The online source for credit information             2010 | 2009 | 2008 | 2007 | 2006 | 2005 |

Human resource management

Change management vs. transformation management

The truth is, change is not the issue anymore in North American workplaces. Unless organizations make quantum leaps now, they will be unable to cope with what’s coming.

WE ARE NOW IN THE CONCEPTUAL AGE

Traditional Change Management strategies were born in the Information Age. We are now in the Conceptual Age according to Daniel Pink in A Whole New Mind. Soon another “Age” will be upon us as change speeds up exponentially. We need transformational leaders rather than change management scripts. We now need people at all levels of an organization to think in transformational ways rather than only be good at giving or receiving orders.

THE DIFFERENCE BETWEEN CHANGE MANAGEMENT AND TRANSFORMATION MANAGEMENT […]

HOW YOU CAN ENSURE YOU STAY EMPLOYED […]

THE TRAITS YOU NEED TO CULTIVATE…

>>> Read more

International credit

Business insolvency worldwide –
Neither better nor worse

Two records in a row: +26% in 2008 and +33% in 2009. These are figures for the increase in business insolvencies across the world, and they are unprecedented. There are many factors to explain these business failures, and one may broadly divide these into two main categories – one that we can label as ‘economic’ factors and the other as ‘financial’ factors. The economic factors include, in particular, a shortage of market outlets, strategic errors, excessive costs, and macroeconomic rigidities specific to a given country or sector. The financial factors that can equally be at the root of bankruptcies include insufficient self-financing, difficulties obtaining payment from customers, and financial costs resulting from excessive debt. We can already draw some ready conclusions about the chain of events at work in 2008 and 2009.

Firstly, unlike in previous crises, the financial factor seems to have been an essential element driving the explosion in...

>>> Read more

Bankruptcy corner

Summary of key legislative amendments

Part 1

HIGHLIGHTS OF NEW LEGISLATION

On September 18, 2009, changes to Canada’s bankruptcy and insolvency legislation came into force. These changes are designed to modernize the insolvency system, increase fairness and reduce abuse of the system, and encourage restructuring as an alternative to bankruptcy.

Below are a few highlights of the amendments to the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA).

In this series of articles, we will examine a summary of key legislative amendments in force as of September 18, 2009.

:: COMMERCIAL-RELATED AMENDMENTS

>> Interim financing

The Court will now have the power to grant a security (over existing securities) in favour of a lender providing new interim financing to an insolvent business that files a proposal under the BIA or a plan under the CCAA. The amendments bring increased clarity about the powers of the Court in this regard.

>> Unpaid suppliers’ rights […]

>> CCAA oversight

The Office of the Superintendent of Bankruptcy will maintain a public registry of CCAA filings…

>>> Read more

Bankruptcy corner

Now what? Your customer has filed for bankruptcy protection

It happens to every credit executive at one time or another; a customer files for bankruptcy protection. When this happens it is critical that you take action – immediately. There’s no time to wait. As the lawyers like to say, time really is of the essence.

Immediately determine if your company has goods in transit to the customer. If you do, contact…

>>> Read more

Credit Internet

Tip of the month – A tip from the trunc*

When you don’t want to enter eight different spelling variations of a facet, you can use truncation, when you enter compet* you’ll get results containing the words […]

:: PUNCTUATION POINTERS […]

One of the things you pay for in premium services is extensive documentation and support. Use Help, and you’ll become quite adept at locating the information you need on the fly.

On the web, all search tools have…

>>> Read more

Collector's corner

Proactively prevent past due accounts -
Don’t wait until it’s too late

Cash on Time – eBilling Solution

In the past, sending and receiving invoices electronically was costly, complex and confusing. Our eBilling solution dismantles these barriers - to revolutionize the way bills, payment reminders, collection/dunning letters and other mass generated billing related documents are delivered and tracked in real-time.

Built by billing professionals for billing professionals, our world-class eBilling application is designed to work within existing accounts and billing environments – there is no need to do away with your previous investments. Our solution seamlessly interoperates with your existing or legacy accounting systems - no matter who the vendor or what the data format in or out. Moreover, our eBilling solution fully automates your billing processes, from generating and sending secure electronic invoices in the client’s preferred format through to receiving ‘Proof of Delivery’ and consultation/alert reports – providing a real-time snapshot of the status of all your invoices.

Cash on Time eBilling has become more than a way for organizations to cut costs - it offers a new way to reach customers, add value, and increase working capital. Our eBilling solution combines the power of automation and real-time tracking to empower your collection team to be more proactive and strategic in how they track, analyze and manage the billing process relative to collecting more money more quickly…

>>> Read more

Bankruptcy corner

Danger signs: Which of your customers will file for bankruptcy protection?

In an ideal world you would only sell to those customers who had excellent credit. But, no credit executive lives in that ideal world. Virtually all of us walk that fine line between meeting the demands of a sales and management team anxious for every last sale and what our credit analysis reveals. So, it is crucial that we keep our eyes on the ball identifying the danger signals when they pop up.

