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 is establishing 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.

Wednesday, January 28, 2015 from 10am-noon

In-Person: Nestle USA headquarters, Glendale CA, or via Web-conference (must have web cam and speakers)

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

We hope to see you there!

CMA Member Credit Confidence Scores – 2009-2011

Each quarter CMA surveys our members about their payment experiences and payment confidence for the next quarter.

The CMA Credit Confidence Score represents the level of confidence our members have in their customers’ ability to pay in the next quarter. The scale is 1 to 10 with 10 being the highest level of confidence.

The graph below displays our members credit confidence by quarter starting in Q2 2009. This is an overall score with all industries included.

Scores since 2009
Scores since 2009

In Q2 2010 we started tracking the score by industry. The three major industries reporting are graphed on the chart below.

Scores by Industry

 

Please feel free to reference this data, with our permission. CMA would appreciate acknowledgment using our full name Credit Management Association and/or website address CreditManagementAssociation.org.

On the Balance Beam – Michael Dennis, CBF

On the balance beam

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

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

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

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

Michael Dennis, MBA, CBF, LCM

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

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

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

Just as Confident As Last Year Q1 2012 7.11 Score

CMA’s Credit Confidence Score is experiencing a bit of deja vu. The Q1 2012 score of 7.11 out of 10 is the exact same as Q1 2011.

Survey Results Questions 1 and 2

CMA Members report orders and payment increasing, and they predict that payment will be on time for the coming quarter.

Survey Results Questions 3-5

While some are continuing to tighten their credit policy, most predict no change for this coming quarter. The use of credit hold has increased and there has been a stabilization in the amount of accounts sent to collections and NSF checks received.

Some members are extremely confident about payment in Q1 2012 with 49% reporting a confidence score of 8 or more.

Survey Results Question 6

 

Credit Confidence Drops Sharply to 6.93 from 7.15

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 202 members gave us a great insight into credit trends for Q4 2011 and the realities of Q3 2011.

Our overall Credit Confidence Score for Q4 2011 is 6.93 out of 10. Click here for Confidence trends. This is the sharpest decline reported in Credit Confidence since we started the survey back in Q2 2009.

CMA Credit Confidence Scores - Click to enlarge

One of the major factors in the drop in confidence is the slowing of payment in Q3 and the anticipation of continued slowing payments in Q4. Orders and applications were up in Q3 showing an increase in sales activity – while payments remained tight.

Survey Results - click to enlarge

Overall, the respondents reported no change to their credit policy in Q3/Q4. There was a slight increase in the amount of NSF checks and credit holds for Q3 2011.

Survey Results - click to enlarge

Breaking the scores down by Industry (manufacturing, wholesale trade and construction) shows the greatest confidence gain for Construction since Q2 2010. Those in construction also report an increase in applications and orders in Q3 – with a expectation of delayed payments in Q4.

Confidence by Industry - Click to enlarge

Thanks for your participation in the CMA Credit Confidence Survey. The Q3 2011 – Q4 2011 survey is now closed. Watch for the Q4 2011-Q1 2012 Survey at the end of December 2011.

CMA Q2-Q3 2011 Credit Confidence Scores

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 201 members gave us a great insight into credit trends for Q3 2011 and the realities of Q2 2011.

Our overall Credit Confidence Score for Q3 2011 is 7.15 out of 10. Click here for Confidence trends.

Q3 2011 Score

This quarter’s survey shows an increased confidence in orders and applications for Q2 2011 and expected increase in orders for Q3. Most participants predict on-time payment in the next quarter, which is also reflected in the Credit Confidence Score of 7.15.

Click to enlarge

Manufacturing confidence edged higher this quarter after taking a large drop last quarter. Seven (7) members in this manufacturing industry category reported a credit confidence score of 10, the most we have seen in this category. Construction confidence is the lowest we have seen in 5 quarters – dropping to 6.08 out of 10.  Confidence in the wholesale trade industry has remaining steady (at @ 6.90) across two quarters.

Click to enlarge

The industries represented in our survey are abundant, making our overall Credit Confidence Score of 7.15 a great benchmark across industries. CMA members are slightly less confident than last quarter when our score was 7.16.

Click to enlarge

Thanks for your participation in the CMA Credit Confidence Survey. The Q2 2011 – Q3 2011 survey is now closed. Watch for the Q3-Q4 2011 Survey at the end of September 2011.

CMA Q1-Q2 2011 Credit Confidence Scores

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 274 members gave us a great insight into credit trends for Q2 2011 and the realities of Q1 2011.

Our overall Credit Confidence Score for Q2 2011 is 7.16 out of 10. Click here for Confidence trends.

Q2 2011 Score

This quarter’s survey shows an increased confidence in orders, payments and applications for Q2 2011. Members in Construction are still not as confident as other industries, their confidence score rates 6.42. Most members who experienced slowing payments in Q1 also predict slowing payments for Q2.

Click to enlarge

Members in the manufacturing industry reported the greatest confidence drop, with their overall score for Q2 dropping from 7.73 (Q1) to 6.90 (Q2). Five (5) members in this wholesale trade industry category reported a credit confidence score of 10, the most we have seen in this category. The wholesale trade industry reported their highest confidence score 6.99 since Q2 2010.

