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.
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.
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 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.
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). I look forward to your participation in CMA’s Industry Credit Groups!
Patrick Spargur, CICP, is a business development executive with Credit Management Association. He can be reached at 800-841-5793 or by email at firstname.lastname@example.org.
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.
To some, January 1st is like the first day of school. Everything starts out fresh and clean (even though I know many of your fiscal years start at different times of the year). For those group members who attend and contribute regularly, the beginning of the year is just a continuation of what you have done in the past.
However, some of you have not attended your Industry Credit Group meetings in months (and for others years) and you may feel a bit embarrassed showing up. Others may not be in an Industry Credit Group at all.
As someone who has facilitated meetings longer than many of you have been alive, let me inform you that nothing could be further from the truth. Your contributions and attendance will be welcomed by all, whether it is at a meeting or joining a conference call. By including your trade data and credit knowledge, the other members have more information to make informed credit decisions. The real embarrassment would be you opening an account that the other group members have previously discussed and determined individually to be risky.
There are two ways to increase the value of an Industry Credit Group; bring in new members and bring back current members who have for whatever reason, have gone astray. Either way, EVERYONE WINS.
As we begin a new year, we ask you on behalf of the other members of your group, to commit to attending each meeting/call, to contribute daily through alerts, RFIs and monthly if your group has a report. Take your calendar and mark off the meeting days for the entire year so nothing else can be scheduled during that time period. Prepare the accounts you wish to discuss prior to the meeting and any topic you would like to bring up. Let’s make 2016 the Year of the Group.
Over the last 5 years, I have written approximately 55 newsletters preaching the value of Industry Credit Groups and encouraging your participation. I do this because I believe that a credit group is the single most valuable resource a credit manager can have. In the spirit of giving, Groups give you valuable data that many times you can only get from the Industry Credit Groups (and more importantly, being engaged in them). As you prepare for the holidays, think about these tips on how you and your company can reap the benefits of this modified Christmas Carole, THE 12 DAYS OF CHRISTMAS
1st day … Mark all of your group’s meeting days for the year on your 2016 calendar so that time is locked in
2nd day…Make sure that you and all of your credit staff is registered on www.anscers.com. If they aren’t familiar with the site (and all of its resources), call CMA’s Lisa Wong for training
3rd day … Discuss benefits of A/R contributions with your boss if you’re not already contributing
4th day … Look at credit references received for potential new group members and offer to call
5th day… Make sure all RFIs have been responded to
6th day… Check aging for any unusual slowness and enter those accounts as alerts
7th day … Contact CMA to inquire about volunteering to assist any committees needing new people and new ideas
8th day… Lead discussion regarding what peripheral industries or companies might fit in group due to common customers and let us help get them to join the group
9th day… Participate in the meetings. Group membership usually pays for itself 10 times over due to advance knowledge of risky accounts. We encourage you to become engaged in your Group!
10th day… If you’re not currently in group, call CMA to see if one exists in your industry
11th day… If no group exists, gather a list of competitors and offer to assist in contacting
12th day… Take a break, you have earned it
Have the Happiest of Holiday Seasons and a Healthy New Year
“As a longtime CMA member, there are two services that I really value. The monthly credit exchange meetings from the Industry Credit Groups provide very valuable information. The accounts discussed may not be on your radar the day of the meeting but down the road a day, a week, or a month, you will have use for what was discussed at the meeting.
In addition to the information gained at the monthly credit exchange, I find the information on the ancsers group reports very valuable in day-to-day decisionmaking. You won’t find that information anywhere else.”
“I Am CMA” is a Membership Committee driven initiative to allow members to share the most valuable aspects of their membership with CMA members. The monthly series explores CMA’s different programs and services and how they have helped members. With a full range of business credit services from Industry Credit Groups to credit reporting to construction forms filing services to collections to business insolvency, we hope the series will inspire you to utilize CMA more to help provide information to reduce your company’s overall risk.
For more information on the blogs, or to be featured, contact CMA Communications Manager Alan Dicker at 323-573-0840 or email@example.com.
I have often wondered how industry groups are able to hold meetings in the winter in the Middle and Northeast parts of the country. Last month, I experienced this when one of my National groups met in Nashville. The temperature went from a high of 18* to a low of -3* with the wind-chill and ice making it much worse. Even under these conditions we had 7 out of 11 members attend. We would have had 9 at the meeting but extremely dangerous road conditions prevented the members from Kentucky and Alabama from driving there.
I bring this up because every month I received emails from members informing me that they will not be able to make a local meeting and conference call for reasons that most would consider trivial. The excuses given that amazes me most was for the conference call. What could be easier to attend, you do not even have to stand up. Yet, statistics show that less than 50% of the members are on the call. Can a group meeting be made any easier?
Let’s compare the time, cost and effort required between the National, Local and Conference Call
Time- 2 ½ days vs 2 hours vs 1 hour
Cost- $500-$750 vs luncheon fee vs $0
Temp- 18* vs Calif/Nevada temp vs your office temp.