There are perhaps two dozen issues that could signal a bankruptcy filing and any one of them…

>>> Read more

Human resource management

Six ways to improve internal communications

In today's recessionary, cost-cutting marketplace, success depends upon the effort, commitment and drive of everyone in the organization. The employees, who fuel the organization, must be encouraged and motivated through a constant flow of information. Some no-cost communication ideas include:

>> 1. Develop a "top-down" culture that encourages and rewards open communication and collaboration […]

>> 2. Communicate corporate mission, expectations, targets and results to every employee […]

>> 3. Share the corporate strategy and vision with every employee […]

>> 4. Align division and department goals with your corporate strategy […]

>> 5. Share financial results (both good and bad) with all employees…

>>> Read more

Collector’s corner

Proactively Anticipate Payment Issues –
To Get Paid Faster
Cash on Time – Automated eCollection Solution

CASH ON TIME - eCOLLECTION SOLUTION

Cash on Time combines highly-intuitive automated productivity tools with real-time tracking and reporting to deliver complete visibility across the entire invoice management process. As a result, Cash on Time optimizes billing and collection best practices and empowers collection professionals to better understand the overall cash flow situation, quickly identify potential payment issues and proactively manage the invoice-to-cash cycle to collect more money more quickly.

Built by collection/credit experts for collection/credit professionals, eCollection enables collection/credit managers to create customizable rules and policies to more efficiently drive their ‘unique collection best practices’ and generate repeatable free cash flow streams.

eCollection Solution - Fuel your Collection Productivity
The single most important benefit of Cash on Time eCollection solution is the ability to collect your receivables faster. With customers across all industries stretching payment terms – there is an alarming increase in the number of invoices that become ‘past due’ and ‘in dispute’. Now more than ever, collection/credit managers need Cash on Time eCollection, the best-of-breed solution in the market to expedite invoice dispute resolution.

Our eCollection solution provides collection teams with a rare commodity – the time to create and execute proactive collection strategies. By combining workflow automation with real-time tracking, eCollection enables collection teams to anticipate payment issues and proactively reach and resolve delinquent accounts to ensure that organizational collection targets are met…

>>> Read more

Credit manager’s corner

Financial analysis for today's credit professional

There's an old saying that goes, "An account properly opened is at least 80 percent collectible." This statement still holds a lot of truth for credit managers and should not be overlooked due to time constraints and limited resources. Excessive bad debt write-offs should not be rationalized as "the cost of doing business." Many of the successful businesses operating today do so while keeping write-offs to a minimum (e.g. less than half of one percent). They achieve this through the use of proper credit investigative procedures.

Depending on your profit margins, the cost of recouping a bad debt write-off can be enormous. Sales must increase significantly to offset these losses, and this puts undue pressure on the sales force, which is probably under enough strain already. Obviously, if your department can possibly collect all or most of the money owed by customers, your company will have more cash in the bank and less of a need to hire a third party (i.e. a collection agency) to go after debtors. The less you rely on outside collection, which can be very expensive, the better.

It is important for you, as a credit professional, to maximize your efforts while minimizing costs in the investigative process. Your successes should demonstrate just how vital the credit function is to your firm's operations and profitability, and will convince smart management to rely on your department for input in decision-making and as an extension of the sales/marketing department.

:: DEALING WITH A KNOWN ENTITY OR A NEWCOMER […]

:: SEARCHING FOR CLUES […]

:: WHAT TO LOOK FOR IN A FINANCIAL STATEMENT […]

:: ANALYSIS PLAYS A CRUCIAL ROLE…

>>> Read more

COLLECTOR'S CORNER

New automated collection software solution
helping you master today’s collection challenges

Cash flow is more than king - it is the lifeblood that sustains your organization’s ability to fund operations, R&D programs, pursue acquisition and expansion plans as well as attract investor funding for future growth.

Organizations the world over are facing challenging times. With customers stretching payment terms, the resulting increase in Days Sales Outstanding (DSO) has distressed many organization’s cash flow projections and position. With less cash to count on, knowing your cash flow position has never been more important. Financial executives are challenging collection/credit managers to let them know what revenues from which invoices are coming in, and when.

As a result, this has compelled collection/credit professionals to recognize the urgent need, to fine-tune their collection practices and implement a solution that integrates automated workflow tools with real-time tracking and trend analysis to help address collection challenges and add value that can be measured across all phases of the collection and recovery operation.

To this end, forward-thinking collection/credit managers are abandoning their traditional manual collection process in favor of the dynamic ability provided by a solution that allows them to effectively automate and proactively manage their invoice-to-cash cycle to drive and sustain cash flow streams for maximized working capital.


The Current Collection Nightmare

Collection activity has always been challenging and continues to become more and more complex as business evolves within highly-competitive emerging environments. Today, collection/credit managers are challenged to improve collection and recovery rates with limited resources in a weakened economy.

Recent studies conducted by industry luminaries such as Deliotte & Touche, CRF International, Pay Stream and other collection industry thought leaders; identify the following top challenges and obstacles to collection efficiency:


1. Cash Flow Preservation

A full third of all medium-sized organizations are experiencing in excess of […]

3. Escalating Invoice Disputes […]

4. Manual Collection Process – Reactive vs. Proactive […]

Cash on Time - Eliminating the Collection Efficiency Gap […]

Cash on Time – eBilling Solution […]

Cash on Time – eCollection Solution […]

>>> Read more

Credit management – CREDIT ANALYSIS

Providing credit references

Providing a credit reference is much the same as providing an employment reference. One cannot be too careful when providing information on a customer. Although there are few restrictions legally with business credit, it is embarrassing to be criticized for anything other than providing factual information in a confidential manner. Also be careful about providing a competitor with information on a new account.

