NACM's Asset Protection Group Alert Update

APG has been informed of recent activities suspected to be a case of business identity theft among the membership. This case has strong similarities to other cases that have been reported and investigated earlier this year. The information supplied on credit applications by the perpetrators seemingly matches the information of the legitimate business. However, a few key indicators were not related to the legitimate business, but indeed linked to the perpetrators.

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.

Subject supplied the following information on the credit application:

Glenn Smith TA Mouser Electronics
1810 Gillespie Way, Suite 101 (address listed on Mouser Electronics, Inc. corporate charter for CA)
El Cajon, CA 92020
888-543-2096 phone (phone number not in service; not affiliated w/Mouser Electronics)
800-881-6515 fax (not affiliated w/Mouser Electronics; telephone number for a non-associated company)

Shipping address:
9382 Main Ave.
East Sparta, OH 44626
330-866-9402
-----and-----
8623 West 131st Place
Cedar Lake, IN 46303
(Please be aware that the shipping address could be affiliated with unknowing persons to the scheme)

Signor of application: Glen Smith (legitimate person w/Mouser Electronics; however not affiliated with this order)
A Trade Reference sheet was also provided, listing four supplier and one bank reference. R. Smith was the signor of the Authorized Signature(s) line (who is a legitimate employee of Mouser Electronics; however is not affiliated with this order). Another document was provided with the credit application listing all pertinent personnel, resale certificate numbers and an address for the legitimate company.

Manual of Credit and Commercial Laws, 99th Edition

This edition continues to provide excellent coverage on information regarding the laws that impact everyday business credit decisions. The 99th edition introduces a new chapter on Credit Applications and includes updates on reclamation and other return of goods remedies, preferences, the SEC'S new guidance on section 404 of the Sarbanes-Oxley Act of 2002, bad check laws, prompt pay statutes and more. Click here to order this title from the NACM Bookstore or call 410-740-5560.

Liens & Bonds: Doing Your Homework Upfront
In the complicated world of construction credit, many credit professionals will utilize liens and bonds in order to secure their investments, but as Greg Powelson, director of NACM's Mechanic's Lien and Bond Service (MLBS), illustrated in his most recent NACM-sponsored teleconference, "Liens & Bonds: Doing Your Homework Upfront," an ounce of prevention goes a long way to making construction credit run smoothly. "Liens and bonds is a big topic," said Powelson. "Doing your homework up front may be the most important part of this process and at the end of the day, the homework you do up front is going to determine whether or not you get paid."

In his presentation, Powelson offered his advice to construction credit professionals about gathering all the necessary information up front, prior to the beginning of a project, and why this is such an important part of the business. "In understanding the construction environment, it's important to recognize how many people have hands in when you get paid and how much you get paid," he said. With contractors, subcontractors, lenders and suppliers all involved in what is usually an "I can't pay you till I get paid" environment, Powelson noted that solid project and customer information can be invaluable in precluding any problems from cropping up down the road.

"Construction credit requires extra due diligence," he said. "The ladder of supply must be fully investigated up front."

Powelson noted that there are two critical documents that require the credit professional's utmost attention prior to the start of a construction project, the first of which is the credit application. He noted that getting an up to date, and most importantly, complete, credit application is vital to the success of the transaction. "It's really important from time to time to make sure credit applications are reviewed. Credit applications can be a critical first step to prevent problems from happening downstream," said Powelson, adding that, aside from having a timely and reliable application, it's also important to make sure it gets fully filled out. "I've always argued that when accepting the application, there can't be any blanks," he said. "I think it's really important."

The second document is the job information sheet, which Powelson said is typically filled out by a salesperson, even if that might not always be the best method for acquiring reliable job information. "Typically, in the vast majority of environments, sales people are sent out to get the job information and sometimes sales guys miss some stuff," he said. "If they're filling these out, you need to check on the accuracy of that information." Instead, Powelson suggested that the subcontractor fill out the form, which typically provides a construction creditor with more reliable information.

Powelson also discussed lien and bond statutes and the importance of reviewing subcontracts and purchase orders up front. For more information on NACM's teleconference series, click here. For more information on Powelson and NACM's MLBS, click here.

