Magazine article Business Credit

The More Things Change ... Credit Managers Focus on Terms, Getting Paid in 2018

Magazine article Business Credit

The More Things Change ... Credit Managers Focus on Terms, Getting Paid in 2018

Article excerpt

In these kinetic economic times, news of local, national and world events spins into the ether at lightning speed. Voices propagated across the internet vie for our attention constantly. The demands on our concentration pile up, as does the requirement that we accurately filter out the sorts of valuable information that can be used to grow the bottom line or protect our valuable assets from the noise that distracts or discourages us.

As NACM looks forward to our members' prospects for a new, prosperous year, we've asked them to relay some of their deepest concerns as credit professionals. The results from our Deepest Concerns '18 survey indicate that trade creditors have remained laser-focused on the matters that most directly impact their daily duties. The top two worries of this year's 394 respondents are the same as they were when we polled them in 2016 and 2015. They are: customers trying to dictate unfavorable terms (49.75% for the T8 survey) and slow payment, delinquency and general customer creditworthiness (45.69%).

The percentage of respondents who see slow payers and creditworthiness as a top issue has been slowly decreasing over the past three surveys--from 53.27% in the 2015 survey and 48.74% in the 2016 survey. Yet it remains a problem for credit managers.

A credit manager at a global technology company said she has seen the number of accounts aging out increase and DSO soar as her firm has taken on a no-credit-application policy. The credit team is having a difficult time collecting, in part, because it doesn't have the necessary information on the front end to ensure invoices go to the correct person or that missing purchase orders can be quickly tracked down.

Ben Kramer, credit and collections manager with Outdoor Research in Seattle, said he's not afraid to address the issue by putting an account on hold if need be. "I have to have leverage to collect," he said. He added that establishing good relationships with sales personnel, helping them meet their quotas and goals in any way he can, and saying "yes" whenever he can grows trust and brings extra support from the sales team when he decides to put a troubled account on credit hold.

Dictating Terms

This year's survey also shows that for the first time in three years the percentage of credit professionals who view the dictation of terms as a top concern fell to a little less than half of the respondents. But it's still top of mind for many, including Jon Hanson, CCE, CCRA, credit manager with Western-BRW Paper Co. Inc. in Carrollton, TX. The company, which is a distributor that sells commercial-grade printing paper, has seen its sector shrink of late by about three to five percentage points per year, leading to slower payments and some customers asking for extended terms, he said.

Hanson and his team participate in their industry credit group and stay as close to their sales team as possible to keep up-to-date on customers. He is also a fan of paying visits or calling customers to be on top of potential issues. These efforts have paid off, as bad debts and delinquency percentages have been down, along with DSO relative to the industry, Hanson said.

Michael Cote, credit and collections coordinator with freight industry firm Magnum LTL Inc. in Fargo, ND, said he's seen customers ask almost weekly for extended terms--up to double the company's standard timeline. The situation is impacting the company's bottom line and KPI (key performance indicator) numbers. Of particular concern is the underlying issue that if there are any errors on invoices generated for accounts that have extended terms, it can result in an even greater delay in payment. "We do as much as possible to push back because of the way the economy has been going in the last couple of years," he said.

If terms are extended, Cote said he asks for payments to be made via ACH, credit card or wire. Additionally, he asks customers to provide trade references and a signed credit application. …

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