A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY August 2006 7931 NE Halsey, Ste. 200 Portland, Oregon Tel: 503.257.0802 Fax: 503.257.0247 NACM Business Credit Journal Helping Businesses Succeed Since 1896 Vaccination Against Bad Debts: What Creditors Can Do Up Front to Improve Collections The Seven Golden Rules Historically, lenders/trade creditors and lessors do not call upon their bankruptcy and workout counsel until a default occurs and it is “too late” to fix underlying problems in the deal documents. Once a loan is in default, and litigation or bankruptcy has commenced, the creditor must generally deal with the documents and the situation as it is at that point with little or no opportunity to improve its position. Foresight is the best defense. It is important to understand that having counsel involved in structuring or drafting a new transaction or just reviewing your routine documents can put you in a substantially better position when default occurs. This paper outlines seven golden rules . . . issues which, if addressed at the outset, can make it much easier (and more profitable) to deal with a defaulted loan or credit transaction. • Eliminate Default Cure Periods Many contracts have default provisions that require the creditor to give notice of default and allow a cure period before the creditor may exercise its remedies. Lengthy notice periods delay action when promptness is sometimes the key to collection. A long cure period may give the debtor the notice it needs and the opportunity to dispose of collateral or file for bankruptcy. Commercial documents should therefore have certain critical default provisions which do not require any notice of acceleration or opportunity to cure. Aside from the delays that cure opportunities create, they also increase the probability of litigation over whether notice of default and right to cure were properly given and whether a cure was actually effected. This issue is even more critical for those with ongoing contracts or leases. If the contract is an executory contract (one with performance remaining on both sides), the cure period gives the debtor the time it needs to file bankruptcy and tie up the creditor so that the contract cannot be cancelled and the creditor must continue to honor the contract in bankruptcy in spite of default. • Make Notices Effective Upon Transmission Any notice that is required to be given under a contract should be effective when sent by the creditor, not when received by the debtor. Notice provisions should also provide for notice by facsimile, hand-delivery, overnight delivery, etc. • Create Multiple “Ways Out” When you are involved in anongoing contract, you generally cannot exercise your remedies until you terminate the contract. This requires having a specific default which gives you a basis to terminate. If a bankruptcy ensues and you have not terminated an executory contract prior to the bankruptcy, you are usually In This Issue Cover Vaccination Against Bad Debts: What Creditors Can Do Up Front to Improve Collections Poyner & Spruill, LLP p. 2 Chair's Message Cheryl Wahlberg, CCE p. 2 New Members p.3 Credit Manager's Index p. 4 Industry News p. 5 International Corner p. 6 Legal Corner p. 7 Education p. 8 CFDD Chapters and Scholarships p. 9 Publications p. 12 Pacific Northwest Credit Conference p. 13 Western Region Credit Conference p. 14 Contacts . ..continue on page 10
Transcript
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Vaccination Against Bad Debts:What Creditors Can Do Up Frontto Improve CollectionsThe Seven Golden Rules
Historically, lenders/trade creditors and lessors do not call upon theirbankruptcy and workout counsel until a default occurs and it is “too late” to fixunderlying problems in the deal documents. Once a loan is in default, and litigationor bankruptcy has commenced, the creditor must generally deal with thedocuments and the situation as it is at that point with little or no opportunity toimprove its position. Foresight is the best defense. It is important to understandthat having counsel involved in structuring or drafting a new transaction or justreviewing your routine documents can put you in a substantially better positionwhen default occurs. This paper outlines seven golden rules . . . issues which, ifaddressed at the outset, can make it much easier (and more profitable) to deal witha defaulted loan or credit transaction.