There are varying policies regarding information being provided on telephone, email or fax. In a few cases, the policy is not to provide any information at all. The policy may also be different in some industries. When providing a credit rating on the phone you should ask several questions and also confirm that the information provided will be kept confidential…

>>> Read more

Credit Internet

Search basics – Fundamental functions apply

Your time is simply too valuable to spend careening through cyberspace with no direction. That’s why it is worth spending some time learning basic search functions that are universal to all searching. Understanding these standard functions can help you acquire information quickly.

:: IN CLOSE PROXIMITY […]

Let’s say you want to redesign your credit application form and would like to look at some examples. You could try…

>>> Read more

Collector’s corner

To improve collections – know when to be specific – when to be general

An Irishman, a Mexican and a Canadian go for a walk in the Colorado Mountains. Sounds like it may be the beginning of a joke, doesn’t it? Not too long ago, I had occasion to visit Abe “Walking Bear” Sanchez at his home in Colorado. It was a special occasion to meet with Abe, well known in the business of collections, but also with others who are well known in the credit/collection fields of their respective countries: Declan Flood with the Irish Credit Institute and Luis Eduardo Peréz from Mexico City.

Each of us has conducted hundreds of hours of training and consulting in effective collections. One might think with all those professional speakers and trainers in one place, it can be difficult to get a word in edgewise – after all – we are paid to talk. It has taken me some time over the years, but learn it I did...in a situation like that, I try to listen more than talk.

Here is a tip I picked up from Declan during an early morning walk with Luis:

“You'll get a much better response,” Declan said, “when you...

>>> Read more

Credit management – CONSUMER CREDIT REPORTS

Personal financial oversights you can’t afford to make

:: CREDIT SCORES

Some larger financial institutions have their proprietary credit scoring systems but by far the most widely used is FICO. The FICO® score, developed by Fair, Isaac and Company, Inc., a U.S-based firm, is a number between 300 and 900 that lenders use to determine credit risk. A FICO® score is a snapshot of the credit risk at a particular point in time. The higher the credit score the more likely you will to be approved for loans and receive more favorable rates.

>> Examples of how scores affect interest rates…

>>> Read more

Credit management – CREDIT EDUCATION

The high costs of cutting training

With 2009-2010 looking to be the most challenging in a decade, maintaining revenues, cash flows and cost-cutting is at the top of many companies to-do lists. After cancelling the company jet, lunches, travel, the Christmas party and cutting staff levels, training will undoubtedly come up as an easy budget-line to cut.

Thus, it is important to ensure that available funds are well spent.

In a credit and collection context, one of the issues is that skills and knowledge have been given less importance in recent years due to a strong economy and relative ease of collecting money. Anyone can call accounts payable and get a cheque that in many cases has been sitting waiting for the call. The problem arises when the communication needs to be escalated. How many clerks are prepared to call the Vice-President or President and negotiate?

Here are some reasons why the training budget should be increased during tough times. Particular attention is placed on collections […]

:: WHY DO MANY COMPANIES NOT DO MORE TRAINING […]

:: DON’T THROW MONEY AWAY ON USELESS TRAINING – PLANNING WELL CUTS COSTS AND INCREASES VALUE…

>>> Read more

Credit management – CREDIT TIP

Credit tip of the month

For larger customers, or any steady customers, try getting their […]

>>> Read more

Credit manager’s corner

Considerations before suing an account – Part 2

How will the defendant defend your legal claim?

Once the customer relationship is severed and moves into a creditor-debtor relationship, some debtors will resort to any tactic to delay or defeat your claim. Lying, even in court under oath, is common with some people. One way to think about this is ask yourself the question: “How would I get out of entire or reduce a claim, knowing what I know about my company?”

Suppose, for instance, you sue a customer in Small Claims Court. The customer, perhaps having been through the legal process previously, countersues you for, say, a ridiculous claim regarding your claim having defamed them or ruined their credit rating or some claim about performance or service of the product. They sue you in Superior Court. Now you must hire a lawyer to defend this claim, as frivolous as it may be. The customer then calls your boss, (not you, a credit professional), the conversation goes something like this…

>>> Read more

Collector’s corner

Can a visit to the dark side help your collection efforts?

Last year, Tori, a scheduling manager with one of my favourite clients called me. “I know your usual topic is Accounts Receivable,” she said, “but I was wondering if you also conduct programs on ‘Accounts Payable’? I don’t know the topics myself,” she added, “but how different can they be?”

Well, the short answer, as most of you know, is “a lot!” However, I am always preaching to folks about getting out of our comfort zones and expanding our knowledge, so for a number of different reasons, I accepted the assignment. […]

We often talk about trying to understand the other person's point of view, but most of the time (me included) it is just talk. We need to go “walk-about” in our customer's shoes and the very best way to learn about a subject is to teach it.

