March 23, 2010
Managing creditworthiness and receivables has become more important than ever in the wake of the economic downturn. But are U.S. businesses taking advantage of the technological advances available to them? As a rule, the answer is "no," said Sam Fensterstock, director of business development at the tech firm PredictiveMetrics.
"It's a small percentage that is using it," said Fensterstock of technology such as collection scoring systems. "Those who do are using antiquated systems and are using it for determining creditworthiness, not looking at their overall portfolio."
At May's upcoming NACM Credit Congress & Exposition in Las Vegas, Fensterstock will be presenting case studies focused on companies who yielded significant benefits—improved resource allocation, cost reductions and forecasting of bad debt reserves—through implementing credit scoring systems that electronically determine which customers are at risk of slipping into delinquency and when they should be addressed. Fensterstock, who gave an abbreviated preview of his "Cashing in With Portfolio (Collection) Scoring" Credit Congress session in a March 22 teleconference, which is available through replay, says such technology can be particularly helpful to companies forced to slash resources at a time when it is more costly to collect money owed than in previous years.
"At more and more places, you have to work smarter, harder and faster, with less available to you...there's a lot of pressure to manage portfolios better," said Fensterstock.
The case studies outlining success at RR Donnelley and Edward Don Foodservices, which both converted to PredictiveMetrics's collection scoring system, will be highlighted during Fensterstock's presentation on May 19th. Representatives from each will also be on hand to answer questions about the impact of credit scoring technology.
"Both were using a bureau before, but we were able to show how much more predictive we were than the credit bureau," said Fensterstock. "Our models were all based on the companies' data. It showed the companies a much better way to manage their portfolio...Technology really can have a substantial impact on the accounts receivable department."
Additional information on NACM's 114th Annual Credit Congress is available here. More on Fensterstock's recent teleconference can be obtained by contacting Tracey Flaesch at 410-740-5560 or firstname.lastname@example.org. For more information on NACM's teleconference series, click here.
Brian Shappell, NACM staff writer
It's Happening at the Credit Congress Expo!
While the Expo doors are open, it's the place to be. During all Expo hours, you have to opportunity to gather information on the latest products and services available from the vendors. Come network with these potential business partners and your credit peers.
Each Expo day contains great value and fun:
Sunday evening. Join NACM in launching the Expo Grand Opening/Opening Reception. Get a feel for the Expo floor and meet and reconnect with peers and vendors.
Monday. Meet your General Session Speaker, enjoy a great lunch and make connections. Then, in the evening, visit with more vendors during the Beer & Browse, all the while, keeping an eye on your bids at the Silent Auction.
Tuesday. Meet your Super Session Speaker, enjoy lunch and wrap up with final visits with your vendors of interest.
Click here for more information about the Credit Congress schedule of events.
Following consultations with its Government Affairs Committee and Board of Directors, the National Association of Credit Management (NACM) recently offered its support to Senator Sheldon Whitehouse (D-RI) for his attempts to reform the way that small businesses reorganize themselves in bankruptcy.
Whitehouse chaired the hearing "Could Bankruptcy Reform Help Preserve Small Business Jobs" last week in the Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts. Prior to the hearing, NACM had met with staff in Whitehouse's office to discuss the possibility of new changes to the Bankruptcy Code that would increase the chances small companies have of reorganizing successfully in the court system.
"It is clear that the less time a small business spends in the reorganization process, the more assets are preserved in that business' bankruptcy estate for creditors and for the business itself," said the letter, signed by both NACM President Robin Schauseil, CAE and NACM Chairman Phyllis Truitt, CCE. "To the extent that Congress is willing to revisit the Bankruptcy Code as it applies to small businesses, NACM supports actions that would seek to improve the process for smaller firms."
Among the principles NACM supported in the letter were expediting the reorganization process for small businesses, reducing administrative costs associated with filing bankruptcy and creating a bankruptcy process that considers the interests of all parties in the case without overburdening the court system.
During the hearing, witnesses and officials present for testimony, including Judge Thomas Small, with whom NACM worked in 2005 to craft changes to the Bankruptcy Code included in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), agreed that change in the Code was necessary, but disagreed on how best to approach the matter. One proposal submitted in the hearing suggested allowing small businesses to file under Chapter 12, which is currently available only to family farmers and fishermen.