• Eliminate Default Cure PeriodsMany contracts have default provisions that require the creditor to givenotice of default and allow a cure period before the creditor may exercise itsremedies. Lengthy notice periods delay action when promptness is sometimesthe key to collection. A long cure period may give the debtor the notice it needsand the opportunity to dispose of collateral or file for bankruptcy. Commercialdocuments should therefore have certain critical default provisions which do notrequire any notice of acceleration or opportunity to cure. Aside from the delaysthat cure opportunities create, they also increase the probability of litigationover whether notice of default and right to cure were properly given and whethera cure was actually effected. This issue is even more critical for those withongoing contracts or leases. If the contract is an executory contract (one withperformance remaining on both sides), the cure period gives the debtor the timeit needs to file bankruptcy and tie up the creditor so that the contract cannot becancelled and the creditor must continue to honor the contract in bankruptcy inspite of default.
• Make Notices Effective Upon TransmissionAny notice that is required to be given under a contract should be effectivewhen sent by the creditor, not when received by the debtor. Notice provisionsshould also provide for notice by facsimile, hand-delivery, overnight delivery,etc.
• Create Multiple “Ways Out”When you are involved in an ongoing contract, you generally cannot exerciseyour remedies until you terminate the contract. This requires having a specificdefault which gives you a basis to terminate. If a bankruptcy ensues and you havenot terminated an executory contract prior to the bankruptcy, you are usually
In This Issue
CoverVaccination AgainstBad Debts: WhatCreditors Can Do UpFront to ImproveCollectionsPoyner & Spruill, LLP
p. 2Chair's MessageCheryl Wahlberg, CCE
p. 2New Members
p.3Credit Manager'sIndex
p. 4Industry News
p. 5InternationalCorner
p. 6Legal Corner
p. 7Education
p. 8CFDD Chapters andScholarships
p. 9Publications
p. 12Pacific NorthwestCredit Conference
p. 13Western RegionCredit Conference
p. 14Contacts
...continue on page 10
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Message from
In June, I wrote about the manyopportunities afforded by membershipin CFDD. One of them was continuingeducation. We all know the importanceof staying on top of the ever-changingworld of credit.
Some other ways of continuing youreducation is through NACM Oregon. The
educational calendar is on the website and on-lineregistration is easy. Upcoming classes are being offeredin "Basic Financial Analysis," "Human Resources andCredit Management," "Essentials of Cash Management,"and "Getting Exceptional Collection Results." These arejust the classes being offered in September and October,the list goes on for the following months.
We are also getting information on the 2006 NACM/CFDD Pacific Northwest Credit Conference – “Don’tGamble with Credit.” This regional conference issponsored by the Canadian Credit Career Group ofVancouver and will be held September 21-23 inVancouver, B.C. The education classes would beappropriate for all levels of credit and financialmanagement. Don’t delay—the early bird registrationdeadline is August 15, 2006. Please join the Oregondelegation and support our neighbors to the North.
Lastly, the 19th Annual NACM Western Region CreditConference in Las Vegas, Nevada, will be October 4-6,2006. The education events are designed along specifictracks; Core, Executive, Construction, Financial, andHot Topics. The opening keynote topic looks interesting,“Bambi vs. Godzilla: Dealing with Difficult People.” Theclosing keynote topic is “Learn How To Work Smarterand Leave the Office Earlier.” That certainly peaks myinterest.
Investing in continuing education will benefit you andyour company.
Have a great month and I hope to see you inSeptember in Vancouver, BC.
