eNews Weekly Update - National Association of Credit Management
January 20th, 2009

News Briefs

  1. APG Warns of Suspected Business Identity Theft
  2. Credit Words: Stories of Victory and Defeat
  3. The Dawn of Obamanomics
  4. Credit's Role in Customer Visits
  5. E-Verify Rules Coming Up for Federal Contractors
  6. Senators Ask, "What's Wrong with U.S.-India Trade?"
  7. Obama Planning on Keeping Estate Tax
  8. TARP Funds Help Drive Record Deficit

APG Warns of Suspected Business Identity Theft

As a service to members, this alert was issued by NACM's Asset Protection Group:

APG has been informed of recent activities suspected to be cases of business identity theft among the membership. The information supplied on credit applications by the perpetrators seemingly matched the information of the legitimate business.

Please take a moment to cross-reference your records with the information provided below. Please contact APG at your earliest convenience with any additional information regarding this correspondence. If you have any questions or concerns, do not hesitate to call us. We thank you in advance for your time and cooperation.

This communication is in no way meant to harm the integrity of the legitimate business entity, but instead to serve as a caution to members.

Subject supplied the following information on the credit application:

SED International, Inc.
Shipping address: (not associated with the legitimate business, SED International, Inc.)
123 Devin Drive
Morage, CA  94556
310-929-5287 phone
&
21850 Edgewater Drive
Port Charlotte, FL  33952
310-929-5287 phone

Subject supplied the following information on the credit application:

Conti Electronics Ltd.
32 West 2nd Ave. (legitimate address for the legitimate business, Conti Electronics Ltd.)
Vancouver, BC  V5Y 1B3 Canada
Contact Name: Tim Alguire (legitimate employee of Conti Electronics Ltd.)
877-726-9102 phone and fax number (not associated with the legitimate business, Conti Electronics Ltd.)

Shipping Address:
Raymond Shepherd
700 Lawrence Road, #107
Hamilton, ON  L8K 1Z5
877-726-9102
(The shipping information provided above is not associated with the legitimate business, Conti Electronics Ltd.)

Balance Work With Life

The nation is facing difficult times and the stresses of both personal and professional lives are mounting. There is always the constant battle between work and home and, as the pressures of the economy push down on executives, there exists the temptation to neglect the need for balance. On January 21, Eddy Sumar, MBA, CCE, CICE, CEW, founder, ER$ Consulting Services, will delve into this conflict during the NACM teleconference “Balance Work With Life.” Sumar will discuss the three “Rs”: Recreate, Re-energize and Refuel. He will also cover Key Life Roles, the OTIS Principle and the OTIS Factor, and will review tools for managing time, stress, organization, relaxation, as well as juggling multiple priorities.

To register for this teleconference click here.

Credit Words: Stories of Victory and Defeat

Overall Winner of $250
Linda Olsen, CBA
Assistant Credit Manager
Credit Department
Oklahoma City, OK

Runners Up and Winners of $50
Loretta April
Credit Manager
Seaboard International Forest Products LLC
Nashua, NH

Bob Steve
Credit & A/R Manager
Harter Secrest & Emery LLP
Rochester, NY

We congratulate Linda, Loretta and Bob on their success. To read the winning stories, watch for your copy of the February issue of Business Credit magazine. The stories will also be posted on the NACM website under Business Credit magazine.

What Goes Around, Comes Around…

…even in the world of business credit! Making a donation to NACM’s Scholarship Foundation doesn’t just provide credit professionals with educational growth opportunities regardless of their company’s size, industry or market position, it also creates a better-educated, more highly-regarded credit community as a whole, lifting up the profession itself as well as everyone invested in it.

Become a part of the credit profession’s future as a respected, educated entity in tomorrow’s business world by donating today. Whether it’s through a donation to NACM’s annual Silent Auction or the Annual Golf Outing, both held at Credit Congress each year, or through cash donations, a contribution to NACM’s Scholarship Foundation is a contribution to your profession, and, as always, donations are 100% tax deductible.

For more information, or to make your donation online, click here.

The Dawn of Obamanomics
President-elect Barack Obama faces a mighty challenge in dealing with a nation that has been driven into an economic slump over the last two years. Over the weekend, Warren Buffet, CEO, Berkshire Hathaway, Inc., went so far as to describe the U.S. situation as an “economic Pearl Harbor” in an interview on Dateline NBC. The global credit crisis has been severe, pushing nearly every country in the world into some form of recession. Central Banks have fought valiantly by slashing interest rates and launching a variety of other initiatives, but their arsenal is nearly depleted as the United States and Japan have hit lending rates approaching zero.