Jacob Barron, NACM staff writer

MLBS Lien Navigator

The MLBS Lien Navigator is the credit professional's authoritative guide to notice, lien, payment bond and suit time requirements for all 50 states and Canada. In addition the Navigator includes the following sections and links:

• "Quick Lists": A quick reference to direct to lien states, immediate action states, lien right limits, full price and unpaid balance lien states, etc.
• Speed Bumps": Beyond the time frames, statute nuances designed to help you make a better credit decision.
• "Bond Bits": Updated and current state-by-state bond thresholds and minimums.
• "Waiver Wire": Contractual waiver considerations and pay if/when paid clause validly.
• "Glossary Section": Includes waiver, job information and joint check templates and the 100 construction credit terms you need to know.
• Statute links.
• Seamless links to NACM's construction orientated Business Credit archives.

For more information about MLBS or to demo the Lien Navigator, please contact Greg Powelson, director of MLBS. Greg can be reached at gregp@nacm.org or by calling 216-212-6020.

Steady as She Goes — Fed Halts Rate Cuts
It's the end of an era. Somewhat. In what began as an all out blitz against a sluggish economy, the Federal Reserve Board had slashed the primary and secondary federal funds rates by more than half between September 2007 and April 2008. But for the first time since the Central Bank began its most aggressive series of actions in nearly two decades, the Federal Open Market Committee (FOMC) agreed to hold the federal funds rate steady at 2%. And there are hints that rate hikes may be on the horizon.

According to the FOMC, recent information shows that overall economic activity is continuing to expand, in part, because of the firming in household spending. But the war is not yet won. The labor markets have softened, financial markets continue to suffer through considerable stress, credit conditions have tightened, along with the ongoing housing slide and the unprecedented prices in energy markets are expected to thump the economy for the next few quarters.

Taking all this into account, inflation has soared to the top of the list of concerns and the FOMC said uncertainty about the inflation outlook remains high. In the short-term, inflation is anticipated to be moderate for the remainder of this year and into next. The Fed hopes that the monetary policy easement that has taken place, combined with the substantial amount of liquidity the Fed has tried to pump into the banking system through the Term Auction Facility (TAF) and other instruments to alleviate illiquidity pressures will continue to promote growth.

"Although downside risks to growth remain," stated FOMC. "They appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased."

Only one Committee member voted against keeping the federal funds at 2%; Richard Fisher voted for an increase in the target rate.

Matthew Carr, NACM staff writer

C⁴F

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SOX 404 Requirements Delayed for Small Businesses
The Securities and Exchange Commission recently approved a one-year extension of the compliance date for smaller public companies to meet the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act (SOX), meaning that smaller companies will be required to start providing an attestation report in their annual reports in fiscal years ending on or after December 19, 2009. Additionally, the commission also announced that it had secured approval from the Office of Management and Budget (OMB) to begin collecting data for an analysis of the costs and benefits of the implementation of Section 404 and the consequences that compliance may have for smaller companies.

An extension in the compliance date has been championed by congressional small business leaders and regulators alike, with SEC Chairman Christopher Cox first discussing the one-year delay in late 2007 and formally proposing it before the House Small Business Committee in early 2008. The cost-benefit study was first announced in February and is being led by the SEC's office of economic analysis with assistance from the office of the chief accountant and the division of corporate finance. The study will include interviews and a web-based survey in an effort to collect real-world data from a number of smaller companies to determine what about Section 404's requirements drive compliance costs upward.

"Over the past few years, the commission and Public Company Accounting Oversight Board (PCAOB) have committed extensive resources to improving the efficiency and cost-effectiveness of the implementation of Section 404's requirements, particularly for smaller companies," said John White, director of the SEC's division of corporate finance. "I am optimistic that this study of real-world data will help further inform our efforts to improve the implementation of SOX 404."

Results of the survey are expected to be available before the new delayed compliance date.

Jacob Barron, NACM staff writer

Pitfalls to Avoid in Being a Subcontractor

Join Byron Saintsing, Esq. on July 9th at 3:00pm for his NACM-sponsored teleconference, "Pitfalls to Avoid in Being a Subcontractor on a Construction Site." Saintsing will use his legal experience to offer construction credit professionals the things they need to prevent costly problems that could arise on a construction site. For more information on NACM's teleconference series, or to register, click here.

Transportation Funding in Need of Overhaul
With the price of oil and gasoline soaring to record highs as rush hour periods extend ever longer, there has been a great deal of focus placed on the efficiency and health of the nation's transportation infrastructure. At the recent State Summit on Innovative Transportation Funding and Financing, the National Governors Association (NGA) and the Department of Transportation (DOT) declared that states must consider new types of funding and financial mechanisms to maintain the nation's roadways.

