January 5, 2010
NACM's December 2009 survey illustrated most credit professionals across the nation share responsibilities, handling credit extension, collection and other tasks altogether.
When asked "Which of the following best describes your credit department?," 48% of survey respondents chose answer #2: responsibilities are shared—each staff member handles multiple tasks, including collections, credit extension and others. The second most popular answer, receiving 24% of responses, was option #1, for credit departments where responsibilities are split with some staff focusing exclusively on collections and others on credit extension.
Only 9% of respondents answered that their company's credit department operates in a different way than the first two options. The remaining 19% of participants noted that their company doesn't technically have a credit department or that they themselves were the only member of the credit department.
"I not only do all the credit and collections for two companies totaling $800,000, I also do all cash sales...post balances...do paperwork and whatever else is assigned," said one respondent. "Being a small, privately held corporation, I am a one-person credit department, handling all aspects of credit and collections, including bankruptcy, court cases, etc., and also due to my length of service, I run the payrolls weekly and monthly," said another. "Needless to say, I stay very busy, but it is not a problem handling all the responsibility I have, including interacting with sales."
Some noted that their company's decision to split responsibilities among staff, with some handling credit extension and some handling collections, gave them a sense of precision that they found necessary to succeed in their industry. "We have three dedicated analysts and two dedicated collectors," they said. "In this industry, we have small margins. Focus is critical in each area." Others, however, found that sharing responsibilities, with some staff handling both credit extension and collection, made the process of getting paid a lot more efficient. "We make sure that the people extending a line of credit are the people that will be calling for collection," said one respondent. "Getting to know who you are dealing with up front usually gives you an idea of how hard it will be to contact the same people to collect from them."
Many who noted that responsibilities in their department were neither split nor shared said that collections in their company was more of an administrative task. "Our department focuses primarily on credit extension. Collection efforts are handled by each business group's administrative support team and the individual managers," said one respondent. "While we monitor progress and review the aging, we only get involved in collections when the business department's teams have exhausted all efforts."
NACM's first survey of the new decade is now live on NACM's homepage. Click here to participate.
Jacob Barron, NACM staff writer
The 2010 NACM-National Honors & Awards Program—Only Four Days Left!
Do you know someone who...
» inspires, challenges and teaches you?
» sets a standard for excellence and integrity?
» deserves recognition for exceptional contributions and commitment?
Nominations are being accepted in the following categories:
* National Credit Executive
* CBA, CBF and CCE Designation of Excellence Awards
* Mentor of the Year
* Student and Instructor of the Year Awards
This is the last week to enter a nomination. The deadline is January 8, 2010. Visit NACM's Honors & Awards web page for details on nominating a remarkable credit professional for a national award.
In a testament to the intensity of the construction sector's struggles, a fund in Michigan established to ensure payment in the event of a contractor default is about to go broke, with little hope for replenishment.
The Michigan Homeowner Construction Lien Recovery Fund, established in 1982 under the state's Construction Lien Act, was created to protect both homeowners who contracted with a licensed builder or remodeler for construction or improvements to a home as well as the subcontractors and suppliers that provided materials or labor on the job itself.
"In the past, if a homeowner had completely paid the contractor for the work done, but the subcontractors, suppliers or laborers were not paid for materials or labor they had furnished, the loss was often borne by the homeowner who had to pay twice to protect his or her property from a lien," said Greg Powelson, president of NACM's Mechanic's Lien and Bond Service (MLBS). "Under the Construction Lien Act, unpaid subcontractors, suppliers or laborers may present their claims to the fund. Every licensed residential builder, electrical contractor, plumbing contractor and mechanical contractor is required to contribute into the fund."
A 2006 amendment to the Construction Lien Act prevented the fund from assessing members a $50 special assessment fee when it fell below $1 million, instead limiting the fee to only $10. This, coupled with an unprecedented increase in claims to the fund from 2006 through July 2009, has left the fund nearly bankrupt. "The fund is currently involved in over 250 pending lawsuits involving more than 350 claims against it that total more than $18 million," said Powelson. "In 2009, judgments against the fund have averaged $123,800 per month. By mid-October, there was only $524,000 remaining in fund coffers."
Absent legislative intervention, the fund is expected to run dry within the next few months, leaving unpaid subcontractors and suppliers to seek redress from homeowners.
