September 29, 2009
For decades, Pennsylvania was recognized as an adversary to construction creditors. Lien laws in the state lagged in the dark ages compared to the rest of the country and a "no lien" culture was prevalent, proving to be a scourge for materials suppliers and subcontractors. An owner could have a "no lien" contract with a prime contractor, and downstream suppliers and subs wouldn't even know about it. Thankfully, in 2007, the state legislature enacted changes that aligned Pennsylvania's lien statutes with those of the other 49 states.
"Historically, Pennsylvania had the most restrictive lien statute in the country," explained Greg Powelson, director, NACM's Mechanic's Lien and Bond Service (MLBS). "First, it was one of the only statutes in the country that limited lien rights to second tier suppliers. Second, Pennsylvania was infamous for this concept of a 'no lien' contract where materials suppliers and subcontractors were getting bullied into signing these contracts and giving up lien rights."
He stated simply, "Pennsylvania had one of the worst statutes in the country. It was a horrible, horrible statute that was completely rewritten in 2007."
But that modernization may have been short-lived.
On October 10, 2009, new amendments to Pennsylvania's lien statute will go into effect and many commercial construction creditors are worried about the direction the state is heading. Senate Bill 563 was signed into law by Governor Edward Rendell bringing with it significant changes for the state's mechanic's lien laws for residential projects and welcoming back the unfriendly creditor lien environment that existed prior to 2007. Under the new amendments, once again, Pennsylvania will allow up-front waivers of lien rights from contractors and subcontractors on residential properties. This can be written in as a condition of a contract, recanting the legislative changes introduced just two years ago that had deemed such advance waiversÂ unenforceable and against public policy, though they were still allowed in certain, limited exceptions for residential projects.
The statute defines residential property as:
"property on which there is or will be constructed a residential building not more than three stories in height, not including any basement level regardless of whether any portion of that basement is at grade level, or which is zoned or otherwise approved for residential development on which there is or will be constructed a residential building not more than three stories in height, not including any basement level, regardless of whether any portion of the basement is at grade level, planned residential development or agricultural use, or for which a residential subdivision or land development plan has or planned residential development plan has received preliminary, tentative or final approval on which there is or will be constructed a residential building not more than three stories in height, not including any basement level, regardless of whether any portion of that basement is at grade level, pursuant to the act of July 31, 1969 (P.L. 805, No. 247), known as the 'Pennsylvania Municipalities Planning Code.'"
"Under the new statute, the $1,000,000 limitation on the residential exception has also been removed.
"The bright spot is that they're going backwards, but they're only going backwards with residential," offered Powelson. "But from a trade creditor's perspective, it's going to make it much more difficult to negotiate fair contracts and that's the problem.
By eliminating lien rights, these changes have the potential to place contractors, subcontractors, sub-subcontractors and material suppliers at greater risk of nonpayment for services rendered on residential property projects.
"It's because of where Pennsylvania was that makes this even scarier," said Powelson. "What happens is with these 'no lien' contracts, the general contractors are going to bully the subs and the materials suppliers to accept 'no lien' contracts to get work. They're going to force them to accept a much higher level of risk, which should never be built into any of these statutes in my opinion."
The larger fear at the moment is whether this is just the first step in a backwards slide for Pennsylvania lien statutes in general; will the commercial environment be next?
Powelson urges any creditors working in the residential sector in Pennsylvania to be more cognizant when reviewing purchase orders and subcontracts. "Because we now know that within those purchase orders and subcontracts, under this new statute, there may now be provisions for 'no lien.' The biggest issue is that if they don't review those documents, they could potentially be buying that term and condition and not realizing it," said Powelson. "So, reviewing subcontracts and purchase orders is job number one. Job number two is if there is a 'no lien' provision within that document to make sure that it's crossed out and returned or negotiated away before accepting the contract. Or if they do recognize that that 'no lien' provision is in there and they're willing to take on that risk, they need to recognize that their recourse for collection is going to be limited to the entity that they have a contract with."
Matthew Carr, NACM staff writer
It's Credit Words Time!
It's time to submit your credit stories for this year's Credit Words Contest. Earn cash and Roadmap points if you're a winner and Roadmap points if we publish your story. It's been a really tough year; we know you have stories to share about how you've made it through the worst business environment you may have ever seen. This is just one topic of many so be creative.
