June 30, 2009
In light of persistent confusion surrounding compliance with the Federal Trade Commission's (FTC's) "Red Flags" Regulations, NACM staff members have scheduled a meeting with officials from the FTC in July in order to discuss the lingering uncertainty many business-to-business (B2B) creditors feel about the regulations and whether or not they apply to their companies.
Over the past several months, NACM has worked diligently with the FTC to educate and inform B2B creditors on how best to comply with the "Red Flags" Rules through two teleconferences led by FTC officials, as well as the publication of several of articles in NACM's eNews and Business Credit. The many questions and concerns voiced by NACM and its members regarding the specifics of the regulations partially contributed to the FTC's decision to delay mandatory compliance with them from May 1, 2009 to August 1, 2009. However, despite continued efforts on the part of NACM and the FTC to clarify the regulations and ease the burden of compliance, many NACM members have noted that they're still uncertain about whether or not the regulations apply to them, and whether or not what they've done is enough to protect themselves from penalties. With the new deadline approaching, NACM saw the need to air the concerns of its members directly to the FTC and also to offer its assistance to the agency in crafting more concise guidance for B2B creditors.
Prior to meeting with the FTC, NACM is seeking comments from you, the member, regarding your experience with the regulations. If you have any specific comments or questions you'd like to share with FTC officials, be sure to send them via email to email@example.com by July 10, 2009. Your experiences and personal testimony will allow NACM staff to present the FTC with a clearer, more complete set of facts regarding how the regulatory burden will fall on B2B creditors while also laying the groundwork for any future guidance on the matter.
Stay tuned to NACM's eNews and the advocacy page on NACM's website for updates.
Jacob Barron, NACM staff writer
Credit's Role in Negotiating Fair Construction Contracts
"As part of the lien and bond seminars that I have been doing over the last 15 years, one of the questions I've always asked is how many people in the room are reviewing purchase orders and subcontracts," said Greg Powelson, director, NACM's Mechanic's Lien and Bond Services (MLBS). "I find it alarming how few credit managers are engaging in the negotiation of subcontracts or purchase orders upfront."
On July 6, Powelson will be presenting the teleconference "Construction Credit: Credit's Role in Negotiating Fair Contracts," which he described as being designed to best express how important it is for credit to take part in negotiations upfront and in all aspects of credit extension.
Construction credit, of all industries, is a maze of deadlines, delays and documents. Unfortunately, credit managers—those individuals that are going to deal with defaults and discrepancies—are generally left out of that initial contracting stage where these headaches can be anticipated and avoided.
Members interested in learning how credit can be more proactive in negotiating contracts can register for Powelson's upcoming teleconference by clicking here.
The Super Session at NACM's recently-held Credit Congress left attendees as inspired as they were informed as NACM Chairman Dave Beckel, CCE updated them on the association's activities and speaker Steven Little, author of two best-selling books on business growth, challenged them with the task of finding new routes to sustained company growth, even in troubling economic times. Can-Tastic, a professional group of drummers who use variously-sized garbage receptacles to create catchy rhythms, opened the session with a lively, invigorating performance, after which, Beckel got down to business, offering a brisk rundown of NACM's activities over the last year. "Financially, NACM had a lean, but successful, year," he said. "NACM continued to fund the initiatives started in 2007, including NACM's Mechanic's Lien and Bond Services (MLBS) and the Job Board with cash from operations." In addition to discussing these initiatives, Beckel updated attendees on the Credit Managers' Index (CMI), which has continued to receive national attention, the organization's renewed legislative advocacy efforts and the association's other programs and memberships.
Beckel, along with NACM President Robin Schauseil, CAE, also took the time to honor certain affiliates with this year's membership awards, which recognize outstanding achievement on the part of those affiliates whose marketing and service efforts gave them a net growth in membership in 2008. Marlene Groh, CCE was also honored for her commitment to education with the Best Student Award for the Graduate School of Credit and Financial Management (GSCFM) Class of 2008. "It's an honor," said Groh, after receiving her award. "I went to school with some wonderful people and to have them do this for me is a real honor." Groh also encouraged her fellow credit professionals to follow her path and highlighted how beneficial education really is in good times or in bad. "Education is the one thing that no one can take from you," she said. "It sets you apart and there are so few people that do it. It shows that you're not only interested in yourself but in your company too."
Little, whose presentation was sponsored by Experian, closed out the session with a lively and interactive presentation designed to challenge the attendees' most closely-held beliefs about how their business, and their world, is organized, and echoing his two best-selling books, The 7 Irrefutable Rules of Small Business Growth and The Milkshake Moment: Overcoming Stupid Systems, Pointless Policies, and Muddled Management to Realize Real Growth. "In a crisis, conventional wisdom often defies common sense, but there are all kinds of truisms that aren't true," he said. "There are all kinds of things that people say every day, that aren't true. Challenge them on it. Businesses are led every day by people who think that they're logical actors, but you are the logical actors in your organizations. You can serve your organizations best by bringing that to the table."