You may find a benefit too, visiting your dark side. Perhaps it is staff and management of accounts payable you often deal with, but it could be others and you don't have to teach a course…

>>> Read more

Credit news briefs - COLLECTIONS

New collection methods

Bell Mobility has started text-messaging reminders to delinquent accounts, which at least they are not charging for yet. And Bell Canada has advanced their serious reminder on commercial accounts…

>>> Read more

Credit management – CREDIT ANALYSIS

Traditional bad debt chart challenged

In answer to a customer’s question on the following chart which has been used for years: […]

Collection and credit agencies often use this well-known chart to highlight the impact of bad debt and the additional need for making up the loss with additional sales. The calculation is challenged by accountants who note that the actual loss is always less than the write-off due to potential profit being included. In fact, according to accounting folks…

>>> Read more

Credit management – CREDIT TIP

Purchase order checklist

While not a problem in every business, credit personnel in construction, advertising agencies should be aware of the consequences of a customer’s purchase order taking precedence. The basis tenet in contract law if “whoever acts on the last form is bound by the terms and conditions of the last form”.

With purchase orders usually being the last form, a customer changing terms or usual terms may bind the supplier. Most staff only care about product or service/quantity/price/delivery. Few notice that a “pay when paid” or “pay if paid” clause is present. The problem is…

>>> Read more

Credit legal matters - Ontario

Construction companies can use a simple letter to save a fortune

Section 24 of the Construction Lien Act, R.S.O. 1990, gives a simple letter the power to save unpaid contractors and subcontractors from costly debt collection proceedings.

The letter, known as a “written notice of lien,” when received by a payer, up the construction pyramid, has the power to stop the flow of funds in the construction process without the registration of a Claim for Lien.

Once an owner, contractor, or subcontractor has received written notice of a lien, that payer must, in addition to the statutory holdback of 10 per cent, retain an amount equal to the amount claimed in the written notice of lien. The funds held back are commonly referred to as “notice holdback.” The notice holdback must be…

>>> Read more

Bankruptcy corner

Staggering increase in Canadian personal bankruptcies but businesses hanging in

For the 12-month period ending June 30, 2009, business insolvencies decreased by 4.9 percent compared with the 12 months ending June 30, 2008. Most of this is because of a reduction in insolvencies in […]

Quebec and British Columbia increased by […]

The following is a chart showing bankruptcies and receiverships at various periods over the past 42 years…

>>> Read more

Bankruptcy corner

Twentieth auto parts supplier files for bankruptcy protection

Lear Corp is the latest auto parts supplier to reorganize itself under U.S bankruptcy laws, bringing the four Canadian plants under the umbrella. Papers filed in U.S. Bankruptcy Court in New York on July 7 showed it had $1.27 billion in assets and debts of $4.5 billion USD. […]

Industry insiders doubt the bankruptcies will stop here…

>>> Read more

Credit manager’s corner

What causes business to fail – Part 5

Business fraud

While deliberate business fraud only occurs in a small number of accounts, during a business downturn, and faced with few survival choices, some business people will resort to almost any action to save their lifestyle. This can also occur in alliance with other parties, such as secured lenders. (Would a lender prefer having inventory as collateral or taking action on a personal guarantee to end up with one-half of a guarantor’s house?)

Other business fraud includes securities fraud, contract fraud, real estate fraud, land fraud, dangerous products and overbuying of inventory. Rare, but not unknown, is counterfeit securities used to secure other loans.

Fraud is any business activity, which resorts to deceitful practices or devices with the intent to deprive another of property or other rights, or to cause economic injury. […]

>> WHY ARE BUSINESSES SUSCEPTIBLE? […]

>> SOME TYPICAL SIGNS TO WATCH OUT […]

>> WHAT YOU CAN DO…

>>> Read more

Credit legal matters – U.S.A.

Overview of U. S. bankruptcy laws

With an increasing number of Canadian companies (the latest being the amusement park company Six Flags, which owns La Ronde in Montreal seeking Chapter 11 bankruptcy protection, saying it needs to shed $1.8 billion in debt and Eddie Bauer who own 38 stores in Canada and $426 million in debt), it is important to understand the United States Bankruptcy Code and some of the differences with the Canadian insolvency regimes. This article will only concern itself with commercial bankruptcy.

Article I, Section 8, of the United States Constitution authorizes the Congress to enact "uniform Laws on the subject of Bankruptcies." Under this authority, the U.S. Congress enacted the "Bankruptcy Code" in 1978. The Bankruptcy Code is a uniform federal law that governs all bankruptcy cases in all states. […]

There are two basic types of commercial bankruptcy rules provided for under the Bankruptcy Code…

>>> Read more

Collector’s corner

Handling cheques marked “payment in full”

When a customer sends a cheque for less than the total amount owing and marks it as "payment in full" should the cheque be accepted or returned to the customer/debtor? Does the creditor lose the right to pursue the balance due if the cheque is deposited? What’s the best way to handle these kinds of problems?

Obviously, we could all rid ourselves of our mortgage and any other debt if it was as easy as this. But it is not as simple as it might seem.