Submission deadline is November 2. Read contest rules and get more information about the contest in the September/October issue of Business Credit, or by clicking here.
Each chamber of Congress tipped its hat to the small business sector recently, with the Senate hosting a roundtable focused on how to increase smaller firms' access to government contracting and the House voting to extend beneficial Small Business Administration (SBA) programs that were set to expire. Both actions were cheered by officials in the Senate Committee on Small Business & Entrepreneurship and its House-equivalent, the Committee on Small Business, as part of a continuing effort to prop up the nation's smaller employers, for whom increased access to capital and contracts are vital to recovery.
"Small businesses have trouble gaining access to contracts because of a maze of complicated laws and regulations that make it difficult for them to succeed," said Senator Mary Landrieu (D-LA), chair of the Senate Committee on Small Business & Entrepreneurship, "We can do better. President Obama has pledged to help expand small business contracting by increasing public knowledge of federal contracting opportunities, and I will continue to do the same. We all know that there is still much work to be done."
Earlier in the year, the SBA announced that, in 2008, small businesses received a landmark $93.3 billion in federal contracts, dwarfing the 2007 figure by almost $10 billion. However, Landrieu and committee ranking member Olympia Snowe (R-ME) reacted coolly to the news: despite the major increase, the amount of contracting dollars still made up only 21.5% of total federal contracting dollars, which fell below the government's statutory goal of 23% of all contracting dollars for smaller firms.
"Federal contracts provide vital economic benefits for small businessâ€”yet, regrettably, the federal government consistently fails to meet its goals for small businesses in general and service-disabled veteran-owned, women-owned and Historically Underutilized Business Zone (HUBZone) firms in particular," said Snowe. "This is simply unacceptable, and the testimony from today's witnesses offered specific and realistic solutions for increasing small business participation in federal contracting and for the government to not only achieve the statutory small business goals but to exceed them."
In the House, the recently-passed H.R. 3614 not only aims to renew specific SBA initiatives but also to strengthen both the America's Recovery Capital (ARC) loan program and the New Market Venture Capital Program, which are two programs aimed at increasing small business access to financing and focusing specifically on those firms located in distressed areas. The ARC program was modified to allow ARC funds to be used to pay down existing government-guaranteed loans like those offered under the SBA's 7(a) program. This provision was endorsed by the American Bankers Association (ABA) and the Independent Community Bankers of America and is expected to open up $360 million in capital for small businesses.
For the New Market Venture Capital program, the legislation would streamline the program's rules so that firms can raise more money. "This extension will not only keep vital programs at the SBA running, but will also improve access to capital for small firms," said Chairwoman Nydia VelĂˇzquez (D-NY). "Small businesses will be central to our economic recovery, and this measure will ensure they can continue to access the tools they need."
The House legislation passed by 417-2 and now heads to the Senate for approval.
Jacob Barron, NACM staff writer
CFDD National Conference: Learn Effective Networking from the Best
According to networking expert Hazel Walker, it's important to recognize that the word "networking" includes the four-letter word "work." Join CFDD in October to hear Walker speak.
In her presentation, she'll outline six important steps to successful networking. Some of the work includes:
1. Know why you are networking
2. Know the rules of the game
3. Know who you need to network with and why
4. Know your message
5. Know how to build your message
Don't miss Hazel Walker at the CFDD National Conference in Denver on October 8-10, 2009.
The November 1, 2009 deadline for commercial creditors to have a written and senior management-approved policy to detect, mitigate and respond to potential fraud committed by identity theft under the Federal Trade Commission's (FTC) "Red Flags" Rule is fast approaching.
The "Red Flags" regulation is built on the concept that consumers and businesses have to form a partnership to combat identity theft. If businesses ignore an event that signals possible identity theft, then consumers are helpless in trying to prevent their identity from being stolen and used to purchase goods fraudulently. The same applies for business-to-business transactions. There has to be a tiered approach to prevention. The multi-agency "Red Flags" Rule has sought to address this by outlining that companies must establish policies to detect, mitigate and respond to possible instances of identity theft.
The Rule is not about data security; they are not about building a fortress to protect your own customers' private information from hackersâ€”there are already laws in place that address that issue. The "Red Flag" Rule is about preventing identity thieves from using someone else's or another company's identity to fraudulently purchase products from another business. The Rule creates a policy barrier to prevent identity thieves from profiting from their crimes.