“What we’ve seen over the last year or so is dramatic change in the U.S. economy as well as the world economy,” said Chris Kuehl, managing director, Armada Corporate Intelligence during the FCIB teleconference “The Dawn of Obamanomics.” “Part of what we are trying to do now as a nation and as credit managers and people dealing with money, is simply reacting to those changes, anticipating what kind of changes will come up in the next few months and what the expectations will be.”

Globally, the dollar has regained some ground, though the reality is that the euro has begun a precipitous fall that has sparked concern from the European Central Bank (ECB). A great gap has emerged in terms of the cost of debt, which has sparked whispers about countries considering their future as part of the Euro zone. In the last six months, the euro has fallen from $1.5569 to the dollar to $1.327.

“When you look at the huge disparity at what you have to pay in Germany to sell your bonds and what you have to pay in Italy or Greece to sell your bonds, there comes a point when those countries may want to just try it on their own,” said Kuehl. “At the moment, it doesn’t help them that much; most don’t think they’ll do it. But that possibility wouldn’t have even been considered a year ago.”

The global economy has also been thumped as the price of oil has tumbled from triple digits to around $35 per barrel with the expectation that it will stay within the $30-50 range all of this year and maybe into 2010. This helps ease fears of inflation in Europe and the United States, but those concerns are now being replaced by fears about deflation. Japan dealt with deflation during the 1990s, but the U.S. and Europe really haven’t had to wrestle with it. The other problem is that the price of oil is beginning to weigh on oil producers.

“They’re not likely to increase supply; they’re cutting back on exploration; they’re not doing as much development as they once did,” explained Kuehl. “At one point or the other, when the recession begins to ease and demand starts to come back, they are unlikely to be able to ramp up production fast enough to accommodate demand. So, people are worrying six months, nine months, 18 months from now, when oil prices begin to shoot back up, are we going to be able to cope with it?”

Over the next year, all eyes will be on commodities as the price of oil, steel, copper, nickel, wheat, natural gas and corn, just to name a few, have fallen 30% or more in the last 12 months. Then there’s the fact that consumer confidence is plummeting to historic lows. On a positive note, lending has begun to pick up, but nowhere near the levels that were seen last year or even comparable to “normal times.”

“Most of these things we’ve dealt with for a long time, it’s just that they keep evolving,” said Kuehl. “And as we go through these different evolutions, our responses change and our expectations change.”

The sobering facts are that debt levels around the world are approaching the astronomical, with parties interested in buying national and corporate debt shrinking, while global trade is currently experiencing the most dramatic tailspin since World War II.

“Consumers are worried,” said Kuehl. “What has been motivating that fear is the future. It all comes down to the issues of jobs and debt.”

Matthew Carr, NACM staff writer

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Credit’s Role in Customer Visits
It seems that, in an age of heightened travel concern, everyone knows someone or has their own story of an airport security nightmare, whether from an overzealous TSA agent or an innocently misplaced bottle of mouthwash. In general, increasingly stringent security policies have removed a bit of the sheen that once characterized the world of air travel. “Traveling today is certainly no glamour gig. It’s a lot of work,” said Susan Delloiacono, CCE. However, she added, braving the crying babies, metal detectors and parking fees may be just the trick for credit professionals looking to enhance their relationship with a customer and, in the end, generate a solid, tangible benefit in the form of quicker customer payment.

Delloiacono, a long-time credit professional and expert on customer visits, recently delivered an NACM-sponsored teleconference, entitled “Customer Visits: Credit’s Role,” where she outlined the many benefits of visiting a potential or existing customer. “This is the best weapon in your credit arsenal when you think about knowing your customer, having them know you,” she said. “You become a human to them. And you become accessible. When there’s a problem, you get the first phone call.” In addition to bringing credit departments and their customers closer together, Delloiacono argued that customer visits can also bring other company departments in on credit’s mission as a sales generator and customer service organization. “Our purpose is to develop a win-win customer service strategy that really looks beyond just the credit department,” she said. “Early in my career I thought the world revolved around the credit department, and clearly, as we grow, we realize that although all roads go through credit, we need to understand other members of our company, other members of our team and their touch-points with the customer.”

“When you go to visit a customer, it not only brings you closer to them, it also brings you much closer to your sales organization,” she added. “You really adopt that team approach.”

