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.

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.

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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UCLA Extension Launches Credit Analysis and Management Course, by Mike Mitchell, CAE

CMA President Mike Mitchell
CMA President Mike Mitchell

I have long wondered why institutions of higher learning have not offered courses in business credit. When I was pursuing my graduate degree in business administration, I don’t recall that credit ever came up as part of the course curriculum. I began working for CMA shortly after I completed my degree, and this is where I learned that business credit is really what makes the U.S. economy as unique, competitive, and robust as it is.

NACM does a great job of supporting professional development and recognizing credit professionals through its Professional Certification Program, but that only touches practicing credit professionals. What about the many more college graduates and job seekers who don’t know that credit jobs exist? How do we reach out to those people who are pre-career or looking to change direction and let them know about credit as a career? What about small business owners who don’t have the staff to delegate credit decisions?

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

CMA is committed to bringing qualified credit management professionals to member companies, and programs like this one at UCLA Extension is a great way to do that, specifically when CMA- and NACM-member companies are looking to fill internships or entry-level positions that require specific skill sets in credit management.

Many students have already successfully completed the coursework, and CMA continues to help UCLA Extension promote this great program. With training from UCLA and professional networking and services from CMA, our collaboration could seed the next generation of credit managers and expand the NACM brand.

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