August 5, 2010
Across the nation, most large credit decisions require the approval of a company's upper management, according to the results of NACM's July Monthly Survey. When asked "Do credit decisions of a certain dollar amount require upper management or CFO approval in your company?," 73% of respondents said "yes," while only 26% said "no." The remaining 1% weren't sure.
Many of those who noted that their company requires upper management approval on a large credit decision explained that this was typically considered a best practice, as it increases management awareness and buy-in on the transaction. "While I make the decisions on some larger orders I will get the management team either on board or against the deal based on my findings," said one respondent. "Currently, anything over $25,000 is reviewed," said another. "Even if this was not required, it is good to have upper management aware of any risk or high-dollar exposure accounts."
Respondents who answered "yes" were asked to indicate their company's dollar threshold in the comments, and these varied widely based on the size of the department. "There should always be a dollar threshold where the CFO should make the call or have direct input on large dollar decisions," said one participant. "The dollar threshold amount would be influenced by total or net sales and the size of the company." The lowest threshold for management approval was any transaction over $500, while on the opposite end, one respondent said any transaction "[greater than] $100 million" required approval of a company officer such as the president or CEO. "There is a step scale for progressively senior levels of credit management up to $100 million," they added.
Among "no" respondents, discussing a large risk with a member of upper management was standard practice, but approval wasn't required before a sale was made. "Only on a rare occasion does my CFO have to approve," said one participant. "I have the company policies on what all is required and, if there is anything out of those parameters, I may discuss with him, but he knows that I will have the company's best interest and requirements in mind when I approve something." Others noted that approval was in their hands and was based on the customer's potential to be profitable. "It's just based on what they, the prospective customer, have proven by worth and payment history and the projection of future dollar value exposure in shipping to each customer," said another participant.
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Jacob Barron, NACM staff writer
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Readers of NACM's Credit Real-Time Blog and Advocacy page will notice that NACM has been in discussions with Senators on both sides of the aisle regarding the potential for bankruptcy reform, and Sen. Sheldon Whitehouse (D-RI) recently took the first step by introducing the Small Business Jobs Preservation Act of 2010.
As its name implies, the bill reforms the Chapter 11 process, as it applies to small businesses and frames it as a job saving measure. Whitehouse has previously chaired a hearing, in the Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts, titled "Could Bankruptcy Reform Help Save Small Business Jobs," during which some high-profile witnesses suggested opening up the Chapter 12 process for use by small businesses. While the now-introduced legislation isn't an outright expansion of Chapter 12 to include smaller firms, rather than just small family farms and fishermen, many of the bill's tenets are inspired by Chapter 12.
Specifically, the bill includes the appointment of a third-party standing trustee, which is taken directly from Chapter 12, and other provisions such as one that increases the size of what constitutes a "small business enterprise debtor," and another that makes a creditor deemed to consent to a proposed plan should it not cast a timely ballot after receiving notice.
NACM met with staff in Whitehouse's office, just prior to the bill's introduction, and previously offered two letters iterating its support of certain principles to which the association believed any bankruptcy legislation should achieve. In one letter, NACM offered its support to the "deemed to consent" provision. "NACM believes that creditors should retain voting rights in all small business cases. However, NACM would also support changes to the Bankruptcy Code that would have a non-voting creditor deemed to consent to the proposed reorganization plan," said the letter. "Such a measure would balance the interests of creditors and debtors and make confirmation of a plan easier, thereby increasing the speed of the proceedings. It would also encourage and hopefully increase creditor participation in a case, which we believe is valuable in any bankruptcy filing."
NACM's Government Affairs Committee has read the bill and will continue to consider it closely. In the meantime, negotiations on the bill continue.