Currently, highway systems are funded by a bevy of taxes and fees that include fuel taxes, vehicle user fees, transit fees, impact fees, bonds, property and sales taxes, as well as general funds. Despite the seemingly vast array of sources, the annual investment in the highway and transit system falls short of the amount needed to maintain the status quo, let alone conduct any improvements.

One of the vast untapped revenue opportunities for states is a federal policy that allows states to impose tolls on federal-aid highways and bridges to meet some of their transportation financing needs. Another option mentioned at the summit was the future of debt financing for infrastructure projects. The NGA and DOT touted that recent innovations in project financing has provided states greater flexibility in funding new construction, including the ability to finance large capital projects that may exceed the available tax revenue. There was also a debate on public-private partnerships that offer states access to new capital and the ability to efficiently allocate responsibilities and risk to deliver projects in less time and at a reduced cost.

"States are leading a quiet revolution in transportation financing and the way we build, maintain and operate our infrastructure," said U.S. Transportation Secretary Mary Peters. "That is why the federal government must give states flexibility to take advantage of technology to cut congestion and embrace more equitable and effective funding systems to unleash the greatest new wave of highway and transit investment this country has ever seen."

Matthew Carr, NACM staff writer

Save on Transportation Costs

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A course facilitator is available for each class to provide assistance. Our instructors are accessible through e-mail to answer questions, provide guidance and help students prepare for the online exams.

Registration is open until July 18 for these college-level courses, beginning this fall:

• Accounting
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U.S. Logistic Costs Surge to Record High in 2007; Now Account for More Than 10% of U.S. GDP
An annual benchmark just released shows the impact of rising energy and carrying costs on the U.S. economy. The 19th Annual State of Logistics Report® released by the Council of Supply Chain Management Professionals (CSCMP) shows that logistics costs increased $91 billion in 2007.

Since 1988, the report has tracked and measured all costs associated with moving goods through the U.S. supply chain. In 2007, total U.S. logistics costs grew to nearly $1.4 trillion, representing 10.1% of U.S. Gross Domestic Product (GDP).

"Supply chain costs are not always visible to the consumer, yet are a major and growing segment of the economy," said Rick Blasgen, president and CEO of CSCMP. "That $1.4 trillion equals annual government spending on national defense, health and Social Security combined."

Put in human terms, the logistics cost of moving goods is equal to $4,656 for every man, woman, and child in the U.S.

Historically, logistics costs, as a percent of GDP, had dropped for decades. They bottomed out in 2003, representing 8.6% of GDP. Since then, rising transportation, inventory and interest costs pushed them up each year.

Other key findings
In 2007, intermodal freight, international containers, and truck freight volumes were down. Truckers in particular had a rough time. Over 2,000 trucking company bankruptcies were recorded last year in fleets operating five or more trucks. The trend appears to be accelerating as 935 trucking firms filed for bankruptcy in first quarter 2008.

Another significant trend: inventories are increasing after many years of tightening. "For the first time ever, wholesale inventories are larger than retail inventories," said Blasgen. "This is a result of retailers continuing to tighten their inventories coupled with manufacturing shifts in sourcing."

Source: Council of Supply Chain Management Professionals

Attention Credit Champs

What's the most successful solution your credit department has implemented this past year? Was it new software, a new machine/computer, process for staff or other? The experts in credit management are you, the people who practice it every day. You can share your knowledge with your profession while earning recognition and roadmap points! Submit an article, or short story, to Business Credit magazine. We'd like to hear from you.

October's Business Credit features articles on solutions and troubleshooting, particularly in regard to technology. To submit an article or short story, email an abstract with the anticipated word count by August 1 to bcm@nacm.org. The article/short story is then due in on August 15. Please include "BCM submission" in the subject line.

SEC Announces "21st Century Disclosure Initiative"
Securities and Exchange Commission (SEC) Chairman Christopher Cox recently announced the inauguration of the "21st Century Disclosure Initiative," an effort by the commission to examine fundamental questions about the SEC's methods for acquiring financial information from public companies, mutual funds and other regulated entities, in addition to the way it makes that information public.

The internal study will include a review of all existing SEC forms and reporting requirements in addition to the consideration of various alternative approaches to acquiring and publishing disclosed information. Through the study, the commission hopes to outline the attributes of an as yet undefined disclosure system for the future that more readily incorporates technology and takes into account the new ways in which investors access information and companies compile and report their required disclosures.