Chairman of the BoardCheryl Wahlberg, CCE
Page 2
New Members
Advanced Ornamentals,Inc., a nursery company.Tami Miller503.633.2833PO Box 519St. Paul OR 97137
Barnes & Thornburg, LLP,law firm.Deborah L. Thorne312.214.83071 North Wacker, #4400Chicago IL 60606
Brentwood Corp.,manufacturers of cabinetdoors.Dave Knapp503.759.7260453 Industrial WayMolalla OR 97038
CP Medical Corp., amanufacturer of medicalsupplies.Bart Hollowell503.232.1555803 NE 25 Ave.Portland OR 97232
Dr Martens Airwair USALLC, a footwearmanufacturer.Mike Kelsay503.222.6300PO Box 29017Portland OR 97296
EasyStreet OnlineServices, an internetservice provider.Kathy Zak503.646.8400PO Box 2518Portland OR 97208
ES & A Sign & Awning,manufacturs custom signs,neon and commercialawnings. Michelle Odland541.485.55461210 Oakpatch Rd.Eugene OR 97402
Gem State Acoustical &Drywall, distributor ofdrywall and acousticsupplies.Karen Morris208.343.36201249 Boeing St.Boise ID 83705
Jewell Attachments LLC,manufacturers anddistributors of constructionattachment products.Luann Pelton503.352.820018135 SW Boones Ferry Rd.Portland OR 97224
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Page 3
Credit Managers Index
For Immediate Release
Credit Manager’s Index for July: Good News in All Sectors
Columbia, Maryland: August 2, 2006—”The seasonally adjusted Combined Credit Manager’s Index (CMI) for Julywas virtually all good news,” comments Dan North, Chief Economist with credit insurer Euler Hermes ACI. “Allthree of the major indices were up on both a month-to-month and a year-over-year basis. In addition, all threemajor indices stand well above the 50 mark indicating economic expansion. And, out of the 30 total components,only two are below 50,” he summed. “There were few dramatic swings in the indices this month except for the 4.6%increase in the favorable components of the manufacturing sector. The survey once again describes an economythat has had enough strength and momentum to overcome the obstacles of a tightening Fed, inflation fears, highenergy prices, a weak stock market and a wobbly consumer.”
The manufacturing sector index for July rose 0.9% on a seasonally adjusted basis. The rise was driven mostly by anincrease of 5.8% in the sales component and an increase of 9.6% in the amount of credit extended. “Both of thesetop-line oriented indices bode well for future growth,” said North.
The July service sector index rose only 0.1% on a seasonally adjusted basis. North comments, “There were noparticularly notable movements that would suggest a significant shift or pattern, but six of the 10 componentsrose.”
“On a year-over-year basis, the combined CMI rose 1.3%, while the manufacturing sector rose 0.8% and theservices sector rose 1.8%,” said North. “Eight out of 10 components for the combined CMI rose, while seven of 10rose in both the manufacturing and services sectors. Overall, the indices reflect the strong economy of the pastseveral quarters.”
The CMI, a monthly survey of the business economy from the standpoint of commercial credit and collections, waslaunched in January 2003 to provide financial analysts with another strong economic indicator.
The CMI survey asks credit managers to rate favorable and unfavorable factors in their monthly business cycle.Favorable factors include sales, new credit applications, dollar collections and amount of credit extended.Unfavorable factors include rejections of credit applications, accounts placed for collections, dollar amounts ofreceivables beyond terms and filings for bankruptcies.
A complete view of the index can be viewed online at http://www.nacm.org/resource/press_release/CMI_current.shtml.
...continue on 4
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
CMI ...continued from 3
Sales
New credit applications
Dollar collections
Amount of credit extended
Index of favorable factors
Rejection of credit applications
Accounts placed for collections
Disputes
Dollar amount beyond terms
Dollar amount of customer deductions
Filings for bankruptcies
Index of unfavorable factors
ISM Combined Sectors Index
J u l J a n‘ 0 5 A u g S e p O c t N o v Dec ‘ 0 6 Feb M a r A p r M a y J u n J u l
58.6 59.3 56.4 59.6 58.3 57.0 57.6 58.4 57.9 60.2 57.3 55.4 N A
Combined Manufacturing & Service Sectors (seasonally adjusted)
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Industry NewsWarning—Attention NACM Members
Fraudsters posing as Fifth Third Bank are using phishing techniques to obtain data from Fifth Thirdcustomers. Do not respond to any emails you get requesting you to provide or verify account oruser information.
Source: NACM
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Page 5
International Cornerby Alice Knight
As an exporter my prime focus for many years hasbeen on analyzing the credit risk of our customers andtheir country of operations.
“Outsourcing,” “global procurement,” and “integratedsupply chain” are all relativelynew terms. The world is indeedshrinking and creditprofessionals with internationalrisk experience have a uniqueopportunity to add value totheir companies far beyond theboundaries of normal credit activities.
Neil Shister, editorial director of World TradeMagazine served as moderator at the annual CofaceCountry Risk Meeting in May 2006.