For more information on NACM's MLBS, click here.
Jacob Barron, NACM staff writer
The Latest on 503(b)(9)
The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 created a safety net for unsecured goods sellers in the form of the 503(b)(9) 20-day administrative priority claim. However, since its addition to the Bankruptcy Code, various court cases and judges nationwide have redefined exactly what it means to hold one of these claims. To learn more about the competing ideologies and interpretations of this important section of the Code, join Deborah Thorne, Esq. for the next NACM teleconference, "The Latest on 503(b)(9)," on January 11, 2010 at 3:00pm EST. Thorne will discuss how creditors can best document their claim and how the claim relates to drop shipping, preference exposure and other items.
To learn more, or to register, click here.
Chief Justice John Roberts' year-end report on the judiciary showed the intense increase in workload that faced the nation's bankruptcy courts in 2009.
"In 2009, a total of 1,402,816 bankruptcy petitions were filed in the U.S. courts, an increase of 35% over the 1,042,806 filed in 2008," said Roberts. "The 2009 total represents the greatest number of bankruptcy filings since 2005, when many debtors rushed to file petitions before October 17, 2005, the date on which the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect."
District by district, Roberts noted that the story was essentially the same, with 93 of the 94 districts exceeding their 2008 totals in 2009. Nine districts experienced increases of 60% or more.
As quarterly figures have shown throughout the last year, filings under each Chapter of bankruptcy increased, with Chapter 11 experiencing the largest bump in 2009. "Bankruptcy filings rose by 45% under Chapter 7, 68% under Chapter 11, 47% under Chapter 12 and 14% under Chapter 13," said Roberts, adding that business filings also experienced a larger increase than non-business filings. "Business petitions climbed by 52% and non-business petitions increased by 34%."
The year-end report on the judiciary typically offers the chance for the Chief Justice to provide his perspective on the needs of the U.S. court system. However, Roberts' report this year was especially brief. "This year, however, when the political branches are faced with so many difficult issues, and when so many of our fellow citizens have been touched by hardship, the public might welcome a year-end report limited to what is essential," he said. "The courts are operating soundly, and the nation's dedicated federal judges are conscientiously discharging their duties."
In last year's report, Roberts requested a pay increase for judges, as his predecessor William Rehnquist also did regularly in the year-end report.
Jacob Barron, NACM staff writer
MLBS Offers Complete Lien and Bond Services and More
NACM's Mechanic's Lien and Bond Services (MLBS) brings best-in-class service options to today's construction credit professional.
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.
A Chinese economic growth haiku (and yes, we know that haiku is a Japanese art form): "Chinese economy/The dragon surges ahead/But fears its own fire." That is admittedly pretty lame but the idea is hopefully accurate. China is well and truly back on the road to economic recovery and the latest figures are very impressive. The rate of industrial production rose by 19.1% over last year and that followed a similar increase in October when the rate jumped 16% over the previous year. Imports had been sagging as the industrial community had not been buying as much as they had in the past. That pattern reversed as imports went from a 6.4% drop in October to a 26.7% gain in November as compared to last year. The same growth is noted in the export levels. There is still a decline compared to last year's numbers, but the reduction has been only 1.2% in November as compared to the 13.8% reduction in October. The resurgence of the Chinese economy has been attributed to several factors and that is part of what is starting to worry the government and those analysts who are ultimately concerned about the downside of rapid growth.
The government poured a significant amount of stimulus money into the economy—much more rapidly than the U.S. did and more rapidly than almost any other nation in the world. Of the $600 billion that was originally allocated, it appears that almost $500 billion has been dispersed. It has had the desired impact as growth has surged in all areas where the money was applied. There have been massive construction projects and more than a few have been questionable as far as long-term use is concerned. The point is not that they are all that valuable in the short-term—they all resulted in job expansion and caused production of basic goods to increase. The Chinese are still struggling to get their exports up to respectable levels (for them) but the domestic economy is starting to play the role that many had envisioned for years. There is an active Chinese consumer class now and they are making the kind of demands that all consumers ultimately make.