Under the FTC's "Red Flags" Rule, entities must first determine if they are either considered a "financial institution" or a "creditor." The regulation uses the definition of "creditor" as "businesses or organizations that regularly provide goods or services first and allow customers to pay later. Examples of groups that may fall within this definition are utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies. This also applies to businesses that regularly grant loans, arrange for loans or the extension of credit, or make credit decisions. Examples include finance companies, mortgage brokers, and automobile dealers or retailers that offer financing or collect or process credit applications for third party lenders." In addition, the definition includes anyone who regularly participates in the decision to extend, renew or continue credit, including setting the terms of credit. Basically, this means that business-to-business creditors are considered "creditors" under the Rule.
Second, a creditor or financial institution must provide "covered accounts" to be subject to the regulation. "Covered accounts" are broken into two categories: consumer accounts designed to permit multiple payments or transactions, and any other account that presents "reasonably foreseeable risk of identity theft." This second type is a catch-all, leaving businesses to make their own determination of the risks their accounts face. It does not mean "any risk from identity theft," because, technically, all accounts are going to face some sort of risk from identity theft. It means any type of account where there exists definitive potential for the person placing an order or asking for the extension of credit not to be the person they say they are or not to have the authority to place the order from the company they allegedly represent.
Companies must meet both criteria to be subject to the "Red Flags" Rule. If a business determines that it does not meet both criteria, it still must conduct periodic risk assessments to prove this.
NACM members can review the March and May issues of Business Credit for more in-depth materials about their responsibilities under the "Red Flags" Rule and for a sample policy. They can also check the FTC's website for Fighting Fraud with the Red Flags Rule: A How-To Guide for Business, which also provides links to a wealth of FTC information on the topic.
Matthew Carr, NACM staff writer
NACM understands that business credit reports are the keystones that help credit professionals make sound credit decisions. NACM Affiliates can provide credit professionals with the most complete, objective and accurate reports available.
â€˘ Business Credit Reports
â€˘ Business Owner Reports
â€˘ Summary Reports
â€˘ Scoring Reports
â€˘ Small Business Reports
â€˘ International Credit Reports
â€˘ Country Risk Reports
â€˘ Monitoring Service
â€˘ Public Record Data
Click here to learn more about NACM's Credit Reports.
"If you think back for a moment to when email started, it came onto most business people's desks in the mid-1990s," said Abby Marks-Beale, professional speaker and email management expert. "Most people are given their computers and they say 'here, this is your computer, this is how you send an email and this is how you receive it.'"
Indeed, in today's business world, not much thought is given to how to use email effectively, and yet, especially in the world of credit and collections, email is an almost constant source of communication that, if permitted, can spiral out of control and begin to cut into productivity. "Email is a twitch factor," she added. "We're interrupted by email because there's so much of it these days; the average person gets 50-100 emails per day that they have to respond to." In her most recent NACM-sponsored teleconference, entitled "Slaying the Email Dragon," Marks-Beale, a regular speaker and fan favorite at other NACM events, offered her unique insights into how credit professionals can get control of their email and also how they can get the most out of this now unavoidable part of the business landscape.
Firstly, Marks-Beale noted that email isn't just about organizing the messages you receive, but also about sending messages that others want to read. In order to make emails as effective as possible, she noted that senders have to double check their messages to make sure they've included all they said they would. "When you say you're going to attach something, attach it," she said, referring to a somewhat common mistake senders make when crafting an email. "It doesn't come across as professional." In order to prevent little mishaps such as forgetting to attach an important document, Marks-Beale suggested making the attachment process the first step. "I don't like getting caught not attaching something, so I will open up an email screen and, before I put in anything, I'll attach what I'm going to attach," she said.
Additionally, the best emails are the ones that make a reader want to open the file. Making this happen begins with the email's subject line. "The subject line should be revealing, specific, captivating and then give the reader a good reason to open your mail," said Marks-Beale. "Most people don't give the subject line a second thought, and some people try to put their whole message in their subject line and it gets lost. It should be no more than about 30-40 characters."
Marks-Beale also offered some examples of good and bad subject lines, and discussed several other tips and tricks business people can use to prevent email from overwhelming them and their responsibilities.
For more information on NACM's teleconference series, or to register, click here.