When a cheque arrives with a notation on either the front or back of the cheque that it is being submitted as “payment in full”, you have the options of: […]

THE NOTION OF ACCORD AND SATISFACTION

Accord and satisfaction occurs when one party buys himself out of a contractual obligation and this "satisfaction" becomes…

>>> Read more

Collector’s corner

Twelve simple ideas to manage accounts receivable

Gain agreement with customers who do not meet your payment terms. Compromise and negotiation is a better tactic than limiting or cutting off credit. […]

Understand your leverage. Other creditors may have more leverage than your company. When you have low leverage, you have to make contact faster and communicate better than ever before. […]

Watch for customers lowering prices. In construction, for instance, a very low contract bid could mean the contractor is trying to keep staff employed or is going to make his profit from the subtrades…

>>> Read more

Credit manager’s corner

What causes business to fail – Part 4

Cash flow crunch

Growing too fast resulting in a cash flow crunch

Growing too fast and knowing what the company's sustainable growth rate is. Many small-medium companies do not prepare budgets and run into cash flow problems very easily. Orders may be flowing in faster than production can keep up. […]

Out of touch with customers

Most small businesses have a personal relationship with customers. This is one advantage that bigger companies lose. Businesses need to focus not only on good quality products and services but aim on high customer satisfaction levels…

>>> Read more

Credit management – CREDIT ANALYSIS

Reviewing credit basics

Never a definite science, credit analysis is usually always a study of varying shades of grey - not too good - not too bad. If things were black and white commercial credit-scoring would have been in use years ago. Here is a brief list of things to watch for. Combinations of, or several glaring areas, may be cause for alternative credit arrangements or further investigation…

>>> Read more

Credit management – CREDIT RESOURCES

Managing in a recession

While being an effective manager is good business in any economy, honing and developing management skills in a recession calls for renewed insights. For instance, in good times, demotivated and unhappy employees will quit; in poor economic times, they will stick around and cling to their jobs, simply because they have no choice. Department managers need to get the best out of their team. Here are 15 basic requirements, which while everyone buys into, are only practiced by a few…

>>> Read more

Credit managers corner

Considerations before suing an account – Part 1

After reaching the stage where negotiations with a customer over payment of an account have failed, the customer now becomes a debtor. In addition to the usual practice of placing the account with a third party or lawyer, suing the account is the next usual option. Some considerations should be made before proceeding to save time and the expense of litigation. Suing an account never ensures payment and since there is no debtor’s prison in Canada, satisfaction is not even a factor. The point of suing an account is not even obtaining judgment. It is to obtain payment and more money than the cost of proceeding. The broad considerations are…

>>> Read more

Bankruptcy corner

Why so little consequence to bankruptcy?

A common question and topic of long-standing debates amongst credit professionals is how a business can go bankrupt and start up again immediately, often with the same owners, employees, location and telephone number. Isn't there any sanction on bankruptcy?

On one side of the debate, there are the arguments that business […]

One area of interest is the Federal Government’s downloading most of the investigatory aspects of bankruptcies to […]

The most interesting aspect is how they are able to get credit. It never seems to be a problem. In fact, many times second-time bankrupts have some of the same suppliers as the initial failure…

>>> Read more

Credit management – CREDIT TIPS

Tips for new managers

New managers face many challenges in their new role. Taking over a department entails a lot of learning... and some politics, especially when faced with staff who perhaps thought they should get the job. Here are a few thoughts on the first three months…

>>> Read more

Credit management – CREDIT TIPS

Hiring a summer student

Jobs for university and college students are in short supply this year. When you hire a student, you tap into motivated labour who have fresh ideas and enthusiasm…

>>> Read more

Credit insurance

Most effective use of your credit insurance policy

Today we will explore the single most important benefit of the product that generally goes unnoticed by policyholders until they have gained experience using the product and have grown familiar with its features over a period of time. In fact, the benefit itself is the largest source of complaints by policyholders.

In the current economic marketplace, with restrictive credit practices, when negotiating a new policy it may be difficulty for the applicant to find an insurer who will be comfortable with the risk presented. Adequate coverage may be hard to obtain. If you already have a credit insurance policy, you most likely have seen your insurer cancel some limits they are no longer comfortable insuring. Some insurers are refusing to quote on industries where they have incurred heavy losses. This is a harsh reality of the times and the trend is not likely to improve in the near term.

How to work with your policy to cap or reduce bad debt losses…

>>> Read more

Credit and sales

The credit department and marketing

In this recession, revenues are often taking priority to collections and delinquency. Is a real sale today tomorrow’s problem? Credit departments are often overruled on credit decisions or credit limits to be given customers. In some lines, business is very competitive. Another company is selling the same product or performing the same service, at probably close to the same price and may be trying to steal your customers. The sales department has a tough job in most competitive industries - no sales means no customers. That means no jobs. Getting new customers and holding on to the old ones is a joint responsibility of every employee and manager - the credit clerk, the personnel assistant and the delivery driver.

In a sense, everyone – from the credit manager […]

The customer wants to pay in 90 days because their customers are paying them in 90 days. The credit facilities can be cut off or restricted or negotiated alternatives can be searched for.