Coface, which is now a privatized insurer ofinternational trade transactions, used to be the Frenchequivalent of our Export-Import Bank. Internationaltrade insurers traditionally look at criteria linked to theeconomic, financial, and political environment todetermine patterns of short-term payment risk.Insurers look at both Macro and Micro economic factorsincluding political and institutional instability, growthvulnerability, foreign currency liquidity weakness,external indebtedness, country financial vulnerability,banking structure weakness, and specific companystatus.
In his opening remarks framing the proceedings forthe annual meeting, Mr Shister choose to bypass thesetraditional areas and, instead, to focus on the globalsupply chain as a new trade finance risk.
The strength, or weakness, of a company’s orcountry’s supply chain is becoming an important factorin accessing economic risk. This integrated supply chaininvolves many new factors and methods of codifyingand measuring are just starting to evolve. Some areas toconsider are availability of supply, alternative supply,flexibility of utilizing facilities for other product,availability of logistic providers, and internalinfrastructure to move goods safely and quickly. Weneed to consider the environmental stability, safety,and ability to recover quickly in the event of a naturaldisaster, war, or insurrection.
A key factor seems to be the inter-relationshipbetween the private and public sector. The governmentneeds to be able to move quickly and effectively whenthe private sector is threatened. There needs to be adegree of co-operation between companies andcountries to ensure that the extended supply chain canfunction effectively across borders.
Much of the needed information to evaluate theseareas is already buried in the country risk informationinternational credit professionals are used to dealingwith. By digging a little deeper and asking a few morequestions we are in position to collect, evaluate, andprovide this information to our companies. Thisinformation will become a part of risk assessment in thefuture. We can be part of shaping the methods andprocedures to be used or learn to live with what othershave developed.
This supply chain interdependence betweencompanies and countries will continue to expand. It willbecome an integral factor in accessing country andcompany risk and a new level of expertise forinternational credit.
Alice Knight is Vice President of Finance & Administration forPaper Products Marketing (USA) Inc., an international papertrading company headquartered in Portland, Oregon. Ms.Knight has over 35 years of experience inInternational Finance and is an activemember of FCIB and NACM. She hasserved as Co-Chair, Panel Member andPresenter at Annual Global Conferences,served as President of FCIB ForestProducts Group, and participated in FCIBConferences in Mexico, Puerto Rico,Munich, and Brussels. She is currently a member of FCIBBoard of Directors and the FCIB Hotline Committee.
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Legal Corner by William G. Fig
In Oregon, many collection lawsuits will be subject tothe mandatory, court-annexed arbitration process.This process is initiated by the creditor filing aComplaint in Circuit Court seeking monetaryremuneration in an amount of $50,000 or less. In suchcases, the court rules require the caption of theComplaint to contain the words “Subject to MandatoryArbitration.”
Once the debtor defendant files its Answer to thecreditor’s Complaint, the case is automatically assignedto court-annexed arbitration. At the time the case isassigned to arbitration, the court sends a list of court-approved arbitrators to the parties. The arbitrator mustbe an attorney. The parties can agree on an arbitrator,or, if the parties cannot agree, the court will select onefor you.
Typically, the parties must select an arbitrator within20 days from the date the list is mailed to the parties.The arbitration hearing must occur within 49 days of thedate of the deadline for selecting an arbitrator. Thearbitration usually occurs at the arbitrator’s law offices.
An arbitration hearing is a “mini trial” where thearbitrator acts as the judge and jury. Although lessformal than “real” court, the arbitration hearing stillfollows the same basic process and rules as a court trial.At the hearing, each party is required to put forthevidence to support their position. In most arbitrationhearings, each party has witnesses testify on their behalfand offers documentary evidence in support of theirrespective case. Unlike court, witnesses may testify viatelephone and, so long as it is properly disclosed to theopposing party, much of the documentary evidence isautomatically admitted into evidence.