Stay tuned to NACM's eNews and NACM's website (www.nacm.org) for more Credit Congress coverage! Complete coverage will be featured in the upcoming issue of Business Credit magazine, which will be released in August.
Jacob Barron, NACM staff writer
Half a Glass of Milk, a Scoop of Ice Cream and a Full Dose of Corporate Soul
"You have to train your mind for happiness. You have to train your mind to be in the moment," said Dr. John Izzo, author of Awakening Corporate Soul. "Train yourself to have no regrets and to not indulge worry."
Speaking at this year's Credit Congress, Izzo married the lessons of spiritual traditions from the East and West to finding happiness within the workplace. The United States is trudging through some dark days as the economy forces businesses to cut costs and cut jobs, and Izzo's emotional accounts brought many members in tears.
"Credit terms—terms, payment terms—are a pricing function," explained author Steven Little. "In classic marketing, you understand that there are only four 'Ps': product, price, place and promotion. So, can we agree, when you set credit terms it's a marketing function. In fact, we can go so far as to say that you don't have a contentious relationship with the sales and marketing function; you are, to a large degree, part of the sales and marketing function;" Little's The Milkshake Moment: Overcoming Stupid Systems, Pointless Policies, and Muddled Management to Realize Real Growth seeks to cure structures of redundancies and in-fighting, like the storied relationship gap between credit and sales.
But don't feel left out if you were unable to make it to NACM's 113th Credit Congress in Orlando to hear the wisdom of Izzo and Little. Copies of their engaging books are still available in NACM's Bookstore, and orders can be placed by clicking here.
The boom that agri-business enjoyed over the past several years has screeched to a halt. American farms are bracing for impact as expenses soar to 79% of gross income and bankruptcies are rifling through the sector as the dreams of cashing in on eco-friendly trends like ethanol have vaporized. Credit quality and repayment capacity for the industry are on the decline while delinquencies head higher. The initiatives outlined in the last Congressional session will be immediately put to the test as rural America looks for ways to cope with one of the most severe economic crises in history.
Over two days last week, the House Agriculture Subcommittee on General Farm Commodities and Risk Management held hearings to review the implementation of the Food, Conservation and Energy Act of 2008 (FCEA), more commonly referred to as the Farm Bill. Last May, the Farm Bill was enacted, making investments in nutrition, conservation, renewable energy and a variety of farm programs, including significant payment limit and income eligibility reforms.
"For me, the Farm Bill is one of the most important pieces of legislation Congress works on because every man, woman and child has a vested interest in agriculture," said Congressman Leonard Boswell (D-IA), subcommittee chairman. "While there have been some bumps along the way to implement the programs, producers are eager to have the rules and regulations finalized so they can continue providing the world with an adequate and affordable food supply."
After the tumultuous weather experienced in 2008, one of the concerns voiced was about the Farm Bill's disaster assistance measures. Last year, crop destruction was seen throughout the country as late-season flooding and hurricanes pounded the Gulf Coast, levy breaks terrorized the Midwest, spring freezes hit the Northeast and drought wrought damage throughout the Carolinas, Georgia and Texas. Because of older technology, the United States Department of Agriculture (USDA) has stated that it will need approximately $300 million to upgrade its system in order implement and keep track of Farm Bill programs, like disaster assistance.
"One of the most common questions we get from farmers concerns the delivery of disaster program assistance," said Bob Stillman, president, American Farm Bureau Federation (AFBF)."For over a year, we have been unable to answer that question since the rules have not been published." Stillman urged the Agriculture Committee to work with the USDA and the Appropriations Committee to secure the needed funding to upgrade the aging system.
He added, "It is unclear how long the antiquated system can continue to support increasingly complex farm programs. Systems across agencies under USDA jurisdiction cannot communicate with each other, which could lead to improper payments and duplicate paperwork."
Other concerns focused on farmer and rancher safety nets. "The economic collapse of the dairy industry is spreading and impacting many in its wake," testified Roger Johnson, president, National Farmers Union (NFU). "With demand shrinking, market prices collapsing, input costs increasing and reduced credit availability, dairy farmers are facing a unique set of challenges on multiple fronts." Johnson reminded the Subcommittee that the NFU was the only organization to call for the elimination of direct payments to bolster other facets of the farm safety net. The predicament facing the dairy industry now, he feels, is an example of the inadequate price safety net included in the Farm Bill, and Congress and the USDA need to take immediate action to rectify the damage being done to the sector.