"With so much new technology available to improve the quality of information for investors as well as the way investors acquire it, we're initiating a broad introspective look at our business model," said Cox. "Sunlight remains the best disinfectant for problems in our capital markets. We'll be examining how to improve the way disclosure works, including tapping the full potential of today's technology and integrating it seamlessly into our regulatory approach. That could mean fewer confusing forms and more useful information at investors' fingertips in a form they can really use."

Results from the internal study are expected by the end of 2008 and will produce a blueprint for future commission action to modernize the collection of public company disclosures. The study is being conducted by a staff of experts led by Dr. William Lutz of Rutgers University.

Jacob Barron, NACM staff writer

Like a Sore Thumb

While it remains to be seen whether or not the U.S. market is even experiencing negative growth and it's unclear how long the economy will feel the fallout from the housing market correction, the global credit crunch and consistent inflationary pressure, it goes without saying that, when times are tough, companies look to cut their costs, frequently by reducing the payroll. Layoffs in the U.S. auto, airline and banking industries attest to this fact; desperate times call for desperate measures. At this point, the credit industry itself has more than avoided the chopping block. But the credit labor market is currently in the midst of a shift which may have an effect on professionals looking both to fill and find new positions. To succeed in this market, companies and credit professionals themselves will have to do their best to stand out from the rest. For more information on the changing credit labor market and how to stand out, be sure to read this article in the July/August issue of Business Credit. Click here to get your subscription started now.

All the Right Stuff
In professional sports there is always talk that the best teams have pieces that compliment one another. There are leaders, specialists, role players and "work horses"; they divide the load, carry their own weight and often achieve great things. The business world is no different. Staffing choices are key and, during turbulent economic times, the men and women an owner has working for them can mean the difference between staying afloat or seeing red.

"The answer for small business owners in hard economic times is to hire and retain the right staff," recommended Laura Harris, author of the soon-to-be-released small business owner self-help book Surrender to Win.

According to the National Federation of Independent Businesses' (NFIB) May 2008 survey, small business' earnings are at the lowest they've been in 16 years and 9 out of 10 owners foresee the economic situation declining further in the coming months. The outlook is grim and staff reductions have taken place from multinationals all the way down to mom-and-pops. But that hasn't dissuaded some owners from trying to make additions. In June, the NFIB Index showed that 43% of the firms surveyed hired or tried to hire, although 77% of those found few or no qualified applicants. And 15% of small businesses were reporting unfilled job openings.

"Eight percent of owners reported the availability of qualified labor was their top business problem," said NFIB Chief Economist William Dunkelberg. "That's much lower than last September (the Fed's first economic warning and rate cut) when openings stood at 25% of all firms and 17% reported the availability of qualified workers was their top business problem."

Harris has five hiring tips for entrepreneurs:

1. Take Time. Get to know your prospective team member rather than hiring on a gut reaction. Part of the interview process should include introducing the potential employee to key staff so you know how the team members will interact.
2. First Impressions Are Everything. Don't hire a prospective employee with an unprofessional voice or sloppy appearance.
3. No Experience Necessary. Hire an inexperienced person you can train to mesh with your style of leadership. Experienced personnel often come with old habits and pre-conceived notions. Training someone from scratch means you can mold them to perform the way you prefer.
4. Purloin Prospects. 'Steal' good employees from other industries. According to Harris, someone who goes above and beyond for their current company has a good enough work ethic to work hard for yours.
5. Variety is the Spice of Life. Hire someone with different strengths and weaknesses than your existing team rather than hiring someone just based on how much you like them. Adding staff should expand what your business has to offer.

Other suggestions from Harris included that it's the client, not the employee, that sometimes needs to be cut loose. "Know what type of client gives you the highest return and is the most hassle free," suggested Harris. "Gear your advertising and public relations toward taking on new clients like those."

Matthew Carr, NACM staff writer

Why Can't We Be Friends?

According to the English Institute of Chartered Accountants, more than 30% of Fortune 500 companies have implemented a shared service center and are reporting cost savings in their general accounting functions of up to 46%. In the July/August 2008 issue of Business Credit, credit executives from multinational enterprises share their experiences on the joys and heartaches of moving towards global shared services. Click here to get your subscription started now.

Trade Agencies Grilled on Border Safety and Swifter Commerce
In a recent hearing in the Senate Finance Committee, officials from several U.S. trade agencies found themselves in the hot seat about whether or not they've successfully enforced trade laws and agreements while securing the nation's borders and protecting U.S. business interests. Officials from Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Treasury Department, the International Trade Commission (ITC) and the Office of the U.S. Trade Representative (USTR) delivered testimony and were on the business end of questions from committee chairman Max Baucus (D-MT).