Jacob Barron, NACM staff writer
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July's Credit Managers' Index (CMI) continued to show that the economy as a whole is stuttering. The overall index remains above 50, but not by much, and these levels have not been seen since late last year when the index was down to 52.9 in December. As recently as April, the combined index was up to 56.5; it now sits at 53, and there are signs that this decline could continue into next month and possibly longer. "The fall is not as dramatic as when the recession started to wind up in 2008, but the trend is far from encouraging as there are weaknesses showing up in both the positive and negative categories," noted NACM Economic Advisor Chris Kuehl, Ph.D., who issues the CMI for the National Association of Credit Management (NACM) each month.
For the second consecutive month, sales declined, which is consistent with the data coming from the retail community and also with the reported declines in consumer confidence. The level of sales had exceeded 60 for five months and only barely slipped back to 59 in June, but has now dropped to 57.2. Much of this is tied to the slip in inventory buildup in the manufacturing sector, but the service sector is declining as well. The fact is that businesses and consumers alike have become cautious with their funds and that is manifesting itself in a retrenchment in sales.
Data in the CMI shows companies getting more aggressive in terms of collecting debt. The number of accounts placed for collection has increased, and it appears that there is less patience than in previous months.
"The only real bright spot in the index is that the negative factors have not appreciably worsened from last month," said Kuehl. In the combined index there was no change at all, but there was a worsening of the situation in the manufacturing sector while conditions got slightly better in the service economy. There has been some conjecture as to whether the issues in the Gulf of Mexico have had an impact on the overall index and thus far there is not much evidence of this. The damage to industry has been highly localized and has affected the tourism and fishing industries more than any others. If there is an impact in the future, it will likely revolve around what is happening in the oil sector itself as this is by far the biggest industry in that part of the country. It remains on hold pending the decisions made about the oil drilling moratorium.
The full report, complete with tables and graphs, along with CMI archives may be viewed here.
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A jobs bill that originally enjoyed broad bipartisan support was filibustered by Senate Republicans last week, delaying the bill till at least the end of the August recess.
All 41 GOP Senators voted against the bill, arguing that while they essentially support its myriad tax cuts for small businesses, they objected to the fact that they were limited in their ability to offer amendments to it. Senate Majority Leader Harry Reid (D-NV) had reportedly only offered the minority party the chance to offer three amendments to the bill, and Republicans balked. "That is the tradition in the United States Senate: majority rules, but you accommodate the rights of the minority," said Sen. Olympia Snowe (R-ME), ranking member on the committee on small business and entrepreneurship. "We're faced with a procedural impasse here because we're being denied the opportunity to offer some amendments."
Nonetheless, one of the bill's sponsors, Sen. Mary Landrieu (D-LA), sharply criticized Republicans for their opposition. "Eighty-one percent of the jobs lost in America are from small business," said Landrieu. "So when the other side complains and complains and just flaps and flaps and flaps all day long about 'it is a jobless recovery,' we have a bill on the floor to create jobs from small business and they say 'no'. That vote today was a 'no' vote to give help to small business. They can color it, paint it any way they want. That is what it was."
Senate Minority Leader Mitch McConnell (R-KY) referred to the lack of a "substantive amendment process" in his statement after the bill was blocked and went on to accuse Democrats of adding their own unrelated amendments in order to delay the bill as a whole and manufacture an election year controversy; by drawing the Republicans into a full-on filibuster, the blame for the bill's failure falls strictly on their shoulders, which, according to McConnell, makes a better story for constituents. "We've been on this bill since June 29, and Republicans have asked for a grand total of eight amendments. That's two votes per week, Mr. President. Not much to ask," said McConnell. "So it's obvious what's going onâ€”they wanted to make this an issue so they have something to talk about other than failed economic policies."
Additionally, in the wake of the bill's failure, an Associated Press (AP) story criticized the legislation for a number of perceived lapses in accountability and effectiveness. It also referred to the bill as another "bailout," a word that has become anathema to taxpayers and lawmakers alike. The White House fired back at the AP story with a line-by-line rebuttal of its claims.
