processes…International resources and government automation tools……Using third-party vendors to create efficiencies…and emerging technologies impacting the credit department to name a few.
  • Convenient Location – This will be in Southern California this spring at The Island Hotel Newport Beach saving costs for those of us who live locally.

The event information is as follows:

Date: March 24-25, 2016
Location: The Island Hotel Newport Beach 690 Newport Center Drive Newport Beach, CA 92660 ($189 a night)
Cost: $495 for CMA members and $595 for non-members
Registration: To register go to www.creditscapeconference.com

We all know how it is important to stay up-to-date with our education. And finding the time to go to these events can be hard too. Invest in your team, and challenge them to improve and grow. This program will be packed with information and has many excellent speakers too. I would highly recommend it.

Additionally, CMA has a prewritten “letter to your boss” to help you show the value of the event. To get a copy, go to http://creditmanagementassociation.org/events/creditscape/cma-annual-meeting-letter-to-your-boss/

Please take a few minutes to read through the program highlights to answer all of your questions on the CreditScape Spring Summit 2016 brochure located at http://creditmanagementassociation.org/wp-content/uploads/2016/01/creditscape-brochure-spring-2016.pdf

Make sure you encourage your teams, support CMA…your association, and network with old friends and make some new ones too. Team up with your colleagues and learn together. Then bring back your experiences to incorporate into your jobs. Let me know your thoughts. I’d love to hear your feedback.

Michael W. Fenner, CBA, is the Credit Management Association Chairman and Manager of Corporate Credit Operations for Beacon Roofing Supply. He can be reached at 714-321-8187, or mfenner@becn.com.