The plaintiff (the creditor) goes first. A creditor wouldtypically submit a copy of the debtor’s creditapplication, account statement and, possibly, invoicesfor the materials/services the creditor provided to the
Mr. Fig is an attorney with Sussman Shank, LLP. His practice focuses on business litigation, construction law,environmental litigation, and consumer debtor/creditor matters. Bill represents creditors, general contractors,subcontractors, and small to mid-sized businesses. He holds a specialty certificate in environmental law with a focus onhazardous wastes. Mr. Fig has been active as a speaker and presenter at various NACM Oregon seminars. His email [email protected].
Page 6
debtor. The creditor’s accountmanager would testify regarding thematerials/services provided to thedebtor and the amount owed by thedebtor to the creditor. Opposingcounsel has the opportunity to crossexamine any witnesses.
Once the creditor finished, the debtor puts on evidencein support of its case. The most common issues raisedby a debtor are: (1) the amount of the payments madeby the debtor and/or credits to the debtor’s account;and (2) the goods/services provided by the creditorwere substandard or defective.
An arbitration hearing typically lasts 3-4 hours. Thearbitrator has 14 days from the date of the hearing toissue his ruling. Each party has 20 days to appeal theruling. If the ruling is not appealed, it becomes abinding and enforceable judgment. If the ruling isappealed, the case is assigned back to Circuit Court for atrial. However, if the appellant (the party appealing)does not significantly improve its position at trial, it isliable for the costs and attorney fees of the opposingparty. This can be a significant penalty if attorney feesare not already at issue. As a result, very few cases areappealed from arbitration.
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
EducationGood Morning Credit!
The Good Morning Credit series is anexcellent way to learn fundamentalcredit and collection managementtechniques, to train new staff, or tohave a good review. The programstarts at 7:30 a.m., so you or your staffcan head back to the office by 9. Join usfor these informative sessions packedwith practical tools for immediate use.
Second Tuesday of each month (exceptAugust).
7:30 - 9 a.m.
NACM Oregon7931 NE Halsey, Suite 201, Portland
$35 (M); $45 (NM)
.15 CEU per class
GMC
September 12—Security: PersonalGuarantees Standyby Letters ofCredit, etc.
September 28—Essentials of CashManagement presented by StevePorter, CCE, Knowledge Learning8:30 a.m. - 12 p.m.NACM Oregon7931 NE Halsey, Ste. 201, Portland$95 (M); $135 (NM)
All-day Seminars
September 19—Basic FinancialAnalysis presented by Rod Wheeland,CCE, NACM Oregon8:30 a.m. - 4 p.m.
NACM Oregon7931 NE Halsey, Ste. 201, Portland$140 (M); $175 (NM)
October 5—Getting ExceptionalCollection Results presented by CherylWahlberg, CCE, and Isaac Miller, FoodServices of America8:30 a.m. - 4 p.m.
NACM Oregon7931 NE Halsey, Ste. 201, Portland$140 (M); $175 (NM)
October 25—Bankruptcy Update:One-year After the Amendmentpresented by Peter McKittrick,Farleigh Wada & Witt; Bill Creim andRichard Macia, Creim Macias & Koenig8:30 a.m. - 4 p.m.
NACM Oregon7931 NE Halsey, Ste. 201, PortlandAll-day National seminar fee:$195 (M); $295 (NM)
November 8 & 9—Oregon/Washing-ton Lien Laws presented by a team ofattorneys from Sussman Shank LLP8:30 a.m. - 4 p.m.
November 7 - December 5—LegalEnvironment of Credit presented byRod Wheeland, CCE, NACM Oregon (5successive Tuesdays)8:30 a.m. - 4 p.m.NACM Oregon7931 NE Halsey, Ste. 201, PortlandCollege Course fee:$95 (M); $135 (NM)
Additional cost for textbooks.
December 6—Security and UCCFilings (Instructor TBA)8:30 a.m. - 4 p.m.NACM Oregon7931 NE Halsey, Ste. 201, Portland$140 (M); $175 (NM)
Certification Roadmap Class
September 7Would you like to earn your designa-tion, but you don’t know how to getstarted? CBA, CBF,or CCE are recog-nized designationsin the credit world.Join us for lunch and we will help youget started on how to attain your goal.