"The farm bill touches the lives of every producer in this country," stated Stillman. "It was a long, hard road to passage of the 2008 Farm Bill, and thanks to the hard work of this committee, the end product was a fiscally responsible compromise of which we can all be proud. However, the work does not end with the passage of legislation, but continues and often becomes more difficult as that legislation is implemented."
Matthew Carr, NACM staff writer
Look for the "A" Players
You need the "A" players. They're the most qualified—the most productive people—in your organization. And, for any open positions you have, you need them fast because any interruptions in staffing can mean missed deadlines, a breakdown in operations and loss of productivity—consequences you can't afford.
You'll find the "A" players at Careers in Commercial Credit, Collections & Finance (C4F), the online resource for the people who are educated and experienced in your related field, and who are looking for the opportunities you can provide.
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C4F: Employment Connections for the Business Credit Community
The worldwide economic meltdown has left few countries unscathed. The United States and Europe are wistfully trying to pinpoint the moment recovery will begin—when they can watch contraction recede into the background—while emerging markets stumble as capital inflows vaporize. For most of the globe, it is an unwanted lesson in resolve. Then there are countries like China and India—two of Asia's economic powerhouses—that are seeing more subdued growth, but growth nonetheless. They have found ways to insulate themselves from crisis and are adopting new policies to remain viable.
A decade ago, open account payment terms were unheard of in India and China. Since then, as the global economic picture has unfolded, open account sales are now offered by a considerable majority of companies in both countries: 65% of Chinese companies and 72% of Indian ones, according to Coface's "2008 Surveys of Corporate Credit Risk Management in China and India." In just the last year, the use of open accounts in China has risen 11% while in India, one in three companies reported increasing the number of open account sales during the last 12 months.
"This is the first edition of our survey for India and the sixth for China," said Yves Zlotowski, chief economist for Coface. "The remarkable resistance of these economies to the crisis in terms of growth does not mean there is no risk of payment defaults. In particular, the Chinese private sector is still under pressure."
The credit insurance giant found that in India, two-thirds of companies surveyed said that open account trade has emerged as a commercial tool because of market competition. On the other end of the spectrum, in China, one in four companies cited that the adoption has materialized out of necessity due to buyers' liquidity problems. That's a stark contrast to only the approximate 6% of Indian companies that pointed to that same reason for offering open accounts. The other difference being seen is that in China, standard payments have extended farther out than in India, averaging 60 days compared to 30. Coface feels that this raises some serious questions about whether payment conditions in China are under control. Companies in both countries are dealing with a spike in overdue payments, but a vast majority (75%) of Chinese companies are struggling with overdue payments of 30 days or longer.
Other interesting results from the survey found that 90% of Chinese companies interviewed had credit management procedures in place, whereas in India, only two-thirds of companies were using proper credit management procedures. A lack of reliable information on clients was cited as the most difficult credit risk management task in India by 35% of companies. In China, the number one reason for financial difficulties was fierce competition, while in India, lack of financing resources was listed as the number one culprit.
Matthew Carr, NACM staff writer
Why Join CFDD?• 30 chapters operating throughout the United States
• Fostering educational opportunities, networking, professional certification and scholarships
• Designed to aid the beginning credit professional as well as those at the mid- and executive-levels
• Membership available to all credit professionals who are members of NACM or CRF; direct membership available in areas with no CFDD chapter
The U.S.-based Financial Accounting Standards Board (FASB) and its international counterpart, the International Accounting Standards Board (IASB), recently issued two proposals which may have ramifications for how financial statements are organized and considered. In a statement, the FASB announced that it was seeking comment on an exposure draft (ED) of a newly proposed accounting standard titled "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses."
"The ED seeks feedback from constituents on a proposed Statement intended to improve the transparency of financial reporting by requiring enhanced disclosures about an entity's allowance for credit losses as well as the credit quality of an entity's financing receivables," said the statement. "Respondents are asked to comment on whether they believe the proposed Statement would achieve its goal of providing more information regarding the nature of credit risk inherent in the creditor's portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses and the changes, and reasons for the changes, in both the receivables and the allowance for credit losses." If approved, the proposal would go into effect with the first interim or annual reporting period ending after December 15, 2009. The comment period ends on August 24, 2009 and interested parties can submit their comments via email to firstname.lastname@example.org, file reference No. 1700-100.
Meanwhile, across the pond, the IASB issued a non-mandatory framework to help entities prepare and present a narrative report, more commonly referred to as management commentary, which allows a company's management to explain how their business' financial position, performance and cash flows relate to the company's objectives and also to describe its strategies for achieving those objectives. "Management commentary is one of the most useful sections of an annual report, yet many countries applying International Financial Reporting Standards (IFRS) do not have guidelines that cover how to prepare or present this important information," said IASB Chairman Sir David Tweedie. "In today's uncertain financial climate, it is particularly important for entities to explain their financial performance relative to their expectations and their strategies."
