NACM Credit Professionals Alliance

The eCredit News is produced in partnership with the ACA, NACM Credit Services and Credit Today. Online at www.credittoday.com

July Dates To Remember:

1st: Canaday Day

4th: Independence Day

July

2014

Volume 146

Page 2-3: Industry News: Making Credit the Department of “Know” Page 4-5: Industry News: Never a Moment to Lose Page 6: Education: Social Media in the Workplace/Antitrust Page 7: Education: NACM Teleconferences NCS Webinars & Extra Credit CFDD Wichita Presents CFDD Kansas City Presents

Six Things Successful Credit Managers Do By David Schmidt

There are credit managers and then there are Credit Managers -people who really know how to harness the strengths and talents of their team and make everything work, not only getting the job done but also creating an environment that fosters ingenuity and growth. Being an effective manager is essential in today's business environment. With success often being tied to the adoption of increasingly automated systems while simultaneously maintaining the flexibility to deal with diverse situations, the best credit managers know how to embrace new ideas and make them work. In order to become a top manager, you need to think and act like those already defined by success. The following six characteristics are an excellent place to start when re-thinking how you go about overseeing your team and running your credit department. 1. Standout Credit Managers Get Their Work Done A standout credit manager will get everything done on his to-do list, even if it takes more than the traditional eight-hour day. 2. The Best Credit Managers Work Smart Because the best credit managers want to get a lot done and still have a life, they must have excellent time management skills. 3. Top Credit Managers March to Their Own Drummer A credit manager who seeks to set herself above the crowd must logically not follow the crowd. 4. Leading Credit Managers Are Both People and Goal Oriented Goals,

goals, goals! When one is reached, there should be another ready to catch your focus.

5. Elite Credit Managers Are Able to Sell While credit managers are not promoting products and services to potential customers, you still need to be able to sell ideas and goals. 6. Effective Credit Managers Are Down to Earth The most effective credit managers put themselves on the same level as their team members.

2 Industry News

Making Credit the Department of “Know” A key credit metric, right up there with DSO and bad debts, should be optimum use of the department's abundance of financial knowledge and information. That may be harder to measure month by month, but over time the payoff in problems avoided and opportunities seized with customers, suppliers and other business partners can be enormous. During the annual review of one major supplier's financial condition recently, Prestige Brands Holdings spotted erosion in the supplier's payments to its suppliers. That prompted an immediate and detailed investigation. First, Prestige Brands' supply chain managers contacted their counterparts in the supplier's purchasing department to request permission to contact the company's lenders. "With that permission granted, we asked the lender about availability and any issues regarding the supplier's financing, including whether there were covenant violations or if the supplier's line of credit had reached its maximum drawdown," explains Director of Credit Harris Semegram. "The bank assured us that we were just looking at a temporary situation, that they were in negotiations to expand the company's credit availability." No Interruptions in Supply What had happened, they learned, was that the company had taken on some new customers and was ramping up operations dramatically. So they had grown beyond their allowed borrowing limit and were seeking additional funding because of new growth. The confidence the lenders expressed in this company, and their assurances that the credit line would soon be expanded, gave Prestige Brands a level of confidence that there would be no disruptions in Prestige's source of supply. "Our credit department functions as a service organization," emphasizes Semegram. "We have the best financial information sources in the company and we're always there to provide them to whoever needs them." Sales, of course, are at the top of the list for these services. Immediate warnings go out about impending bankruptcies or other serious problems picked up from Credit's many information sources. When potential problems are spotted which are less clear and more ambiguous, a new credit investigation is launched in a thoughtful and measured way. More Volume, Slower Payments One customer that had increased its purchases found Prestige to be looking at slower payment when Prestige's billings came due. The credit team searched out the cause, which turned out to be a minor problem with the billing process. That, of course, was quickly corrected. Continued on page 3…...

3 Industry News

Continued from Page 2…..

Making the Credit Department of “Know” Then, in discussions with the customer, the credit team became aware that what was initially perceived as a payment problem was actually an opportunity. This customer, they reported, had the capacity to have their credit line increased to permit more volume, provided a suitable support (e.g., promotional funding) could be arranged with Sales.

"So, in a situation where initial problems appeared to be some cause for alarm, it turned out to only be growing pains with this customer," he says. "The point is, we don't make snap judgments. We look into problems to find the root causes. Then we can recommend the best solutions. That's a big part of being a service organization." Credit departments have, with some justification, been labeled departments of "no," he points out. "We're the department of 'know.'" Supplier financial analyses, which have been an increasing part of the credit department's role, have become more nuanced, as the situation described above. Enhancing Supply Chain's Comfort Level "People in the supply chain, while they may have excellent knowledge of suppliers' manufacturing practices, may not necessarily have the broad-based knowledge of suppliers' stability," he notes. "We've been increasingly tasked to contact suppliers and obtain information that will enhance the supply chain's comfort level. We're skilled in discussing matters with CEOs and banks, whereas people in the supply chain may not be comfortable with that." The supply chain has created a matrix of suppliers, domestic and overseas, and they draw basic trade credit reports, such as the D&B Supplier Evaluation Report or an Experian report. Then the supply chain director reviews any potential supplier financial stability issues they have spotted with Semegram, and, based on what information they see in those reports, they decide if they are going to need supplemental data. "Let's say that on an Experian report we see the supplier has a less than stellar payment history to its suppliers, and we see a number of liens and judgments recently placed," he says. "That would suggest there is something there to be reviewed with the supplier, and the more information we obtain about it the better. There could be something that is perfectly understandable, or it could be an indication of serious issues. It's our responsibility to find out."

