May 10, 2012
A common theme that emerged in nearly every session at this year's FCIB International Credit Executives (ICE) conference was the ever-expanding role of the credit department. From assessing risk beyond accounts receivable, to implementing bold new productivity enhancements, credit professionals are involved in numerous functions within their companies, and presenter after presenter at the conference proved it.
Held from May 2-4 this year at the luxurious Westin Michigan Avenue in Chicago, ICE offered attendees the chance to hear cutting edge, in-depth economic presentations from an elite set of presenters, along with worthy insights from professionals that shared their day-to-day responsibilities and concerns. Chief among the presentations that focused on the mutual exchange of practices between credit professionals was a productivity enhancement roundtable, moderated by FCIB honorary life member David Marsh, CICE, CBF.
The session offered four individual credit professionals a chance to discuss specific changes they made to increase productivity in both their departments and their companies. Susan Fattore, ICCE, corporate credit manager at Heico Companies, talked about consolidating her company's 20-plus accounts receivable operating systems. After six to eight months of preparation and three years of implementation, Fattore noted that the single system now in effect improved efficiency for her and the credit staff at Heico's numerous other entities. "There's no human error and it promotes better communication among the credit managers because they know which of them share the same customers," she noted. "It gives users access to information that they didn't have prior to the system."
Kelly Bates, FCIB vice chairman and director of global credit and collections at Chiquita Brands, Inc., talked about her efforts to shift her company's global credit function to a North American headquarters. Inconsistency among credit and collection practices drove Bates to push for a more centralized credit function. "At first it was rejected, but I think it was a process of elimination," she noted. "It evolved into the right decision." Now, Bates noted "our best practices were tweaked into global policies and procedures. The reporting structures are consistent and everything is managed out of our department."
Implementing a new, similarly consistent bolt-on system that focused on collections was the focus of Larry Durrant, CCE, ICCE of UPM Kymmene, Inc.'s presentation. "We had so many systems and so many practices that we needed to standardize," said Durrant, noting that choosing the right system for the company was an intensive process that involved the IT, credit risk management and purchasing departments. Nonetheless, the results have offered a great deal of user flexibility. "They can pull their statements any time they want, they can track their orders and they can get their invoices," he added. "They can view their account any time 24/7 and see what's paid and not paid."
Finally, Rick Hayes, ICCE, senior manager of worldwide credit and collections at Viskase Companies, Inc., recalled his experiences at a prior company eliminating redundancies in their order management process. "There was a trade credit operation and then there was a long-term customer financing operation, and the two were throwing a lot of data back and forth," said Hayes. "There was a lot of time spent looking at the same things." By bringing in new analysts, Hayes was able to reduce deductions, headcount and take the company, as he put it, to a point "where we're spending most of our time on fire prevention and much less time on fire fighting."
After that, attendees gathered for a networking dinner and reconvened the next morning for two especially relevant presentations, the first, a global economic forecast from NACM Economist Chris Kuehl, PhD, and the second, a "Doing Business in the BRICs" panel, this time moderated by Kuehl. Previous panelists Fattore and Hayes joined Luis Noriega, ICCE, vice president of JPMorgan Chase Bank, N.A., and Norman Zusevics, credit risk manager at Shure, Inc. in a lively, attendee-led discussion of selling concerns in these economically hot countries, as well as many others beyond the scope of the presentation's title.
Between the diversity of the program and the wealth of networking opportunities that punctuated each presentation, the 2012 ICE conference served as a model growth tool for credit professionals, offering answers to attendees rather than just rehashing their problems.
- Jacob Barron, CICP, NACM staff writer
For more information on FCIB's educational opportunities, visit www.fcibglobal.com. And don't forget to look for more coverage and photos from this year's ICE conference in the upcoming June 2012 issue of Business Credit.
Follow FCIB's NEW Twitter Feed
Want the most relevant and interesting stories regarding international business and credit? Looking for the most important information and announcements from FCIB without sifting through volumes of daily information? Then follow FCIB's new Twitter feed!
It's an international news "best of," providing the most critical information for busy FCIB and NACM members. The feed includes quick links to in-house analyses from NACM writers and expert contributors, key mainstream media stories and member announcements of vital importance.