As with any well-considered business venture, Delloiacono noted that proper planning for a customer visit is essential and offered tips about what to prepare for when visiting a buyer. She also outlined the different considerations that need to be made depending on the type of customer visit, whether it’s at your office, theirs or in a neutral territory like a trade show or whether it’s a pre-sales customer visit, a maintenance visit, or a problem solving visit.

For more information on NACM’s teleconference series, or to register, click here. Also, this month’s NACM Online Monthly Survey deals with the value of customer visits. To participate, visit www.nacm.org.

Jacob Barron, NACM staff writer

Business Credit Compensation Survey

NACM's groundbreaking Business Credit Compensation Survey provides invaluable data for the credit professional. This study is NACM's first comprehensive salary survey specific to the credit industry and includes compensation benchmarking information for individuals in comparable positions and with similar backgrounds, education and experience.

See how you stack up for your position nationwide.

Click here here to order the survey through the NACM Bookstore.

E-Verify Rules Coming Up for Federal Contractors
New regulations requiring most federal contractors to sign up for and use the Department of Homeland Security (DHS) and Social Security Administration’s (SSA) E-Verify system will go into effect next month, meaning any prime federal contractor in any contract worth $100,000 or more, not to mention subcontractors with contracts over $3,000, will have to enroll in the program within 30 days after the contract is initially awarded. As of February 20, 2009, the date the rules go into effect, any existing indefinite contracts will also be amended to include these provisions.

In their quest to keep track of illegal immigration and illegal social security contributions, DHS and SSA implemented E-Verify, an Internet-based authorization system where employers would run employee data against these federal agencies’ databases in order to determine whether or not that employee was eligible to work in the U.S. These new alterations to the Federal Acquisition Regulations (FAR) reach deeper into the process of government contracting, not only touching the company with the direct contract, but also their suppliers, distributors, vendors or any other firm that provides a prime contractor with goods or services. Penalties for non-compliance can be costly as well, especially for businesses who rely heavily on government funding. Any employer or contractor that fails to properly enroll and use E-Verify could be suspended or disbarred from the program itself, making the company ineligible for government contracts.

Enrollment in the E-Verify program requires an employer to send in a Memo of Understanding (MOU), register, pick an officer responsible for administration, train their employees and then maintain the use of E-Verify whenever future hires are made. Within 90 calendar days after enrollment in the program, contractors not only need to scan new hires but also all existing hires who are “assigned to the contract,” vaguely defined as any employee who directly performs substantial duties related to the contract but not those who perform supportive, indirect or overhead work.

The only real exception to the rule is that contracts that last for less than 120 days, or contracts that are for commercially available items sold off the shelf, are exempt. Contracts also only apply for work performed in the U.S., including Guam, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

For more information, click here.

Jacob Barron, NACM staff writer

It's a Cold World Out There

Well, it can be if you're not prepared for the professional challenges that inevitably spring up in today's unforgiving economic climate.

An NACM designation is a great way to show that you're prepared. It tells your employer and peers of your high level of motivation, attests to your competence and knowledge and demonstrates outstanding achievement.

Stay off thin ice by calling 800-955-8815 or visiting www.nacm.org today!

Senators Ask, "What’s Wrong With U.S.-India Trade?"
Currently, nearly one-third of all crops grown in the United States are sold to foreign markets. Agriculture exports are at record levels, setting a high mark of $81.9 billion in 2007, up more than $13 billion from the year before. Canada, Mexico and Japan remain the three largest markets for U.S. agribusiness with China moving its way into the top five, but many of the other word’s growing economic powerhouses are lagging as viable markets.

Senators Max Baucus (D-MT) and Chuck Grassley (R-IA) want to know why. The duo is calling for a study of the agricultural market in India, including the effects of tariff and non-tariff measures on U.S. agricultural exports. India, the “I” in BRIC, and one of the world’s largest economies, provides a great deal of opportunity for American farmers but only turns to the United States for a small portion of its agricultural needs.

“In my home state of Montana and around the country there are agricultural producers that can and should benefit from better access to India’s growing marketplace,” said Senate Finance Committee Chairman Baucus. “Although the United States is the top exporter of wheat, peas and lentils, only 5% of India’s agricultural imports come from the U.S.”