4 Industry News

Never a Moment to Lose In sales and marketing circles, it is common to hear people talking about "jumping on opportunities quickly" and "not wasting a moment of indecisiveness.” For some credit managers, this philosophy is just as valid. One such executive is Alfred Navarro, Credit Manager for Jacmar Foodservice Distribution (Alhambra, CA). In the early stages of an account's life, Navarro does take his time: ● He spends more time and money checking creditworthiness upfront than many other people do. "Most credit problems start during the credit application process," he explains. ● He also takes time to call customers once or twice a month just to say "hi" and to thank them for their prompt and consistent payments. Beyond this, though, Navarro is a vigilant professional who never lets a problem remain unattended for more than a moment - whether the problem relates to late payments or unauthorized deductions. "We sell to restaurants, which go in and out of business every few years," he explains. "Few last beyond four years, and even when they are operating, business can be very unstable. We have to jump on problems immediately in order to protect ourselves." Payments Terms for most customers are Cash 3 Days, Cash 7 Days, or Cash 10 Days. (The customer pays the drivers for previous deliveries as new ones arrive.) Longer-term customers may receive Net 14 Days or better. "Blue Chip" customers may receive Net 30 Days. Less stable customers may receive Cash terms (immediate cash payment) or C.O.D. terms (immediate cash or check payment). "Besides the fact that restaurants often go out of business, we're selling perishable items, so if we are unable to collect, we don't have the option of taking the merchandise back," explains Navarro. If a customer is scheduled to pay a driver on a certain day and does not, the driver is instructed to call Navarro immediately. Navarro then gets on the phone with the owner or manager to find out the source of the problem and to make timely payment arrangements. "I will usually insist that the customer have a check ready at the time of the next shipment," he states. If the customer offers to pay by mail, Navarro notes the date the check is to be sent and calls the customer if it does not arrive within one to two days. If a customer starts to get in a habit of not paying on time, Navarro faxes him a copy of the original credit agreement the customer signed, at which time he (the customer) agreed to the terms. Navarro pens a note on it to the effect, "What do you want me to do with this?” He also highlights the section of the agreement in which the customer agrees to pay court costs and attorney fees if Navarro is forced to take him to court. The result? "The customer pays very quickly, and I almost never have the same problem again," he replies. In fact, some customers go to the trouble of visiting Navarro in person to make payment! Continued on page 5…..

5 Industry News

Continued from page 4…. Never a Moment to Lose

Deductions Jacmar allows customers a 1% cash discount if they pay for shipments on the day they are delivered or otherwise make payment before the due date. The company also allows appropriate deductions for any shipments that are spoiled, provided that the customer returns the shipment and Jacmar personnel agree that it has spoiled. New customers, however, sometimes attempt to take unauthorized cash discounts and/or spoilage deductions on their own. "A lot of times, they're just trying to save a few dollars," he explains. "They assume that we're a large company that doesn't need the money and also assume that we won't make an issue out of it.” Despite the saying, "The customer is always right," in this case, "The customer is wrong.” Navarro does make an issue out of it - and quickly. A customer who takes an unauthorized discount or other deduction receives a call from Navarro immediately: If the driver notices that the check is short, he will call Navarro, who will talk with the owner or manager right away. If the driver does not notice it, Navarro will place the call as soon as the driver turns in his checks at the end of the day. While Navarro jumps on unauthorized deductions immediately, decisively, and firmly, he is also diplomatic. He patiently and politely explains that the deduction is not authorized and that the customer is expected to make full payment. He then adds that, if he allows this customer to take the unauthorized deduction, he must then allow all customers to do so, which would eventually jeopardize Jacmar's financial stability. If the customer has taken an unauthorized cash discount, Navarro asks for a second check to cover the 1%, and then explains that, if the customer pays early next time, he will be entitled to the discount. If the customer has taken an unauthorized spoilage deduction, Navarro explains that he must return the shipment first before the deduction can be authorized. Results? "New customers may try this once, but after we talk, it almost never happens again," he explains. "Storm Warnings" If and when Navarro suspects that a customer is not doing well and will be going out of business soon, he moves quickly. Early signs include: slow payments; bad checks; and/or reports from drivers, sales reps, and credit colleagues in other supplier organizations that the customer's restaurant is struggling. Navarro may then visit the restaurant himself to assess the situation. If it turns out that the customer is indeed having problems, Navarro begins tightening up terms, often requiring cash or C.O.D. payments. Such quick action frequently saves Jacmar from being left with unpaid bills.

6 Education

7 Education

Educational Update: NACM’s Education Department/ Audio Teleconference Series

July 2014: July 14: Bankruptcy for Beginners (2 day seminar) July 16: Bankruptcy for Beginners (2 day seminar) It is very simple to participate: Go to http://www.nacm.org and click on the Education tab, then click on Teleconferences and select the program you want to register for.

For more information regarding CFDD Educational Events visit: www.creditproworld.com OR www.nacmkc.org

The following webinars are being offered by NCS Credit to register for these go to: www.ncscredit.com NCS EXTRA CREDIT VIDEO SERIES: Video 17 - Implementing A Notice, Lien, & Bond Claim Program July 8, 2014 Webinar: UCC Remedies Upon Debtor’s Default By: Jerry Bailey July 17, 2014 Webinar: The Economic Outlook By: William A. Strauss July 22, 2014 Webinar: LienTracker® NTO By: Jerry Bailey

CFDD Kansas City Presents: July 9, 2014 Everything is Clearer with a Different Pair of Glasses By Frank Keck, CSP Grand Street Café 8815 Renner Blvd. Lenexa, KS RSVP: jvanderlinden@dfamilk.com

CFDD Wichita Presents: July 8, 2014 Credit Family Feud Pizza Hut 1725 E. 61st St., North Park City, KS RSVP: bdick@wsmind.com