Jacob Barron, NACM staff writer
Bouncing Back from Disappointment
The current economic crisis has given many different people of many different professions a reason to feel disappointed. Whether it's a good account that's suddenly gone off the rails or simply the loss of important staff members who have been laid off, credit professionals have not been insulated from the wrath of the economic collapse and the personal havoc it can wreak on one's life and business. Still, credit professionals need to be resilient in the face of adversity and are often required to bounce back and get back into the game as quickly as possible. Resilient people do more than rely on positive thinking and luck. They experience just as many challenges as everyone elseâ€”and sometimes more. Yet, they have developed effective coping skills that allow them to survive and thrive during adversity. To learn how to develop this skill set for yourself and encourage it in others by challenging inflexible thinking, asking solution-oriented questions and responding proactively, join Susan Fee M.Ed., L.P.C. for her upcoming NACM-sponsored teleconference, "Bouncing Back from Disappointment," on September 30 at 3:00 pm EST.
To learn more, or to register, click here.
There used to be a trend in the corporate sector to consolidate banking relationships. Then the U.S. economy sputtered and dipped into recession, and a record number of banks coast-to-coast began shutting their doors, sparking government bailout and lending programs. The trend then moved the other direction, toward the multi-banked corporate. Corporations around the globe have diversified their banking and trade partners as a direct result of the global financial downturn. The overwhelming weakness in the banking sector and ongoing vulnerability due to toxic assets and a dramatic increase in bankruptcies, delinquencies and defaults have forced companies to seek new relationships with financial institutions. Unfortunately, with those new relationships often come new proprietary communication platforms and formats.
According to a study that will be released Wednesday, September 30, on global connectivity and payment trends by SunGard, 30% of corporations grossing $5 billion or more are relying on 21 or more cash management banks. In that same category, 40% of those companies reported using 11 or more systems, with 25% utilizing more than 21 different systems. In total, only 32% of large enterprises reported using only one to five different systems.
"It's staggering if you take a look at the number of banking relationships that corporations have," said CJ Wimley, executive vice president, Corporate Solutions, SunGard AvantGard. "And what it really comes down to is that it costs a lot of overhead to maintain that communication out to that many banks. Many times, that type of communication is one-to-one; it's between the bank and corporate. There's a lot of overhead, a lot of cost to change and there's a lot of stagnant communication."
There are some obvious problems for companies that are using a wide range of disparate payment systems, such as inefficiencies and a lack of transparency across a company's network of suppliers, buyers, banks and other trade partners. Complex international organizations with multiple back-end systems and a growing number of banking relationships are further burdened by internal workflows. Wimley thinks that there are opportunities for companies, both domestic and international, to simplify their processes.
"Trade receivables is the most inefficient marketplace in the world today," stated Wimley, citing that commercial trade transactions take anywhere from 30 to 60 days, and in today's slow pay environment, an increasing number are taking 90 days or more. "It just takes too long to settle that trade receivable and that's where all the inefficiencies are."
There are ways to speed up the payment cycle, but SunGard found that only 12% of respondents were able to pay 75% of their vendors electronically. Wimley believes an offshoot of consolidating communication and payment systems under one umbrella is that a single buyer would then have a single connection point to all of their suppliers, which then triggers its own efficiencies.
"In North America, we're still struggling with checks and check processing," said Wimley. "If I'm a buyer, I want to have efficiency. I want to maybe get away from checks. I think that the suppliers would like us to get away from checks in North America, and I would think that the suppliers would like the ability to consolidate payments to be sure all the regulations are handled in these cross-border payments."
Large enterprises struggling with decentralization and disparate systems, as well as the different processes revolving around these different payment systems, have an opportunity to consolidate their communications and achieve better transparency.
"You can centralize connectivity. You can bring in the buyers and suppliers, you can bring in the banks and financial institutions and the trading partners," said Wimley. "If you can consolidate thatâ€”centralize it and create a networkâ€”now all of a sudden you don't have that overhead associated with maintaining that communication channel out to all those corporate."
He added, "All of a sudden, you've got a network of suppliers to one buyer, and a lot of overlap between those suppliers to the next buyer."