Seminar fee: Complimentary
Page 7
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
ScholarshipsNACM-Oregon Foundation Scholarship FundsAvailable for 2006
• Pacific Northwest Credit Congress (PNWCC)—seven (7), $300 scholarships, September 20-22,2006, Vancouver, BC.Deadline: August 18, 2006Total: $2,100
• NACM SeminarsTotal: $1,000
• Certification Fees—to establish files for examsand for continuing certifications and recertifica-tions i.e. CCE, CBF, CBA, CICP.Total: $2,000
• College courses approved and required foraccreditation and certification. Includes onlinecourses through NACM National EducationDepartment.Total: $1,000
• Phylliss Clark Memorial Funds—three (3), $300scholarships. Applicants must be a CFDD mem-ber and a first-time Pacific Northwest CreditConference attendee. One scholarship allocatedfor each chapter—Eugene, Portland, and Salem.Deadline: August 18, 2006Total: $900
Contact Lou Rice for an application or more informa-tion at 503.454.1051 or [email protected].
NACM Oregon
• Three (3) scholarships for each seminar avail-able (does not apply to National seminars andGood Morning Credit! classes/series).
CFDD ChaptersSalem/AlbanyThis chapter of the NACM Credit & Financial DevelopmentDivision meets the second Tuesday of each month.
Coordinator: Theresa Quillard5 0 3 . 3 6 2 . 3 6 3 3t q u i l l a r d @ a i r b p a v i a t i o n . c o m
Eugene/SpringfieldThis chapter of the NACM Credit & Financial DevelopmentDivision meets the second Wednesday of each month.
*** No August Meeting ***
Coordinator: Michael Stapleton5 4 1 . 2 4 2 . 7 8 2 5m s t a p l e t o n @ l e v i . c o m
PortlandThis chapter of the NACM Credit & Financial DevelopmentDivision meets the second Thursday of each month.
Meeting Date: Thursday, August 10, 2006Location: Days Inn City Center, 1414 SW 6th Ave.Networking Time: 5:30 p.m.Dinner: 6 p.m.
Topic: “Credit Today”
Presenter: Jim Jensen, CCE/CEW, International BusinessC o n s u l t a n t s
Coordinator: Marilyn Rea, CBA, Pacific Architectural WoodP r o d u c t s503.284.0024 ext. 18m a r i l y n r @ p a c i f i c w o o d p r o d u c t s . c o m
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A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Publications
Credit Professional HandbookThe Technical Reference Manual for Credit andCustomer Financial Management
This is the 2nd edition of Credit Research Foundation’sCredit Professional’s Handbook.The first edition, compiled in 1999was the first book of its kind wherepractical knowledge filled the pagesfor a quick and easy to use reference.CRF developed the handbook forcredit professionals as not only adesktop reference but also as a tool tobe utilized in the development andeducation of workers in the field ofbusiness credit management.
It presents the principles of creditand receivables management as wellas the more advanced financial and analytical techniquesused in business-to-business transactions. It is intended to beused by both seasoned credit executives and those new tothe field as a quick and easy reference and learning aidwithout extraneous details.
On the surface there are few differences between this copyand the first edition (1999) of the Handbook. As before, thepublication is constructed to cover fundamental subjectsthat in theory are core principles for those working in thefield of business credit. However while the principlesremain the same, the last seven years have seen significantchanges to the legal and technological environmentaffecting credit management: bankruptcy, security,privacy, advanced automation, credit scoring, ERP systemsto name a few. A revolution was caused by the suddenimpact Sarbanes-Oxley had on the way we examinecustomers and perform the administration of creditmanagement. Also changes to the way technology haseffected our field seem to happen overnight. This 2nd editionaddresses these distinctions.
The first 16 chapters represent information that iscentral to the interest of managers and supervisors; whilethe remaining 17 sections are filled with required materialcore to the development of all personnel working in the fieldof credit and accounts receivable.