Here is one example…

>>> Read more

Collector’s corner

19 characteristics of the most effective collectors

In good economic times, deficiencies in communication skills can be overlooked. Skills do not need to be that sharp. When the economy turns, the amateurs will be out of the game first. The collector…

>>> Read more

Credit manager’s corner

What causes business to fail – Part 3

Management experience

Ultimately, the root cause of all business failures is management. There are many other blame and given reasons for business failure – the U.S. credit crisis, China, difficulty in getting credit, heavy debt, competition, but they are all effects. The people, whether owners or directors/shareholders, make the decisions that determine the direction the business takes. In retail credit, character receives the majority of the decision-making process. In business-to-business credit, it is often overlooked or seen as “everything is OK, he is a good guy, never been bankrupt”. Yet, management and character cannot and should not be ignored.

Some of the causes why businesses fail: […]

A person's willingness and ability is shown to a great degree by his/her past record. The analyst should look for information on some or all of the following: […]

While some factors decline in importance as the years go by in business, the new business, in particular, should be carefully analyzed for […]

Running a business is increasingly complex today. The successful business manager must be adept at a variety of areas, […]

Evaluating the “Character” of the people we do business with is not an easy process. Each case should be looked at in an overall sense. People are the product of their environment. Assessing background is basic to professional credit management and should not be ignored because of the difficulty of investigating the information.

Here is one example…

>>> Read more

Bankruptcy corner

Creditors role in bankruptcy proceedings
in dealing with abuses

When creditors have information regarding assets, fraudulent preferences (for example, a payment by the debtor to a creditor that gives the creditor preference over other creditors), improper dealings between the bankrupt and relatives or a related company, or other possible irregularities, these matters should be brought to the attention of the trustee or the inspectors.

As an example, […]

:: Statutory offences […]

:: Offences by bankrupts (sections 198, 199 and 200) […]

:: Offences by creditors (subsection 201(1))…

>>> Read more

Credit Internet

Staying alert – setting electronic snares

A word about jargon. There are two ways to obtain information online. […]

Suppose you want to monitor a customer in the process of a big merger. The outcome of the merger could have a material impact on this important account. You arrange to have press releases…

>>> Read more

Credit risk management

Action planning in a recession

A good motto for an economic downturn is “hope for the best but prepare for the worst”.

Aside from being vigilant and watching for normal warning signs of a distressed customer - slowing down of payments usually, other danger signals include: […]

:: When the possibility of a large loss is discovered, the creditor should develop an action plan to accomplish these goals […]

1. will the customer have counterclaims or defence?
2. are all assets secured so that in the event of a judgment there is nothing to seize? […]

:: In communicating with the customer, it is important the creditor should not make a problem worse […]

>>> Read more

Credit news briefs – CREDIT BUSINESS PRACTICES

Federal government instituting new credit card regulations

[…] Canadian Federal Government has proposed new credit card rules. The Credit Business Practices Regulations will: […]

The proposed regulations apply to credit cards issued by federally regulated institutions. Some provisions in the regulations would have broader application to other financial products, such as…

>>> Read more

Bankruptcy corner

Staggering increase in consumer bankruptcies in March 2009

Reflecting continuing job losses and difficulties in getting help for short-term financial difficulties, 10,578 personal bankruptcies were recorded in March 2009, according to the latest statistics from the Office of the Superintendent of Bankruptcy. This was an increase of 57% from March 2008 and 17% from February 2009. Consumers are now filing at the rate of about 350 per day.

The largest increase came from…

>>> Read more

Financial statements

Off-balance sheet items can hold surprises
for credit analysts

Off-balance sheet items, usually found in the Notes to financial statement, are not necessarily meant to the wool over your eyes, but must be read and understood to gain a complete understanding of a company’s financial condition.

Some of the confusion surrounding off-balance sheet items, which include things like contingent liabilities, balloon payments and lease agreements, is the name itself. "Off-balance sheet" is somewhat misleading because it implies that something should be on the balance sheet instead.

These items are also not well-known as the notes to financial statements never appear in credit/business reports.

Some major items reported in the notes are […]

:: Other borrower prohibitions…

>>> Read more

Collector’s corner

Payment plans and payment arrangements

In these tough economic times, payment plans with distressed customers are often requested and have to be dealt with. An extension to a delinquent customer increases the risk to the supplier, thus, favours the customer. Another common problem is that many times the plan is undocumented.

It is both frustrating and aggravating to set up a payment plan, for instance, involving post-dated cheques, only to have each cheque returned NSF each month. Or, the customer goes bankrupt, leaving the creditor with an empty payment plan. Not only are they nearly always a further extension of an existing past due account (thus increasing the risk), payment plans are also difficult to administer. For instance, a NSF cheque (which is theoretically a criminal offence), is turned into a civil matter if the customer is given time to pay.

Whenever possible, payment plans should be developed and approved in general in advance as part of company policies and procedures. Simply agreeing to whatever the customer comes up with often ends in grief. It is not a weakness to negotiate a payment plan. It is nonsense to accept anything the customer comes up with – “I can give you a dollar now and a dollar a week for 10 years!”.