Republican presidential candidate Mitt Romney has gone on the offensive to try to turn his negatively-perceived 2008 views on the auto bailout into a positive. It will take work on his part to disengage the resulting brake that slowed his campaign efforts during the GOP primaries in states like Ohio and Michigan earlier this year.
Romney, bashed for the self-penned 2008 New York Times headline "Let Detroit Go Bankrupt," was back on the Ohio campaign trail and proclaimed that he deserved "a lot of credit" for the rebound of the automotive industry. Romney tried to remind people that in his opinion piece he called for a "managed" and controlled U.S. automotive industry bailout, which was shepherded by incumbent President Barack Obama in 2009. The basic gist was that the president had acted on his publicly-offered advice. Romney sidestepped the fact that he opposed much of the government's financial involvement for U.S. auto companies despite assertions from most bankruptcy experts that private investment was not nearly strong enough during a steep downturn to have facilitated it without the bailout. They argue that liquidations would have been near-unavoidable.
Since last year, eNews stories have predicted the automotive industry bailout would be used as a campaign issue for as long as Romney was in the race. Romney eked out a win in his home state and later went on to win Ohio as well, though his primary opposition did well in both February and March. Both auto industry-dependent states are key "swing states" that will go a long way in determining the 2012 Presidential Election. Of the states almost assured to not lean red or blue, based on history and demographics, only Pennsylvania and Florida are likely to have a greater impact.
Romney faced a considerable image problem in both states during the primaries largely based on the ill-worded headline. Then, Romney bashed Obama for the proposed bailouts of Chrysler and General Motors, noting a burden on taxpayers as a key critique, despite what most analysts paint as a successful effort. Romney's point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies with no suggestions of liquidations which would have caused millions to lose their jobs. But, in the sound bite-driven, 24-hour news culture, the headline was spun by past and present opponents to make him appear anti-Detroit and anti-auto. The bankruptcy bailout almost certainly will remain a battle issue in both states through November. After all, it was the first issue Romney publicly used to engage Obama after announcing his official candidacy last year.
- Brian Shappell, CBA, NACM staff writer
Building Community at Credit Congress
Going to Credit Congress? The on-site Scholarship Foundation events create credit community in a fun and entertaining fashion. Join us for the Golf Outing on Sunday, June 10 to experience the Cowboys Country Club. Then, make the winning bid to take something home to your loved ones or coworkers at Monday night's Silent Auction during the Beer and Browse. See what's already on the auction list here.
Your registration and winning bid dollars go to support your fellow credit colleagues through scholarships for a number of educational venues. There's still time to register for Credit Congress and, if already registered, add these events.
To see who contributed to building the credit community this past year, look for the donor pages in the June issue of Business Credit, coming soon.
NACM's April monthly survey found that 61.2% of credit professionals use accounting ratios in their analysis of a customer's creditworthiness. A surprisingly sizable 37.2% don't, and the remaining 1.4% weren't sure. But regardless of how they answered, respondents noted that the use of accounting ratios was tied to the availability of financial statements from their customers.
"I use them when we get a customers' financials, we just seldom get financials," said one participant.
Repeatedly in the survey comments, respondents noted that accounting ratios could only be calculated with proper financial information, which was scarce almost across the board, and nonexistent in some industries. "In our industry, I don't believe that it's common to see financial statements and, thus, ratios are not commonly used," said one respondent. "We receive financials on less than 10% of our customers," said another. "When we do get them, we fully analyze including ratios and other factors to compute a risk of default."
Some participants noted that this was driven by their customer base, whether it was comprised of exceedingly large or exceedingly small companies. "My company does not analyze credit risk. It mainly caters to corporate giants," said one respondent, while another noted that their "customer base is small enough to have direct knowledge of each customer," rendering financial information and accounting ratios less important.
Credit professionals dealing with diverse customer bases had "yes-and-no" answers, noting that they use ratios when possible. "While most of our customers are 'mom and pops' without much financial information that doesn't come out of a shoebox, for the more sophisticated operations, ratios are a very helpful snapshot," said one participant.