Price: $75 & S & H
Your Guide to EscheatmentEvery state, Puerto Rico, Guam and the Virgin Islands
have unclaimed property statutes.With origins in British common law,whereby property without heirsreverted to the sovereign, modernunclaimed property laws provide forthe state to act as custodian ofproperty in perpetuity on the behalfof the rightful owner. Thispublication reviews the objectives ofmodern unclaimed property lawsand the importance of complyingwith state reporting and remittanceregulations.
Price: $20 + S & H
Reclamation ManualSellers' Rights of Reclamatin, Stoppage of
Delivery, and New Administrative Claim
Second Edition
Written by Bruce S. Nathan (Lowenstein Sandler PC; NewYork) and a task force of members from ABI’sUnsecured Trade Creditors’ Committee. Thesecond edition, updated to include the 2005changes to the bankruptcy law, guideslawyers and trade creditors through theexacting requirements that must be satisfiedin order to obtain quick relief when eitherreclamation or stoppage of goods in transit isavailable as a remedy for unsecured tradecreditors, and outlines the steps creditors must follow tosuccessfully exercise these remedies.
Price: $10 & S & H
Three Easy Ways to Order:
Fax: 971.230.1183Phone: 971.230.1182 or 800.622.6985 ext. 182.
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
prevented or at least substantially delayed in gettingrelief. Conversely, if you have properly terminated acontract pre-bankruptcy, you may avoid all of thedelays inherent in the bankruptcy case.
Many leases, loan documents, purchase orders, andother contracts typically have default clauses whichsay that the filing of a bankruptcy or the insolvency ofthe contract party is a default. These provisions arenot enforceable in bankruptcy but are not illegal.While it is permissible to continue to include theseprovisions in case they have any deterrent value,other specific requirements and covenants which giveyou an ability to call a default and terminate thecontract prior to bankruptcy are essential. Tradecreditors can include cross default mechanisms suchas indicating that any default by your customer underits loan agreement with its primary lender will be anevent of default under your contract. Loanagreements as well as trade agreements can havespecific covenants related to the financial stability ofthe borrower/customer. Be creative and includecovenants that will give you grounds for default whenyou need them. If you are relying on the other partyto the contract to handle funds or goods in a certainway, spell out the expectations and build in amonitoring mechanism and a default if the other partyfails to comply with the covenants.
• Obtain A Guaranty or Letter of Credit IfPossibleHaving a guaranty from the principal of your debtorentity or from an affiliated business entity will notonly provide another source of recovery but mayensure that your debt receives priority treatment.Taking it even further, require the guarantor to“secure” the guaranty with a security interest inproperty owned by the guarantying party. Consideralso requesting a letter of credit from a financialinstitution to protect the payment due to you,particularly if selling under open credit terms. Ifyou obtain a guaranty, include language saying it is aguaranty of payment not of collection. Remember thatit is far easier to obtain a guaranty or letter ofcredit up front when everything is positive and thedebtor is sure they can perform.
• Check Your Attorney’s Fee Clause
There are plenty of bankruptcy cases which indicatethat an attorney’s fee clause that says that you cancollect fees “if the matter is turned over to an attorneyfor collection” are not enforceable in a bankruptcycase. Your attorney fee provision should be broad andspecifically say that it covers any attorney’s fees andexpenses incurred to protect or enforce your rightswhether or not litigation is commenced, specificallyincluding monitoring or responding to pleadingsfiled in a bankruptcy by or against your debtor.
• Provide For Interest on Past-due BalancesLoans generally provide for a higher default rate ofinterest effective upon default. Agreements governingsales on open account frequently fail to includeinterest when the account is in default. Considerhaving your standard contracts and documentsreviewed to see if changes can put you in a betterposition when default occurs. All sales on openaccounts should provide for interest on past due orbalances with said interest to accrue from a specificpoint such as the date of delivery or due date. Also, beclear regarding when the right to interest arises. Forexample, “All past-due balances are subject tointerest at the rate of X percent effective upon default.Interest will accrue from date of invoice until paid.”