The aim of a payment plan is to obtain […]

:: Areas to be considered […]

:: Post-dated cheques […]

:: Promissory notes…

>>> Read more

Credit news briefs - STEEL

Companies across Canada will feel ripple effects of steel plant closings

While the auto manufacturers woes make daily headlines, far less ink is used regarding the steel manufacturers in Canada. The closure of nearly all U.S. Steel operations in the Hamilton and Niagara peninsula area of Ontario is rippling through the economy, affecting everyone in the supply chain from iron ore producers in Quebec and Labrador to coal companies in Western Canada. Only the company’s Lake Erie coking operations remain open. The only other operations still inhabited are some furnaces that cannot be shut. The other major Hamilton operation Arcelor Dofasco has reduced salaries for employees to try to forestall layoffs.

In Saskatchewan, Evraz (the Russian company that took over IPSCO in 2008) has laid off 400 employees.

The big story is…

>>> Read more

Credit news briefs

U.S. credit card reforms which are much needed
in Canada

On March 31, 2009 the U.S. Senate panel passed tough new rules to curb abuses.

Some major provisions approved would…

>>> Read more

Credit manager’s corner

Amendments to Canadian Competition Act have some possible effects for credit managers

The Federal Government included as part of its 2009 Budget Implementation Act some significant changes to the Competition Act. The Budget bills were enacted quickly and without debate or revisions. While the provisions have greater effect on sales and marketing, credit professionals should be aware of the Act as well as the effects on pricing, discounts rebates and be mindful of the need for credit groups not to “conspire” or create blacklists.

:: Restructuring of the competitor agreements regime […]

:: Implications for business

Similar to the notion of preference payments in a bankruptcy, the new presumed conspiracy offence envelopes activities which do not necessarily constitute cartel conduct.

Lawyers report that…

>>> Read more

Credit feature story

Canadian business expectations remain very pessimistic

Expectations about improving conditions remain pessimistic over the next year in the face of the continuing global recession, according to the latest Bank of Canada Quarterly Survey. The Survey is not quite as negative as the prior three months, however.

The Bank's quarterly survey of 100 selected firms tracks business sentiment across a wide range of issues, such as sales volumes, product pricing, investment intentions and credit conditions. (The three pertinent surveys are shown below).

The survey was conducted between February 23 and March 20, 2009.

In a separate survey of senior loan officers, the Bank of Canada says lending conditions…

>>> Read more

Credit news briefs

Delayed payments becoming worldwide issue

Research from news media around the world shows the payment issue of up to 120 day terms is spreading. Some of the reports include:

>>> Read more

>> BELGIUM TO INVESTIGATE ANHEUSER-BUSCH INBEV
OVER PAYMENT DELAYS

St. Louis Business Journal – April 20, 2009
Belgium plans to investigate whether Anheuser-Busch InBev has abused its dominant position in delaying payments to suppliers, Reuters reported.

>>> Read more

The world’s largest brewer has changed its terms of payment to 120 days from receipt of invoice from 30 days. (This policy has included American and Canadian subsidiaries).

>>> Read more

>> SMALL MEDIUM ENTERPRISES FACE 120-DAY PAYMENT WAIT –
BUILDING UK

Subcontractors are having to wait more than 120 days for payment as the downturn hits construction supply chains, it has emerged.

>>> Read more

>> WHAT MAKES YOU SO SPECIAL….?

One comment from a supplier in the auto industry on a conversation with a manufacturer, “We pay everybody 180 days payable…that’s our policy, what makes you so special that you think you should be paid in less than 90 days?”…

>>> Read more

Credit news briefs

Federal government considering allowing banks and other federally regulated financial institutions to offer leasing

The Minister of Finance has released a consultation paper seeking views on the potential merits of allowing banks and other federally regulated financial institutions to offer financial leasing for vehicles and household property.

The goal of the consultation process is to see if it would be easier to get financing and “contribute to a more competitive financial system."

For years, lease financing has been an important way for consumers and businesses to obtain vehicles and equipment…

>>> Read more

Bankruptcy corner

Extraordinary remedies for creditors

The Bankruptcy and Insolvency Act (BIA) is a federal statue that is uniformly applicable throughout Canada. The legislation includes the duties and powers of the Office of the Superintendent of Bankruptcy, a federal agency under Industry Canada, responsible for ensuring that bankruptcies are administered in a fair and orderly manner. Under s. 43(1) of the Bankruptcy and Insolvency Act, one or more creditors may file a Petition for a Receiving Order if:

1. The debt owing to the petitioning creditor or creditors amounts to $1,000; and
2. If the debtor has committed an act of bankruptcy within six months next preceding the filing of the petition.

:: ACTS OF BANKRUPTCY

There are many acts of bankruptcy in the Act. Most creditors rely on the ground that the debtor has ceased to meet his liabilities generally as they become due. Other Acts include…

>>> Read more

Credit manager’s corner

What causes business to fail – Part 2

Economic dependence

One of the major reasons for a business to fail is known as “economic dependence”.

This could be subtitled “having all your eggs in one basket”. A business with a small number of customers may become distressed very quickly with the loss of one or two customers. Under Canadian Institute of Chartered Accountant Section 3841.02, economic dependence must be disclosed.