NACM's Government Affairs Committee has consistently been focused on bankruptcy reform since the release of its Issue Brief and Suggested Changes to the BAPCPA. Stay tuned to NACM's eNews, its Advocacy page and NACM's Credit Real-Time Blog for future updates. Additionally, if you have any thoughts on potential changes to the Bankruptcy Code, especially as it applies to small businesses, please email your ideas to email@example.com.
Jacob Barron, NACM staff writer
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MGM Mirage made a splash when it announced plans for its massive, opulent mixed-use CityCenter complex just before the economy crashed. Now nearing its completion, the somewhat troubled project faces the specter of a potential mechanic's lien worth nearly one-half billion dollars. But there is much debate as to whether the size of the lien is so extraordinary, in actuality, and just how heated a court battle would get.
In a Securities & Exchange Commission (SEC) filing this month, MGM Mirage noted the lead general contractor, Perini Building, on its $8.5 billion CityCenter project threatened a mechanic's lien worth up to $492 million. If filed, the potential lien from Perini's parent company Tutor Perini Corp., the second largest general building contractor in the nation, would be among the largest filed in U.S. history. But it would be in line with the scope of the project, actually, since CityCenter was the largest privately-funded project at its inception. The mechanic's lien, if filed, would likely come before month's end, MGM Mirage confirmed.
It is also heavily rumored that MGM Mirage is cooking up its own lawsuit against Perini because of alleged building defects and change orders on the soon-to-be completed Harmon Hotel tower of CityCenter, which also features the Aria Resort & Casino, retail and restaurant space, a park, a movie theater, multiple boutique hotels and residential condominiums on the Las Vegas Strip. Representatives from MGM Mirage and Perini did not respond to multiple NACM telephone queries.
Greg Powelson, director of NACM's Mechanic's Lien & Bond Services, says the brewing battle is significant because of the "bottom-line, major-dollars perspective." Still, problems with such epic projects in Las Vegas should not come as a shock. The city's real estate segment and overall economic conditions have been in shambles, more so than most U.S. cities in the nation, since the downturn took hold. Key areas of struggle include low sales at high-end retail businesses and condominium projects that were feverishly built mid-decade at a pace that far exceeded that of actual demand. Additionally, there is a history of financial squabbles at high-cost Las Vegas mega projects, said Powelson, as was evident in the development of Fountainebleau and the Venetian. Both struggled with bankruptcy issues.
"This is not surprising given the problems in Las Vegas," said Florida-based attorney Oscar Soto, an expert in mechanic's lien law. "And you do have to take the numbers in the context of the project. While $500 million sounds like a huge lien, it's a multi-billion dollar project. In the scheme of things, it might represent only the last few bills due...and some change orders."
Randy Clark, assistant division manager of credit with Young Electric Sign Company (YESCO), also is among those who believe the lien is not too out of the ordinary because its size represents less than 10% of the total cost of the project. Still, Clark admits the firm, which provided signage for several portions of the CityCenter project and is still owed some payments for its work, is "concerned" about the conflict. However, he is optimistic that the parties will avoid a lengthy court battle and that subcontracting companies will be taken care of because the contracts for the project were not as "onerous" or one-sided as in past ventures such as the Venetian.
"All in all, I think they'll come to some kind of settlement or agreement without litigation," said Clark, who characterized the lien as infinitely less worrisome than a bankruptcy. "It doesn't mean everyone will get 100 cents on the dollar, maybe they'll get 90 cents on the dollar. But I think Perini is an upstanding company, so they'll do right. Plus, Perini is going to want to keep doing work here in the future."
Brian Shappell, NACM staff writer
Certification Exams at Credit Congress
Start off your Credit Congress experience knowing you'll soon have a new designation! Credit Congress offers both an exam review the morning of Sunday, May 16th and exams in the afternoon for each the CBA, CBF and CCE designations. Then unwind from it all with light fare and drinks at the Credit Congress Opening Reception in the Expo on Sunday evening.
From a personal finance perspective, recent news items have shown that companies have begun to check their potential employees' credit scores as part of their screening process. Credit professionals, and all professionals really, looking to be hired or looking to move up in today's still struggling job market may have more success if they know their consumer credit score and how to improve it.