For many companies, the vast U.S. domestic market has always had a tendency to lead to complacency. As the nation’s economy stumbles, the global marketplace has had some bumps and dips but continues to trudge on and expand at a rapid pace. U.S. exports to China increased more than 18% in 2007, making it the fastest growing market for U.S. goods and the country’s second-biggest trade partner behind Canada. Total trade between U.S. and China is over $386 billion with U.S. exports representing $65 billion of that. Inside those figures is the fact that China is the U.S.’ top market for soybeans and cotton, with soybean exports increasing significantly between 2007 and 2008. In 2007, exports to India increased 75% from $10 billion to more than $17 billion. And India’s economy, like that of China, is expected to continue robust growth of more than 8% into 2009 and beyond, despite the anticipated global economic slowdown. India’s total trade has expanded seven-fold since 1990, but the country still only makes up about 1% of total world trade.

Over the last two decades, India has emerged as the world’s number one importer of edible oils and goods, such as chickpeas, lentils and dry peas. Between 1991 and 2007, agricultural trade with India has increased at an average of 9% per year, but in 2007, U.S. agricultural imports to India topped just $475 million, while total agricultural trade between the two countries was just $1.7 billion. U.S. agricultural exports to India have increased 12% annually since 2000 in many categories, though products such as cereals and grains have been on the decline, while U.S. exports of edible oils have nearly ceased completely because of global price competition.

Baucus and Ranking Member Grassley want Shara Aranoff, chairman, U.S. International Trade Commission (ITC), to provide a report on agriculture trade data with India from a five-year period starting in 2003 and ending in 2008 to be submitted to the Finance Committee within the next 10 months. The idea is that the report should give a comprehensive view of the Indian marketplace and the regulatory scheme so that Congressional leaders can begin to remove barriers and get more American-made goods to the people of India.

“India is one of the world’s largest economies, yet U.S. farm products constitute only a small share of India’s agricultural market,” said Grassely. “This investigation will help us to understand what factors, including Indian government policies, have led to U.S. products having a disproportionately low presence in the Indian market.”

The Senators also believe that the information from the report may help to provide further direction for U.S. engagement in Doha Round trade negotiations.

On another Congressional front, House Ways and Means Committee Chairman Charles Rangel (D-NY) has introduced H.R. 496, the Trade Enforcement Act of 2009, which looks to actively open markets by targeting foreign barriers to U.S. goods and services. Rangel wants to address unfair and illegal trade practices that he claims became prevalent during lax enforcement over the last eight years.

“Our trading partners need to live up to their end of the agreements and open their markets to U.S. exporters,” said Rangel. “This bill would help eliminate trade-distorting subsidies, and the dumping of products into our market.”

Matthew Carr, NACM staff writer

Not Holding Their Breath

In October, when many credit professionals sat down at their computers to fill out NACM’s monthly survey question, “ Looking forward to 2009, as a credit professional, what are your biggest concerns?” it was the facts of the global economic crisis as much as it was the unanswered questions that weighed heavily on their minds, with an overwhelming majority (88.1%) of respondents listing “the state and future of the economy” as one of their three foremost concerns. The October survey’s second most popular answer was “slower payment due to tightened credit” with 75.4% of respondents choosing that option as one of their foremost concerns for this year. Many others were distressed about a number of other issues, but despite the diversity of credit professional concerns, when all of the responses and follow-ups were distilled down to their very essence, one almost universal refrain seemed to rise to the surface: 2009 is going to be rough.

To learn more about what credit professionals expect out of the new year, be sure to read this article in the January 2009 issue of Business Credit magazine. Click here to get your subscription started now.

Obama Planning on Keeping Estate Tax
Following his inauguration today, President Barack Obama and several prominent democratic legislators will act quickly to block the expiration of the estate tax, which is scheduled to occur in 2010. Given the nation’s lamentable economic situation and government deficits already set to reach record highs, Democrats are reluctant to give up the estate tax’s potentially large budget contribution, despite a wealth of criticism from small businesses, farmers and affluent families.

According to Obama’s plan that was detailed during the campaign, the estate tax, which is levied on big money inheritances, would be locked in at the current rate, exempting estates of $3.5 million and $7 million for couples from taxation and taxing estates valued above that at 45%. The current rates generate far less revenue than Clinton-era levels, which excluded only $1 million estates from taxation and taxed the rest at 55%. Some have argued that, given record deficits, a return to these levels may be necessary, although they face stringent opposition from many critics who charge that the estate tax no longer affects the super rich, who have the means to circumvent the tax through loopholes, and instead affects smaller businesses who leave their estates to their children and have no means to get around the tax.