Click to enlarge

The industries represented in our survey are abundant, making our overall Credit Confidence Score of 7.16 a great benchmark across industries. CMA members are slightly more confident than last quarter when our score was 7.11.

Click to enlarge

Thanks for your participation in the CMA Credit Confidence Survey. The Q1 2011 – Q2 2011 survey is now closed. Watch for the Q2-Q3 2011 Survey at the end of June 2011.

CMA Credit Confidence Survey Q4 2010-Q1 2011 – Results

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 198 members gave us a great insight into credit trends for Q1 2011 and the realities of Q4 2010.

Our overall Credit Confidence Score for Q1 2011 is 7.11 out of 10.

Q1 2011 Score

This quarter’s survey shows an increased confidence in orders and payments for Q4 2010 and Q1 2011. Members in Construction are still not as confident as other industries, their confidence score rates 6.28 with high marks for slowing payments, tightening credit policies, and placing accounts on credit hold.

Survey Results

Compare that to members in Manufacturing with a credit confidence score of 7.73 (the greatest variance we have seen between the two industries) experiencing increased orders, on time payments and no change in credit policy. 5 members in this industry category reported a credit confidence score of 10.

Survey Results

Members in wholesale trade are predicting a mix bag of economic fortune. A credit confidence score of 6.44 with increases in orders and payments for Q4, and a predicted increase in orders of Q1 2011. Yet payments slowed in Q4 and credit holds increased dramatically.

The industries represented in our survey are abundant, making our overall Credit Confidence Score of 7.11 a great benchmark across industries. CMA members are slightly more confident than last quarter when our score was 7.00.

Member Industries

Thanks for your participation in the CMA Credit Confidence Survey. The Q4 2010-Q1 2011 survey is now closed. Watch for the Q1-Q2 2011 Survey at the end of March 2011.

CMA Credit Confidence Survey Q3-Q4 2010 – Results

Every quarter, CMA Members participate in the CMA Credit Confidence Survey. 246 members gave us a great insight into credit trends for Q4 2010 and the realities of Q3.

Our overall Credit Confidence Score for Q4 2010 is 7.00 out of 10.

Another story is told when we break out the score by industry. The construction industry confidence in payment for Q4 is 6.29, while those in manufacturing rank a full point higher at 7.45.

In Q3 2010, CMA Members saw an increase credit applications, orders and payments received – all great economic signs. Still most members identified payments as slowing in Q3 and continuing that trend in Q4.

Survey Results - Click to enlarge

Most members predict no change in their Credit Policy for Q4. In past surveys tightening the Credit Policy had ranked high and chances are many members have already adjusted policy to meet this economic market.

Use of credit hold in Q3 increased noticeably. Since credit hold is used in times of slow payment, this corresponds to the trend in slowing payments.

Survey Results - Click to enlarge

The industries represented in our survey are abundant, making our overall Credit Confidence Score a great benchmark across industries. CMA members are slightly less confident than last quarter when our score was 7.10.

Industry Results - Click to enlarge

Thanks for your participation in the CMA Credit Confidence Survey. The Q3-Q4 2010 survey is now closed. Watch for the Q4-Q1 -2010-2011 Survey at the end of December 2010.

CMA Credit Confidence Survey – Q2 2009

Overall, the Q2 survey results suggest no real improvement for trade creditors over Q1, with some performance indicators falling well below expectations set during the first quarter.

The number of companies reporting an increase in credit applications dipped (from 40% to 30%), and a rising number of companies reported a decrease in credit applications, (from 34% to 39%.) These results indicate an overall decrease in the volume of new credit applications in the second quarter. This was followed by a 4% rise in the number of companies reporting a decrease in the number of orders received in Q2. Although the number of companies reporting an increase in the number of orders received remained fairly constant, only a little over less than half of the companies predicting an increase in Q2 (47.5%) actually experienced an increase (26.3%).

36.9% Fewer companies are predicting an increase in orders for Q3, down from (39.6%) than did for Q2 (47.5%). Payments showed improvement in Q2, with a higher percentage of companies reporting an increase and a lower percentage reporting a decrease.

A significantly higher percentage of companies expect no change in payment trends in Q3 (48.6%) than did in Q2 (36.1%), suggesting that the economy has begun to stabilize, but that recovery is expected to be slow.

CMA member responses to payment trends suggest that companies continue to experience the same level of slowing payments, but more companies are reporting on time payments and fewer are extending payments. Fewer companies are predicting payments to be on time and more companies are predicting an increase in slowing payments in Q3.

Credit policies are just as tight as in Q1 and are likely to remain tight into Q3, with few signs of relaxing.

Companies continue to experience significant increases in collection claims, account holds, NSF checks, and repayment agreements, although these increases are not as great as those reported in Q1.

Although 1/3 of respondents still have a confidence level of 7 in their customers’ ability to pay, results show a slight improvement in overall confidence levels 7 and above, from 60.5% to 65.4%.

Credit Confidence Graph

Conclusions:

Overall, credit applications and orders suggest that business is down, and while credit managers might not feel that things will get worse, they are acting as though things will not improve significantly in the next quarter. The level of confidence remains above average, but does not suggest a quick turnaround in the economy.

Q2_2009_CMAsurvey