The cornerstones of the bill include an array of tax cuts and the establishment of a $30 billion lending fund which would provide capital to small, viable community banks to increase lending to smaller firms. The fund would be performance-based, and would incentivize those lenders that extend new credit by decreasing the dividend rate banks pay as they increase lending. Perhaps what's most attractive about the bill is the fact that it's deficit neutral, and even reduces the tax gap, which represents the difference between taxes owed and taxes collected.
Jacob Barron, NACM staff writer
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Those predicting more struggles for the commercial real estate sector for the second quarter and the month of June unfortunately proved to be accurate once again.
Borrowing for commercial and multifamily properties for 2010's second quarter remained relatively stagnant (+1%) compared to the statistics recorded in the same quarter of 2009 in the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Originations. While that tally is 35% higher than the first-quarter, MBA notes volume remains very low "on an absolute level."
"Borrowing remains light as few commercial property owners are selling or refinancing their properties unless they have to," said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. "Low volumes of property sales, depressed property values, stressed cash flows and modest loan maturities are all keeping borrowing to a minimum."
There were, however, notable categorical improvements during the quarter for hotel, industrial-based and health care properties, MBA statistics illustrate. Still, the overall statistics demonstrate a recent decrease in optimism for business prospects in the coming months as the economic recovery more resembles a sputtering jalopy than a race car. Case in point, despite a more stable credit outlook, the latest Wells Fargo/Gallup Small Business survey for the latest period (3Q2010) fell to its lowest point in more than seven years of existence. The culprit, at least during the latest quarter, weighing on business owners appeared to be continued reluctance by consumers to spend.
Meanwhile, statistics from the Associated General Contractors of America (AGC) for June 2010 show construction employment declined in 285 of the top 337 U.S. markets over the last year.
"The overall lack of demand for new construction is hurting more than the stimulus is helping at this point," said AGC Chief Economist Ken Simonson. "While more metropolitan areas have started adding construction jobs, most are still experiencing losses nearly four years after the construction downturn began."
The biggest losers, so to speak, are in the greater Chicago market, where 21,300 (15%) of construction jobs have been lost. Chicagoland is followed closely by Pascagoula, MS (-20,000 jobs); Las Vegas (-16,500); Houston (-16,300); Los Angeles (-15,900) and Seattle (-12,400). Leading the short list of gainers was Calvert-Charles-Prince George's Counties, MD (+1,900 construction jobs or 5%). Hanford-Corcoran, CA and Kansas City, KS. Columbus, OH also showed small to moderate gains.
Brian Shappell, NACM staff writer
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Networking sites have put a spotlight on the value of a well-written profile. In the past, professional biographies were typically only needed by executives or conference speakers. But today, job seekers and professionals at all levels post them on LinkedIn and Facebook as a vehicle for self-promotion.
Other people send these biographical snapshots to hiring managers and potential clients to give them a quick, easy-to-digest overview of who they are and what they bring to the table. While the profile doesn't replace the traditional resume and cover letter, it certainly deserves a place in your career toolbox. Consider the following bio-building tips:
Remember that brevity is best. In an era dominated by quick communication in the form of tweets and text messages, the bio's appeal is easy to understand: It's accessible and user-friendly. Don't attempt to recount your entire work history or connect the dots of your career trajectory as you would in a resume or cover letter. Instead, think of your profile as the written version of your "elevator pitch"â€”the punchy sound-bite you'd deliver to a prospective employer if you had a mere 30 seconds of his or her time.
Focus, focus, focus. Zero in on the skills, attributes and accomplishments that are most compelling and relevant to your current goals. That might mean you only mention the last few positions you've held, or even just your current one. Showcase your biggest selling points, such as your considerable experience or proven ability to identify cost savings and manage critical projects.
Keep it fresh. Your bio isn't meant to be set in stone. In fact, a stale bio often looks worse than having no bio at all. When you get a promotion and/or title change, earn a credential such as the Certified Payroll Professional designation or receive professional honors, update your profile quickly. After all, marketable achievements won't do you any good if nobody knows about them.
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