Specifically, CBP commissioner W. Ralph Basham was questioned about what his agency was doing to ensure that American businesses can effectively engage in international commerce to protect U.S. competitiveness while maintaining border security. "I'm not yet convinced that you struck that right balance between commerce and border security. I'm generally convinced that you don't pay enough attention to the commerce side of your duties," said Baucus. "What can you say about what you're doing to address American business concerns? What can you quantify? Do you have benchmarks? Do you have a timetable?"

Baucus has stated previously that he plans to introduce a Customs Reauthorization bill before the end of 2008 in order to ensure the CBP and the other aforementioned agencies prioritize trade facilitation and have adequate resources to do so.

"U.S. imports and exports drive America's competitiveness," he said. "As our first line of defense, CBP needs to do a better job to facilitate trade—and America's economic security—at the same time that it safeguards our national security."

Jacob Barron, NACM staff writer

NACM's Credit Manager's Index for June 2008 Reflects Torpid Times
"The seasonally adjusted Combined Credit Manager's Index fell 0.9% in June, setting or tying a number of unpleasant records in the process," said Daniel North, chief economist with credit insurer Euler Hermes, ACI, who evaluates and issues the report for the National Association of Credit Management (NACM). "All three indexes tied their records for the most components below the critical 50 value indicating economic contraction: six for the combined and manufacturing indexes, and seven for the service index," he noted. A record nine components fell in the manufacturing index. The combined and manufacturing indexes reached their second lowest levels ever at 50.1 and 49.8, respectively.

"What a difference a month makes. In contrast to last month's cheery tone, credit managers now seem downright depressed," North said and reported "UGH...rough month!" from one survey participant. "While the housing market used to be the single largest source of misery, fuel prices are starting to take over," he said. "As gasoline continues to set record inflation-adjusted levels, businesses from retailing to transportation to groceries are suffering. Given that May was the fifth straight month for job losses, real retail sales and wage growth are both negative year over year, foreclosures are at sky-high record levels and business bankruptcies continue to rise, it's no wonder that the majority of credit managers are seeing tough times."

The seasonally adjusted manufacturing sector index fell 2.7% to 49.8%, only the second time that the index has dipped below 50, indicating economic contraction. Nine of the 10 components fell. Six are below 50. Two components, dollar collections and dollar amount beyond terms, set record lows. A manufacturer of audio tapes noted that their customers were "Going out of business at a very rapid rate!" and a sheet metal company reported, "Customers are attempting to stretch out their terms." North said, "Once again rising prices affected the survey as one participant reported that higher sales figures were due only to higher prices, not higher volume, and another explained that his increased sales were due to customers rushing to purchase goods before a price increase took effect."

The seasonally adjusted service sector index fell 1.2% to 50.3% as six out of 10 components fell, leaving a total of seven components below 50. Norh said, "Once again survey participants noted difficulties caused by rising fuel prices, but customer payment patterns were the source of an unusual number of complaints: ‘very slow pay for big jobs,' ‘customers experiencing cash flow issues,' ‘a rise in collection problems,' ‘past-due accounts getting harder to collect,' ‘significant spike of cash flow problems,' ‘more customers extending out payment terms' and ‘the number of accounts being placed for collections is rising.'"

On a seasonally adjusted basis the year-over-year comparisons are grim. All 10 components in all three indexes fell. The combined index fell 6.3%, the manufacturing index fell 6.9%, and the services index fell 5.7%. The drop in the manufacturing and combined indexes set records.

The CMI, a monthly survey of the business economy from the standpoint of commercial credit and collections, was launched in January 2003 to provide financial analysts with another strong economic indicator.

The CMI survey asks credit managers to rate favorable and unfavorable factors in their monthly business cycle. Favorable factors include sales, new credit applications, dollar collections and amount of credit extended. Unfavorable factors include rejections of credit applications, accounts placed for collections, dollar amounts of receivables beyond terms and filings for bankruptcies. A complete index including results from the manufacturing and service sectors, along with the methodology, can be viewed at http://web.nacm.org/cmi/pdf/CMI_June2008.pdf.

This report and the CMI archives may be viewed at http://web.nacm.org/cmi/cmi.asp.

Source: National Association of Credit Management