The original expiration date was set and approved by Congress under the Bush Administration in 2001. Rollbacks were also implemented with the expiration date, reducing the tax’s effect gradually until it officially ceased to exist next year. It is expected that the Senate Finance Committee, chaired by rural democrat Max Baucus (D-MT), will move within weeks of inauguration to reverse the law that will nix the estate tax and replace it with a new proposal from President Obama, which is expected to come with his budget in February.

Jacob Barron, NACM staff writer

NACM Member News

Have you recently been honored with an industry award, gotten recognized for your communityservice or promoted within the credit department?

Forward your news to bcm@nacm.org by February 16 so we can share it in April’s Business Credit magazine, which focuses on B2B relationships.

TARP Funds Help Drive Record Deficit
The United States government is already in the hole a record $485 billion in just the first three months of fiscal year 2009. According to the Congressional Budget Office, projections for the total year’s deficit will soar past $1.2 trillion, which doesn’t even include President-elect Barack Obama’s planned $800 billion stimulus package. Much of the government’s balance sheet grief can be pinned to the Troubled Asset Relief Program (TARP), which just had the remaining $350 billion in funds released by the Senate last week, albeit with a web of strings attached.

The seeds of the current economic crisis were planted nearly a decade ago during a seemingly benign era of low interest rates and low inflation. New financial products blazed onto the scene, and investors’ confidence grew in using these innovations, while financial institutions and banks began increased leveraging in what was perceived as a low-risk market. Unfortunately, when the $11 trillion U.S. residential mortgage market began to slide, large losses began taking their toll and the tumbledown is one the nation is still witnessing. In a devastating six-month period, eight major U.S. financial institutions collapsed, with six of those occurring in September 2008 alone.

“As a result, credit markets froze,” said Treasury Department’s Interim Assistant Secretary for Financial Stability Neel Kashkari. “The commercial paper market shut down, three-month Treasuries dipped below zero, and a money market mutual fund ‘broke the buck’ for only the second time in history, precipitating a $200 billion net overflow of funds from the market.”

This is where the Emergency Economic Stability Act of 2008 (EESA) and its TARP provisions swooped in. The Treasury Department deviated from its original course because of the debt market complexities and used $250 billion of the original $350 billion in TARP funds to develop the Capital Purchase Program to invest directly into banks. So far, the agency has poured $189 billion of that into 257 institutions.

“People have begun recently to ask what the banks are doing with the money we’ve invested in them,” said Kashkari. “We designed important features into our investment contracts to limit what banks can do with the money: one, we restricted dividend increases and share repurchases, and two, placed restrictions on executive compensation.”

He added, “Banks are in the business of lending and they will provide credit to sound borrowers whenever possible. They may also use the capital to absorb losses as part of loan write-downs and restructuring. If a bank doesn’t put the new capital to work earning a profit or reducing a loss, its returns for its shareholders will suffer.”

There has been a lot of dissent about the Treasury Department not stepping in to stop banks from possibly using TARP funds for mergers and acquisitions. To this, Kashkari said, “We must remember that when a failing bank is acquired by a healthy bank, the community of the failing bank is better off than if the bank had been allowed to fail.”

As more skepticism surrounds TARP and its future, legislators continue to stress for more oversight. House Financial Services Committee Chairman Barney Frank (D-MA) has introduced H.R. 384, the TARP Reform and Accountability Act, to amend TARP provisions of the EESA. Frank wants to close loopholes while increasing accountability and transparency of fund uses, and requiring the Treasury to move forward with significant steps to prevent foreclosures, part of the original scope of the bill. The just released funds are supposed to target more of the toxic assets originally outlined, but the pitfalls associated with that idea still have yet to be eliminated. Treasury Secretary Henry Paulson had scrapped the concept in lieu of direct investment in banks because of the difficulties in analyzing which assets the government should purchase while protecting the taxpayers’ investment.

Government officials continue to stress that, in the long run, TARP will cost taxpayers far less than the total amount allocated. Since the funds are being used to acquire financial assets, such as preferred shares in banks, there should be some return.

“Even so, the public is understandably concerned about the costs of this program, particularly as most other industries experiencing distress are not receiving comparable assistance,” said Federal Reserve Board Vice Chairman Donald Kohn before the House Financial Services Committee. “History clearly shows, and recent experience confirms, that—because of the dependence of modern economies on the flow of credit—serious financial instability imposes disproportionately larger costs on the broader economy.”

Kohn said that there is no special regard given to the financial industry over others besides the fact that further deterioration of financial conditions would affect all industries, in all regions of the country.

Matthew Carr, NACM staff writer

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