Groups only work when everyone participates and contributes. Your company has made a commitment and as its representative, it is your responsibility to fulfill it.
And to those 7 brave souls who agreed with my recommendation to meet in Nashville in February, my sincerest apologies.
Credit managers manage risk. Therefore, I think credit managers need to actively seek out “bad news” from their collectors. Small problems can be used as opportunities for credit administrators and collectors to learn more about how to manage risk and collect past due balances more effectively and more efficiently. It’s clear that credit administrators are far more likely to report good news than bad, but that tendency is exacerbated when managers tend to either (a) shoot the messenger, or (b) ignore bad news or (c) cannot offer advice and guidance about how to address and resolve the problem.
One resource that CMA members have to help them seek out this “bad news” is the Industry Credit groups which are intended to help companies in the same vertical market get the most complete picture available about their customers.
Actively seek out bad news and use the information as an opportunity to learn, and to train others, and to improve processes and procedures.
Have you used CMA’s Industry Credit Groups? Did they help? As always, I welcome your feedback.
Michael Dennis is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals. He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events. He can be contacted at 949-584-9685.
Having recently watched Major League Baseball and its fans pay tribute to one of its greatest players, leaders, and ambassadors, the retiring Derek Jeter, it made me realize that we have industry credit group members that have displayed the same loyalty and longevity and should be recognized for their achievements. Here are just a few that come to mind:
Candy Royster of Oceanic has served as an officer of the Underwater Sports group multiple times and never misses the opportunity to share information with fellow group members, as she’s done so for over 2 decades.
It is difficult to determine if Linda McCarty is employed by Florexpo or CMA by the way she supports, encourages others, promotes the group and simply over many years has exhibited a positive attitude for all involved in the National Wholesale Floral group.
There are not many titles that Sandy McConnell of Charleston Auto Parts has not held in her years of involvement in the Las Vegas Materialmens group and CMA boards. She has played a major role in the growth and success of CMA in the Desert.
When constructing this newsletter, I asked our group secretaries for recommendations of individuals who satisfied the “Jeteresque” qualifications, hoping I could get a few names. What I received were over 30 nominees of members who have exhibited the same professionalism, loyalty and integrity as the Yankee shortstop. I wish I had the space to list them all and to express our appreciation for all that they do for the Credit Profession.
Now our challenge is to find suitable replacements for these individuals as they transition over the next few years into a well-deserved retirement. CMA is happy to be working with UCLA Extension in developing the next generation of Credit Professionals through the Credit Analysis and Management Course. This program may become the “Minor Leagues” for upcoming credit people and keep the profession and groups well stocked with quality people for years to come.
Industry credit groups and networks offer CMA members a unique opportunity to network with other credit professionals in their industry.
From July 2013 to June 2014, credit groups exchanged information on transactions in excess of $3.5B. More than 8,680 companies were discussed with advanced notice on $104.5M in total balances greater than 91 days past due.
Credit Management Association offers more than 60 industry credit groups and networks at the local and national level; including food and beverage, construction, health care equipment and more. Active participation in these groups is rated as a top benefit that the association offers.
CMA has been approached by its members to investigate the viability of forming several new credit networks. Here are the proposed new networks we are researching and developing:
Fuel Credit Network: Wholesale Fuel, Seiberts Oil, Boyett Petroleum and Robert V Jensen are looking to expand their credit network of fuel jobbers and distributors selling to stations, farmers and business accounts.
Animal Feed and Supply Store Network: With champions from Western Milling and Associated Feed behind the formation of this network, it should fill the void of information on retail feed and supply stores.
Supply Chain Management Network: Vendor analysis has become a greater priority with many companies. Two experts in the field are leading the push for this CMA network, we hope to start a Best Practices Bulletin Board in the next 60 days.
In all cases, contact me at firstname.lastname@example.org or 818-972-5323 if you’re interested in joining these groups (or have any ideas of other ones you think we should form.
There are many benefits associated with joining an industry credit group. In my opinion, one of the best reasons to do so is to make certain that your company’s tolerance for credit risk is similar to other companies selling to common customers.
I am all in favor of leading rather than following, and I fully support the idea that credit decisions need to be made independently and in a manner that does not violate antitrust rules. However, I assume and expect that I will benefit from knowing how other creditor companies have assessed the risk associated with extending credit to a common customer.
I think the opportunity to understand how other creditors evaluate/ assess credit risk is probably the most under-appreciated benefit of credit group membership.
Credit Management Association offers more than 40 industry credit reporting groups. In my career, I’ve been in several groups. As a result of what I have learned from others, I’ve saved my employer tens of thousands of dollars over the years. How have credit groups helped your company? I welcome your feedback.
Michael is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals. He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events. He can be contacted at 949-584-9685.
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 drought and the horrible winters throughout the country.
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 10 FREE NACM credit reports, bringing your total to 25/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.
Supervisor-Industry Credit Groups