• Provide For Rights of Offset and RecoupmentEvery contract should expressly provide for rights ofsetoff and recoupment. The Bankruptcy Codespecifically acknowledges these rights if they arecontained in the contract. Generally, the right ofoffset allows Party A to offset an obligation it owes toParty B against an obligation owed by Party B to PartyA. Recoupment goes a step further and is similar tooffset but specifically relates to offsetting claimswhich arise out of the same transaction, or sometimesthe same contract. This is an important right atcommon law but also in bankruptcy since theBankruptcy Code specifically recognizes recoupmentas well as setoff. More importantly, the right ofrecoupment, if it exists, enables the creditor to offseta pre-petition claim against a post-petition claim,something not ordinarily allowed. This is because
Vaccination Against Bad Debts...from cover
...continue on page 11
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A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Vaccination Against BadDebts...from 10
recoupment relates to a singletransaction which crosses over thefiling date barrier.
SummaryMany of these vaccinations are factspecific and must be considered inlight of the types of transactionsgenerally undertaken by thecreditor. When times are good, it isthe best time to take a step back andreview your documents before thenext wave of defaults hits.
Meeting RoomRentalNACM Oregon has meeting roomsavailable for your organization’suse.
The larger room, approximately700 square feet, will comfortablyaccommodate 24 people classroom-style or 35 people theater-style. Thisroom has whiteboards on two walls,and all contemporary technology isavailable.
Meeting Room Rental Fee: $190per day/$70 per hour (two-hour minimum). NACMOregon Members/BuildingTenants receive a 50%discount on these fees.
NACM Oregon also has aBoardroom that comfortablyaccommodates ten people. Thisroom includes a whiteboard andappropriate technology.
Boardroom Rental Fee:$150 per day/$50 per hour(two-hour minimum). NACMOregon Members/BuildingTenants receive a 50%discount on these fees.
The Banfield Plaza, an NACMOregon property, is centrallylocated at the I-205/I-84 junction inPortland. NACM Oregon offices areon the second floor.
For more information pleasecontact Lisa Rogstad, BuildingManager, at 971.230.1160 or [email protected].
This publication of Poyner &Spruill LLP provides generalinformation about significant legaldevelopments. Because the factsin each situation vary, the legalprecedents noted herein may notbe applicable to individualcircumstances.
American RedCross Blood DriveThe final results of your Friday, June30, 2006, blood drive at NACMOregon, Inc., are as follows:
Goal: 16
Presenting Donors: 20
Deferred Donors: 5
First-time Donors: 5
Total Pints Collected: 15
Summertime is achallenging time forblood collections.High schools are outfor the summer andmany regular donorsare traveling. Withoutthe commitment ofpeople like you, bloodwouldn’t be there for all the peoplewho desperately need it. Thank youso much for all your hard work anddedication.
Through our partnership, we canensure that the blood needs of ourcommunity are met.
Sincerely,
Marni HarringtonDonor Services Representative
Page 11
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
• How To EffectivelyManeuver theCanadian BankruptcyWebsite
• Securing Your ReceivablesWith Standby Letters ofCredit
• Is Coffee Break the Best Partof Your Day?
• Laugh For the Health of It
Cost: US $285After August 15, 2006: US $315
Page 12
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
October 4-6, 2006,Monte Carlo Resort & Casino
Las Vegas, Nevada
Be there when the starting gun goes off at the 19th Annual NACM WesternRegion Credit Conference (WRCC).
The Get on Track Conference is designed for anyone who performs the businesscredit function at your company. Our educational tracks support entry level toexecutive experience. From the Credit Analyst to the CFO, you can all benefit byattending the Get on Track Conference.
Visit our website at www.wrcc.biz for Conference details.
19th Annual NACM Western Region Credit Conference
Page 13
A MONTHLY JOURNAL PUBLISHED IN SERVICE TO THE BUSINESS CREDIT COMMUNITY
August 2006
7931 NE Halsey, Ste. 200Portland, Oregon
Tel: 503.257.0802Fax: 503.257.0247
NACMBusiness Credit JournalHelping Businesses Succeed Since 1896
Board of DirectorsChairmanCheryl Wahlberg, CCEFood Services [email protected]