Additionally, while credit scoring for businesses can often provide a quick, broad look at a potential customer's financial standing, when dealing with smaller businesses, the information from which their business score is derived may be sorely lacking. Knowing all there is to know about a customer's finances, their business and their industry is integral to the success of a credit decision, but when a buyer is new to the business or exceptionally small, this information is often elusive or has yet to be established.
Since many small business owners intermingle their own finances with that of their business, the consumer credit score can be a powerful tool when selling to these customers. A company that uses both a potential buyer's business and consumer credit score will receive a much more complete picture of their buyer's finances, thereby allowing them to make a more informed, and ultimately safer, decision.
Needless to say, the time for credit professionals to know all they can about consumer credit scoring, is now.
For a thorough, dynamic rundown on consumer credit scoring, be sure to join Dan Ridenour, CBA for his upcoming teleconference "Consumer Credit Scoring," scheduled for March 31st at 3:00pm EST. Ridenour, president/COO of NACM Great Lakes Region, author and noted expert on the subject, will offer his observations on consumer credit scoring and show consumers how they can make the most of their own credit score. To learn more, or to register, click here.
Jacob Barron, NACM staff writer
Join the CFDD Network
CFDD exists, in part, to dynamically impact NACM's global vision by being the leader in educational programming and direction, thereby setting industry standards for professional excellence. To learn more about CFDD, click here.
Join CFDD at Credit Congress at its annual Awards and Installation Luncheon on Tuesday, May 18th! For more information, click here.
If Sen. Charles Schumer (D-NY) has his way, credit unions will be lending to small businesses far more often in 2010 and beyond.
Schumer is getting close to unveiling legislation that would eliminate a federally-mandated cap on credit unions loans to small businesses. A 1998 federal statute set the cap on such commercial activity at credit unions at 12.25% of an institution's total assets. No cap existed prior to 1998. Schumer characterized the move as necessary because of an unwillingness of many large banks to extend credit and an inability of some cash-strapped community and/or regional banks to do so.
"Our focus must be on increasing the lending to small businesses, which are the lifeblood of our economy," said Schumer. "They have not only been a casualty of the ongoing credit crisis, but have unduly felt its impact. The situation facing these businesses right now is much worse than a matter of them simply being denied new credit loans. They are being strangled by having existing lines of credit pulled. A threat like this to small businesses could upend the livelihood of millions of workers and be catastrophic for the larger economy."
Schumer applauded credit unions' historically low rate of delinquency and responsible lending practices and, quoting Credit Union National Association estimates, said overturning the credit union caps would result in $10 billion of new small business lending within one year.
However, some in the banking lobby bashed Schumer's proposed bill, intimating the charges are unnecessary and competitively unfair. The Independent Community Bankers of America are chief among dissenters saying many credit unions aren't even near maximum capacity for small business lending and that Schumer's plan strays from the tax exempt entities' key purpose.
Brian Shappell, NACM staff writer
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 as to 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 find the group for your industry.
In its current form, Sen. Christopher Dodd's (D-CT) new financial reform bill would shift enforcement responsibilities for the Fair Debt Collection Practices Act (FDCPA) to a new bureau operating within the Federal Reserve that the legislation would create.
The Federal Trade Commission (FTC) has enforced the FDCPA since its enactment in 1978.
In response to Dodd's proposed legislation, representatives from the accounts receivables management (ARM) industry recently called on Congress to keep FDCPA authority within what they considered to be the FTC's capable hands. In a joint statement, DBA International, ACA International, the Commercial Law League of America (CLLA) and the National Association of Retail Collection Attorneys (NARCA) urged lawmakers to alter Dodd's bill to leave the FTC in charge of their industry and its business. "We are not running from regulation; we simply want an appropriate regulator," they said. "The bureau, as proposed by Sen. Dodd, is geared toward banks and others depository institutions. The FTC is the appropriate venue for our industry."
The coalition of ARM industry associations stopped short of rejecting the entire creation of a new consumer financial regulator, but cited the FTC's success as reason to keep the FDCPA under the commission's umbrella. "We understand Congress' intent to create a new bureau, and agree there is a need for fresh oversight in many areas," they said. "But the FTC has done a commendable job protecting the rights of consumers and bringing law enforcement action against outliers in our industry...Given the FTC's specific expertise at governing the debt industry, and given how preoccupied a new regulator would be addressing issues other than those from FDCPA, we are calling upon Congress to leave the industry's regulatory powers with the FTC. The FTC is an effective protector of consumers' interests when it comes to the FDCPA. There is no need to break up something that is already working effectively for the American people."
