Magazine article Business Credit

Knowing Your Customer: Issues with Buyers Lead the List of Credit Concerns for 2015

Magazine article Business Credit

Knowing Your Customer: Issues with Buyers Lead the List of Credit Concerns for 2015

Article excerpt

Successful businesses have a way of meeting customers' needs as well as their own. But balancing customer service and support with what makes good business sense can at times seem more like a juggling act than actually doing business.

The top three most pressing concerns revealed in NACM's annual survey reflect this conundrum for commercial credit professionals as they look toward the New Year.

Slow payments, delinquency and general customer creditworthiness rose to the top with 59% of those who responded to the October survey identifying this tension trio as their number one concern. "Companies need internal control measures to ensure they complete risk assessments of new customers before both parties sign a contract," said Andrea Bohr, chief accounting officer of DRMP, Inc.

Customers who try to dictate unfavorable terms followed closely with 56% of respondents recognizing it as a source of great concern. "We are already seeing an increase in requests for extended terms," said Doug Jacobson, CCE, Northwest regional credit manager for Roofline Supply & Delivery. "I think it is going to become more prevalent next year."

Not having enough information about potential customers placed third on the survey with 31%. Getting financial data from private companies is difficult, said one participant. "More and more companies provide less information that can be validated to accurately access their creditworthiness and financial health. For example, the fuel industry offers 10-year contracts with high dollars attached to them for various-sized gas station operations," said Vicki Powers, CCE, US oil division credit manager for US Venture. "It often becomes a challenge to gather solid information on smaller, newer entities in order to form a strong recommendation regarding credit risk."

Beyond Customers

Customer issues were not the only problems facing credit professionals, however. Economic and global issues remain at the forefront. Economic growth prospects globally--especially in the European Union and China--and domestically, caught the attention of nearly 22% of respondents. Despite "general apathy in the business world, global unrest is real and fear and terrorism is encroaching on all of us," said Anthony Garside, CCE, ICCE, credit and risk manager for ARYZTA Business Services. "2015 is going to be another tough year," predicted Arrel Tucker, credit/collections manager for Summit Premium Tree Nuts. "The EU is not stable yet, and who knows what effect the sanctions on Russia will do to [it] and to the EU." In addition, "South America is unsteady and so is the Pacific Rim. The US is getting better, but at a turtle's rate."

Others shared similar concerns. "Whether the economy will continue to improve or slide back down" was an issue for Leslie Henley, CCE, credit manager of Morse Steel Service. Another survey participant agreed. "We have seen a bit of a slowdown in our markets in the eastern half of the country. We believe and hope it to be just a temporary down cycle."

Global "disruptions will filter back into our economy in the USA, said Richard Reed, credit and collections manager of CVR Energy, Inc. and Coffeyville Resources Refining & Marketing, LLC. "Although the railroad business is doing well in the US and Canada, many US markets are shrinking as some of their exports are affected by the slow global economy," said Allen Vickers, CCE, corporate credit manager of A&K Railroad Materials, Inc. "Having said that, there are several major factors pushing the railroad business in the US, which include energy, crops and government-assisted projects. And if there are reductions in all or any of those driving factors (meaning less oil demand, lower export numbers, or government cut-backs), then it will begin to also impact the railroad industry."

More of the Same

The credit world continues to bounce up and down as the economy fluctuates, said one respondent. …

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