All respondents that did make use of accounting ratios extolled their virtues and noted how valuable they were as a quick measure of creditworthiness. "Calculating just a few ratios on the financial statements can quickly provide guidance on the financial strength of the customer and their expected capacity to pay," said one participant. "While these ratios are not in and of themselves guarantees of prompt payment, it does provide a great deal of insight as to the strength of the organization and how well they manage their own cash flow," said another.
NACM's monthly survey for May is now live and asks about what factors are most important when choosing a collections or legal services provider. Click here to participate today.
- Jacob Barron, CICP, NACM staff writer
New Lien and Bond Course Available in Credit Learning Center
Construction-oriented credit professionals understand the value of knowing the basics of the lien and bond process.
In "Liens and Bonds: The Critical Nature of the Preliminary Notice," the newest module in NACM's Credit Learning Center, the preliminary notice is stripped down to its basic components. This module addresses the when, why and how the preliminary notice relates to retaining lien rights, while leveraging receivables down the ladder of supply. From state-to-state nuances through timeframes and required elements, this must-view module will get you started down the right path.
Click here for more information about this course and the Credit Learning Center.
Through this week's elections, the Greek populace and opposition politicians sent their anti-austerity message and thumbed their noses at those holding the purse strings behind the European Union and International Monetary Fund's bailout of the debt-addled nation. Other members of the EU, mostly northern, aren't taking it lightly—and the response could lead to even greater uncertainty.
Railing against the austerity demands allowed by incumbents, neither of the two major parties—New Democracy and Pasok in Greece—were able to come close to winning a minority. This situation will cause heightened uncertainty in the nation and beyond over the coming weeks. The politicians who made the gains railed against any ideas for alliances and have publicly used rhetoric about desiring more favorable bailout conditions.
Those footing the bill, notably the Germans, aren't amused and have answered with thinly veiled threats about delaying the planned bailout payment to Greece scheduled for May 10. Worst-case scenario has Greece falling out of the euro currency by some time this summer, NACM Economist Christ Kuehl, PhD noted.
But what is the big impact on the credit industry? Perhaps the answer, for the short-term, is to do nothing except keep an eye on things very closely in the coming days and weeks ahead. Remember the basics: know your customer.
Regine Hilgers, FCIB Board Member, and Ben Deboeck, country and sector risk coordinator for Ducroire Delcredere who is speaking at FCIB's International Credit & Risk Management Summit in Hamburg from May 13-15, noted that Greek unrest rarely comes as a surprise anymore. Deboeck, the conference's keynote speaker, pointed out that bond markets barely moved.
"Nothing too surprising happened yet," the Belgian-based Deboeck told NACM. "So, immediate consequences of the Greek elections, as well as French elections, are rather limited I'd say. More important than Greece/France is probably what is happening in Spain, with the government finally moving towards action to tackle the banking problem".
Going forward, however, Deboeck admits the impact of sustained volatility or an increase in volatility could affect consumer and business confidence and therefore eventually, credit.
- Brian Shappell, CBA, NACM staff writer
For more information on next week's International Credit & Risk Management Summit, including Deboeck's keynote speech, visit www.fcibglobal.com. Additionally, check out the NACM blog and future editions of eNews for on-site coverage from the event.
Make Better Credit Decisions with Industry Credit Groups
Credit groups are an effective management tool. They permit credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data about the most recent payment practices. The purpose of exchanging information is to help group members segregate fiction from fact, so competent and realistic credit decisions about a customer can be made.
Managed and operated by NACM Affiliates nationwide, NACM-Canada and FCIB internationally, credit groups:
- Provide unparalleled networking opportunities
- Assist in the exchange of credit information on common customers
- Facilitate the receipt and analysis of information to make unilateral credit decisions
- Provide a forum to discuss the latest developments on credit department procedures,
equipment and other credit management functions
- Support the discussion of account information and delinquent account reports
- Adhere to federal antitrust guidelines
Contact your local NACM Affiliate to learn more about NACM credit groups and to find the group for your industry.