Comments will be accepted on the IASB's proposal until March 1, 2010, and can be submitted on the board's website (www.iasb.org) in the "Open for Comment" section.
Jacob Barron, NACM staff writer
Distressed Business Services
Many NACM Affiliates are involved in a national network to provide assistance in the rehabilitation (if possible) or liquidation (if necessary) of businesses in severe financial difficulty.
While courts can take several months or more to get a reorganization plan started, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Most helpful is the knowledge that experienced professionals are ready to step in at the most difficult time. NACM Affiliated Association staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.
Click here to learn more about NACM's Distressed Business Services.
For much of the past several months, the 26 million small businesses that exist in the United States have been hailed as the drivers of recovery. Efforts to make more capital available to the sector have been in full swing, including the easing of lending standards by the Small Business Administration (SBA) and the injection of billions upon billions of dollars into banks to loosen the grip of the credit squeeze. Small- to medium-sized enterprises are seen as heralds of a rebound because the vast majority of new jobs—with estimates of 95% or more—will be created by these companies and a large percentage of the population is employed by firms that have 100 employees or less.
President Barack Obama has called for the creation of 4.1 million new jobs to counteract the rising wave of layoffs seen in the manufacturing, construction and other hard hit sectors of the economy. The stimulus plans passed by Congress were supposed to do just that by trying to jumpstart flailing industries, but criticisms have been vocal and varied.
According to the American Small Business League (ASBL), of the $2.7 trillion that has been mainlined into the economy to stimulate recovery, only $21 billion—less than 1%—has gone directly to small businesses. The advocacy group claims that the remainder of the funds have gone to aid the nation's top 1% of firms—firms that haven't been responsible for creating new positions in decades.
The ASBL is suggesting that the stimulus plans that were touted as essential to increasing inflows to small firms will actually wind up being more destructive than beneficial. For example, the group points toward the billions of dollars that have gone to JPMorgan Chase, which has actually reduced the availability of capital to small businesses to remain on the path toward viability. Of more concern to the ASBL is a new bill in Congress that would change the definition of small business. This would dismantle assistance programs and allow wealthy venture capital firms to score billions in federal contracts.
Matthew Carr, NACM staff writer
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For more information or to enroll in this program, please click here and enter passcode 51JVYT or call 1-800-MEMBERS (1-800-636-2377, 8:00am-6:00pm EST, M-F).
A new international bridge to Mexico is set to open October 2009 in the South Texas city of Mission. The Anzalduas International Bridge, a $168-million joint project between the United States and Mexico, will be one of the newest and largest border crossings in the country, and will directly connect Mission with Reynosa, Tamaulipas—a Mexican city known for advanced manufacturing and import/export operations.
Since the passing of NAFTA, Mexico has stepped up as a major competitor to China for cost-effective manufacturing. One reason is because China is just now experiencing an increase in manufacturing wages—the same increase that hit Mexico years ago. Today, the cost difference between low-wage Mexico and lower-wage China is shrinking rapidly.
However, the most important advantage Mexico has over China is lower transportation costs. Our southern neighbor, Mexico has cut the long-distance, transoceanic supply chain that is currently driving U.S. oil prices into the triple digits. Mexico provides a shorter, faster and cheaper transportation route to move products and supplies by truck, rather than over thousands of miles by ship, rail and truck combined.
In South Texas, specifically the Mission metro area, eight international bridges connect the area with the industrial border communities of Reynosa, Matamoros and Monterrey, Mexico—some of the largest Mexican cities dealing with maquiladoras, importing/exporting goods and vehicle traffic.
This relationship has made Mission and the surrounding border area an important industrial manufacturing corridor. Sharyland Business Park in Mission is in a Foreign Trade Zone (FTZ)—a "free port" allowing materials and finished goods to be imported or re-exported without payment of customs duties. The new Anzalduas Bridge will help further trade operations between the two countries.
"In the past, when the market softens in the U.S., we have always seen an increase in companies looking at our area as a way to reduce their costs and be more competitive," said Pat Townsend, President of Mission Economic Development Authority.
This is evident in the number of companies that have visited the region. Companies like Black & Decker, Panasonic and ALPS Electric Co. are attracted to the area for its low cost of living, career opportunities and location. Every day, more companies are relocating here.
Area leaders have also been keen to other infrastructure planning on this side of the border, with a new six-lane expressway now connecting Mission with its sister cities. Another major artery of transportation will be the new Interstate Highway, I-69, which will connect trade routes from Mexico and Latin America to the United States and Canada.
Source: Mission Economic Development Authority
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