Other business and industry leaders have been heavily critical of Dodd's move to create a new consumer regulator and the provision that would do so has been a lightning rod for criticism ever since its first mention last year. Among the loudest critics has been the U.S. Chamber of Commerce, which continued its opposition following the release of Dodd's bill, saying it "takes three steps backwards with the hope of making future progress."
Jacob Barron, NACM staff writer
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C4F: Employment Connections for the Business Credit Community
Which social media platform one uses and when one does so can be critical to the effectiveness of building better business relationships on the Internet.
Hazel Walker, president of the Referral Institute of Indiana, recently led an NACM teleconference on social networking and suggested that those in the business world ready to embark on using social media for the first time should learn about and create a profile on LinkedIn.
"LinkedIn is the most professional of the sites," said Walker. "You won't find games on there."
LinkedIn, originally launched as a tool for headhunters before evolving into a virtual B2B world, won't replace face-to-face communication, but it can be used to break the ice for professionals better than its less formal counterparts Facebook and Twitter, said Walker. However, it is crucial to take plenty of time to study how to use LinkedIn before launching one's own site. Walker said any business user should take the time to answer 100% of the account setup questions on LinkedIn as some could draw the wrong conclusions based on an incomplete, low-scored, profile.
The popular platform, which is still relatively new in the business world, has already helped Walker personally, in part because of the "testimonials" feature on the site.
"When people tell me at a conference that they like my presentation, I ask them 'Would you mind going online and writing that for me?,'" she said. "It helps build you and your company's credibility. I've actually been hired for speaking engagements because of them."
Additionally, Walker has been able to connect on LinkedIn with authors trying to get their latest works published through one of many offerings in the groups feature. "We share information, links, where and how we've gotten published...it gives us an opportunity to figure out what people have been able to get done," said Walker.
And while such features can lead to money-making opportunities outside a business' typical wheelhouse, Walker suggested people stay off any social media site for the most part during the day's peak profitability hours.
"I try not to use social media too much during business hours," said Walker. "I can be making sales calls."
Walker, among others, talks more about social media and some of the pitfalls of using it improperly in a business setting in the April edition of NACM's Business Credit Magazine. Additionally, a replay of her teleconference is available by contacting Tracey Flaesch at 410-740-5560 or firstname.lastname@example.org. For more information on NACM's teleconference series, click here.
Brian Shappell, NACM staff writer
As trade between the U.S. and India has more than doubled over the past five years, officials in both countries have worked to continue nourishing this ever-growing trade relationship, most recently by signing a "Framework for Cooperation on Trade and Investment."
Signed by U.S. Trade Representative Ron Kirk and Indian Minister of Commerce and Industry Anand Sharma, the agreement will strengthen bilateral cooperation between the two nations and includes a recently-launched initiative called "Integrating U.S. and Indian Small Businesses into the Global Supply Chain." This move, the first significant act taken under the framework, fits in line with both President Barack Obama's recently inaugurated National Export Initiative and Indian Prime Minister Manmohan Singh's budget objectives.
"There is almost limitless potential for growth and trade between our two countries, and that can contribute to economic recovery and job creation in the United States and continued economic growth in India," said Kirk. "We can realize that potential by working together toward the goals set forth in the framework agreement, such as developing and enforcing policies that encourage technological innovation, increasing agriculture, services and industrial goods, and increasing investment flows."
"Closer collaboration with entrepreneurs and private sector leaders in both our countries will enhance our work," he added.
Under the framework, the U.S. and India intend to meet the objectives of developing and enforcing trade policies and fostering a trade-enhancing environment by undertaking initiatives to help the two countries meet those goals. Examples include increasing opportunities for private sector partnerships in infrastructure projects; enhancing intellectual property rights (IPR) awareness and enforcement; promoting increased bilateral cooperation in the healthcare, education, information technology, energy and environmental services industries; working to empower women and disadvantaged groups; creating greater mutual understanding of respective approaches to government procurement and development of small and medium enterprises.
Jacob Barron, NACM staff writer
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