Matthew Carr, NACM staff writer
MLBS Lien Navigator
Lien laws are continuing to evolve and change. Texas recently adopted considerable changes that affect the minor lien notice errors or omissions and their relationship to the Fraudulent Lien Act. Colorado has passed legislation that affects two sections of the Colorado Revised Statutes and ultimately all lien waivers entered in the state as of July 1, 2009.
For construction credit professionals, tools like NACM's MLBS Lien Navigatorâ€”a credit professional's guide to notice, lien, payment bond and suit time requirementsâ€”gain prominence in this changing environment. MLBS Lien Navigator is already the leading source of information on when action needs to be taken to protect lien rights across the 50 states and D.C. and is updated as new regulations are passed and affect lien rights.
Members who are interested in learning more about the benefits of NACM's MLBS Lien Navigator and who would like to try a free demo should click here.
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) recently announced that they would seek public comment on the Horizontal Merger Guidelines used by both agencies to determine the competitive effects of mergers and acquisitions. In a series of public workshops, the nation's two antitrust regulators will examine whether or not the guidelines accurately reflect current FTC and DOJ merger review practices and also take into account the many things that have changed, legally and economically, since the guidelines' last major revision in 1992.
"The bulk of the merger guidelines are over 17 years old," said FTC Chairman Jon Leibowitz. "The 1992 guidelines explicitly stated that they would be revised from time to time. We think the time has come to do that."
The FTC also issued a set of questions about the current guidelines, which can be found here. After public comments are received and original research is conducted, five workshops will be held in December 2009 and January 2010, starting with one on December 3rd in Washington, D.C. Other workshops will be held in Chicago, New York City and San Francisco, with the final workshop taking place in Washington again.
"It is an appropriate time for the antitrust agencies to conduct a review of the guidelines to determine whether any revisions should be made to better protect American consumers and businesses from anticompetitive mergers," said Christine A. Varney, Assistant Attorney General in charge of the DOJ's Antitrust Division. "Having guidelines that offer more clarity and better reflect agency practice provides for enhanced transparency and gives businesses greater certainty when making merger decisions, resulting in a more competitive marketplace that benefits consumers."
Topics to be discussed include the overall method of analysis used by the agencies; the use of more direct forms of evidence of competitive effects; unilateral effects; especially in markets with differentiated products; price discrimination; the relevance of large buyers; the non-price effects of mergers, especially the effects of mergers on innovation; and remedies to any issues raised.
Jacob Barron, NACM staff writer
Look for the "A" Players
You need the "A" players. They're the most qualifiedâ€”the most productive peopleâ€”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 productivityâ€”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.
Click here to get started!
C4F: Employment Connections for the Business Credit Community
Employees today are being asked to do more with less support, particularly at firms where workforce reductions have occurred. While it's great to still have a job in this economic climate, layoff survivors face no shortage of formidable challenges.
Time-strapped workers are left to perform their regular jobs, while absorbing the unfinished assignments and potentially unfamiliar daily tasks of former colleagues. If you're struggling to get a handle on your increased workload, the following time-management tips will help you maintain your sanity and boost your efficiency:
Get your priorities in order. First and foremost, check with your manager to outline and prioritize your new and existing duties. In times of transition, it's always better to seek clarification than to make assumptions. Once you have a complete list of responsibilities, organize your projects in order of urgency and importance. This upfront investment of time will save you hours over the long term.
Clean up your act. The benefits of an orderly workspace can't be overstated. You can't afford to waste time hunting for critical documents buried under a crumpled mass of outdated memos and sticky notes. After making an initial clean sweep, schedule time weekly to cut the clutter. Once you've categorized a document, get into the habit of filing it, trashing it or forwarding it to the appropriate personâ€”don't leave it on your desk to collect dust.
Minimize multitasking. Despite your best intentions, you can't focus on producing a top-notch report while simultaneously preparing for a meeting and emailing your boss. Create a daily game plan each morning and do your best to cross items off your to-do list one by one. When working on an assignment, give it your undivided attention so you do it right the first time. Multitasking frequently leads to errors and oversights, minimizing your overall effectiveness.
Be a team player. Instead of being competitive with your fellow layoff survivors, pull together and work as allies. There's no better way to foster goodwill than to pitch in and assist overworked coworkers. By lending a hand when you can, you'll likely receive much-needed help when you're swamped and a pressing project lands on your desk.
Source: Robert Half International
To view past eNews issues or to visit the NACM Archives, click here.