Following a deal last week between House Majority Leader Eric Cantor (R-VA) and Minority Whip Steny Hoyer (D-MD), the U.S. Export-Import Bank's (Ex-Im's) authority to finance exports is set to be reauthorized.
According to the terms of the agreement, Ex-Im's charter would be renewed for another three years. Its lending cap would also be increased from $100 billion to $140 billion. To get votes from the House's more conservative members, the reauthorization bill also requires the bank to increase the transparency of its business and show that its loans and loan guarantees are necessary due to a lack of financing from the private sector. It also includes a somewhat perfunctory measure for all companies benefiting from the loans to certify that they do not do business with Iran.
Driving the reauthorization efforts were the National Association of Manufacturers (NAM) and the U.S. Chamber of Commerce. "Today Rep. Cantor and Rep. Hoyer displayed much-needed leadership to bring both parties together to save the Ex-Im Bank and protect nearly 290,000 jobs," said NAM President and CEO Jay Timmons after the agreement was reached. "The bill announced today to reauthorize the Bank and increase its lending cap brings us a step closer to protecting these jobs and will be a vital tool for small manufacturers exporting to new markets."
"We cannot grow jobs and the economy without exports, and Ex-Im has to play a role in that effort," he noted.
Reauthorization of the bank's charter has, in years past, been a routine exercise. This year, however, has been highly political, and some conservative groups, such as the Club for Growth and Heritage Action for America are set to include the vote on their congressional scorecards. A vote in favor of reauthorization would count as a strike against the voter's record.
Ex-Im is already close to hitting its lending cap, and its authority to operate is set to expire at the end of the month.
- Jacob Barron, CICP, NACM staff writer
Best-in-Class Service from NACM's Mechanic's Lien and Bond Services (MLBS)
MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.
MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.
For more information on NACM's MLBS, click here.
Findings of a new study could foreshadow a continuation of the heightened need for business-to-business credit and financing through sources other than traditional lending institutions, as both approval rates and demand for bank loans are down.
Large financial institution-generated small business loan approvals declined to 10.6% in April, said a new study by Biz2Credit.com. Its Small Business Lending Index found, in a 1,000-loan sample size, bank approvals of 10.9% in March and 11.6% in April 2011. Similarly, the rate at small banks shrank to 45.9%, down nearly two full percentage points from previous months. Credit unions reported a decrease, albeit a smaller one, as well.
Also noted in the survey is small business' newfound hesitancy to seek loans. The Biz2Credit survey found a 5.4% drop in demand in April, the first time in over a year that such a decline was apparent. A number of factors could be in play: from the March expiration of a Small Business Administration program which assisted in the area of guarantee fees to sputtering domestic job growth and economic uncertainty abroad.
"The disappointing April jobs report in which only 115,000 new jobs were created—when the expectation was much higher—is an indication that the economy is slowing down," said Rohit Arora, CEO of Biz2Credit. "High oil prices as well as the European crisis intensifying have combined to cause both borrowers and lenders to proceed with caution. The flow of capital may be slowing, which is a cause of concern."
- Brian Shappell, CBA, NACM staff writer
Do You Have It? Introducing the "NEW" Manual of Credit and Commercial Laws—2012 Edition
Now in four separate volumes to meet your specific needs. Buy whatever volumes you need, or get the complete set at a significant savings!
NACM has re-envisioned and revitalized the Manual of Credit and Commercial Laws. Not only will the new edition continue to provide essential information for credit and finance professionals, it will do so in a highly flexible and more affordable format. In its new form, the Manual of Credit now comprises four volumes that either may be purchased separately or as a comprehensive set. Chapters and appendices from the book have been reorganized under the following headings:
• Volume I: General Business Law, Related Statutes and Collections
• Volume II: Commercial and Consumer Credit Topics
• Volume III: Construction Issues
• Volume IV: Bankruptcy and Insolvency Issues
Many sections within the chapters have also been reworked, including those covering cellphone-based collection efforts, FTC rulemaking in terms of decedent estates and data security/breach initiatives at the federal government level.
Click here to visit NACM's online Bookstore for Manual features and updates, and more information about the wide array of resources available to today's credit professionals.
To view past eNews issues or to visit the NACM Archives, click here.