All of this growth is bringing some problems with it and the reaction of the Chinese will be critical in the months to come. The threat of inflation remains pretty remote in the U.S. and Europe but it has started to appear like a specter in China. There are already substantial asset bubbles in many communities. The flood of money has meant that banks have had plenty to loan and they have been doing so with reckless abandon. The reaction in the real estate community has been rapid price acceleration but these high costs have hardly deterred the new middle class. There are now significant asset bubbles throughout the country and especially in some of the more remote cities that have been scrambling to catch up with their coastal brethren.
The Chinese now have a choice and it will not be a pleasant one. Either the growth is allowed to keep rolling on as China learns to contend with sharply higher inflation, or the government and central bank start to get aggressive and work to lower the rate with a more restrictive monetary policy. The economists are all in favor of the latter, but this is politically unpopular. The loose money policy has allowed China to keep its population happy and as soon as the policy tightens, there will be significant levels of frustration. The factories will shed jobs and the population will become more frustrated as they lose the ability to buy cars and homes. The balance in China is delicate and nobody in Beijing really wants to test it.
Source: Armada Corporate Intelligence
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 start a reorganization plan, 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 Affiliate 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.
Most turnaround professionals predict a hard slog toward economic recovery in 2010 as businesses weighed down by debt hit rough patches and credit markets shun them. Nearly half (49%) the respondents to the Turnaround Management Association's distressed industries forecast think durable economic improvement is unlikely until at least the second half of 2010. About three out of 10 think the worst is over, but nearly 20% suggest the economy has yet to hit rock bottom.
Three out of four respondents think the commercial real estate industry will fare the worst in 2010 as debt matures and lenders remain reluctant to refinance. Retail again garnered the second highest proportion of responses, 35%, down from 52% last year. Automotive, at the top of last year's predictions list for most troubled industries, slipped to third (31%) during a year in which the federal government brokered restructurings of two of the big three automakers.
Technology appealed to nearly 30% of respondents as the industry most likely to improve in 2010, and energy and health care ranked nearly as high. Commercial banks, which ranked third among industries most likely to improve in 2009, slid to fourth place.
Persistent Economic Trouble
Nearly all (92%) said economic conditions pose the greatest threat to struggling industries, and the most hard pressed will contend with too much debt compounded by lack of access to capital, according to 78% and 52% of respondents, respectively.
Industries likely to fare better in 2010 will do so mainly because of increased demand for products and services (59%) and an improved economy (52%).
If the economy recovers without sufficient job creation, most respondents suggest the unemployment rate could be lowered through tax incentives for hiring, capital spending and technology investment. To a lesser degree, respondents think stimulus spending to create public works and youth employment projects and repatriate manufacturing jobs could help absorb some of the millions of out-of-work Americans.
Source: Turnaround Management Association
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.
Click here to get started!
C4F: Employment Connections for the Business Credit Community
Is boosting productivity one of your New Year's resolutions? If so, now's the time to root out inefficient and outdated practices that no longer work. Use the following tips to help increase the quantity and quality of your team's output in 2010:
All too frequently, tasks and procedures are hastily stitched together when a need arises, and that approach then becomes the "way it's done" regardless of how effective it is. Take the time to look under the hood and question the status quo, keeping a constant eye on working smarter.
Be on the lookout for common inefficiencies such as duplication of work and unwarranted layers of approval. Whenever possible, streamline and consolidate functions, making sure your top performers are tackling high-priority duties that contribute to the bottom line.
Avoid Meeting Mania
Meetings are often needed to accomplish key goals, but they can also be huge time wasters if managed improperly. In a recent survey by Robert Half, senior executives said that almost a third of meetings they attend are unnecessary. Moreover, 45% of respondents felt employees would be more productive if their organization banned meetings one day a week.
Before calling a meeting, carefully consider whether it's absolutely essential. If you have no significant updates and everyone is facing heavy workloads, why have the weekly staff gathering? And remember that when calling a meeting it's important to invite only those individuals who truly need to be in on the discussion. Also, stick closely to the agenda, watch the clock and quickly rein in tangential conversations.
Promote (and Practice) Good Time Management
If you're operating with fewer staff members, it's all the more critical that your employees use their time well. Impress upon all your accounting professionals the importance of looking at the big picture and prioritizing their assignments accordingly.
Being focused and well organized yourself will help set the tone for your staff. Regularly review your to-do list, be willing to delegate and budget time for those unexpected but inevitable interruptions.
For more advice on management and career issues, listen to The Management Minute, Robert Half's podcast series at www.rhi.com/podcasts.
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