In general, depending on the nature of the business, sales of 40% or more to one customer would be a warning signal to a credit manager. Other instances could concern…

>>> Read more

Credit management – CREDIT TIPS

Credit application fallback tips

Credit is offered to the above stated company on the following condition:

If         (Company)         has not received payment within 45 days of the date of any invoice made out to the above company, then         (Company)         will be authorized…

>>> Read more

Credit management – Collection tips

High risk accounts

High risk accounts, which include accounts of which little information is available, pose a serious threat to the financial health of your company (as well as the health of your career). If you are concerned about the financial strength of a particular customer you have several choices:

1. Shorten the terms of sale. Most times, giving the customer notice is a good idea to let them know they are under credit watch.
2. Require more money up front or upon delivery of goods and services.
3. You can request a letter of credit if you have sufficient leverage …

>>> Read more

Collector’s corner

Strengthening your collection procedures – Part 5

Effective collection techniques: Assertiveness

:: BASICS OF ASSERTIVENESS

The skilful communicator does not "demand" payment. Even though it will sometimes work, a large percentage of the time (and particularly on the telephone), one of three things will happen:

1. The other party fights back.

2. They pay but dig in their heels the next time or don’t buy from you again.

3. They promise to pay but not keep the commitment because they feel they been “had” or been weak.

Arguments tend to produce weak agreements. Overpowering someone on the telephone will also endanger any ongoing relationship. Maybe that doesn't matter if you don't plan on dealing with them again but bitter feelings generated by one encounter have a way of coming back to haunt the aggressor.

:: ASSERTIVENESS AS IT APPLIES TO COLLECTION TECHNIQUES

Why is assertiveness important?…

>>> Read more

Bankruptcy corner

Business bankruptcies still lagging indicator of recession

January 2009 bankruptcy statistics released by the Office of the Superintendent of Bankruptcy Canada on March 24 show business bankruptcies declined 3.2% year over year to 6,087 from 6,287. Proposals to creditors were about even at 1,296 compared to 1,290 in same period.

By business sector, increases were found…

>>> Read more

Credit risk management

Who really owns your customer’s company?

Poor credit risks, people with bad reputations and criminals know that a proper credit assessment will include checking on the ownership of a company and its principals before granting/increasing a line of credit. They can make it very hard to find out who you're doing business with since absentee ownership or fronting a business with non-active management is not illegal. Here are some situations to watch out for: […]


:: WHAT SHOULD YOU DO?

• Delay making a decision until you investigate and find out all you can about the principals with whom you contemplate doing business. […]

:: WATCH FOR FALSE CREDIT REFERENCES

• As absurd as this may sound, references supplied can include outright phony names or affiliated companies. […]

:: WATCH FOR UNSOLICITED NEW CUSTOMERS

If most of your orders are obtained through normal sales channels, pay attention to the unsolicited order. Here are some "warning signals" to watch for…

>>> Read more

Credit feature story

Opening new credit accounts

Many of the thousands of people who have been laid off in 2008 will never find work in their field again. The jobs don’t exist for their skills. And despite the government’s spin that people will be able to retrain in new fields, it is naïve to think that someone working on the line at an auto plant is going to work in IT after retraining. […]

Aside from the lack of experience factor in running and managing a business, will the business be able to support their current obligations and lifestyle immediately? Was the starting capital borrowed? Are they living from lines of credit established before they bought/opened the business?…

>>> Read more

Credit news briefs - Construction

Many business people feel federal government stimulus will not have an effect

In an online survey conducted by Reed Construction Data the week of March 9, in an answer to the question: “The federal budget contains $12 billion in infrastructure spending. Do you think the federal infrastructure stimulus package will begin having an effect soon?”…

>>> Read more

Financial statements

Questionable financial statements: What’s in it?

When a credit grantor is fortunate enough to have enough leverage (or alternatively the customer is public) to obtain a copy of a financial statement, do not judge it favourably after a quick perusal of the cash figure or a few ratios. Instead, look for indications that the financial statement may be questionable. The ease of engineering financial statement to say almost anything should be kept in mind.

Additionally, be aware that financial information in credit reports may not only be questionable but incomplete and downright wrong.

Some of the areas to be on the lookout for: Compiled or Notice to Reader statements on page 1 of the statements. Sample of a “Notice to Reader Report” that does not require an audit or review follows: […]

:: OTHER AREAS DIFFICULT TO DETECT BUT OCCUR WITH SOME FREQUENCY...

>>> Read more

Credit news briefs

Need evident for deeper and better credit investigations and monitoring

These economic times require improved or optimal credit performance. In addition to the sometimes lax credit adjudication with new accounts, monitoring accounts to ensure that current information is gathered, issues are properly monitored and dealt with in a timely manner and that credit quality improvement game plans for each riskier customer are reviewed continuously.

In many cases, your customer’s customer may lie at the root of any problems...

>>> Read more

Credit news briefs

Credit card debt may be next disaster

A March 10 Bloomberg Report reports that Canadian banks are suffering from a rise in credit card losses. Four of the country’s biggest banks set aside 51% more in the first quarter of 2009 for card losses. Canadians held 71.6 million cards issued by Visa Inc., MasterCard Inc. and American Express Co. at the end of 2007, according to The Nilson Report, an industry publication...

>>> Read more

Credit legal matters - Ontario

To sue or not to sue

In the last article of the National Credit News Magazine we discussed the cash crunch and the credit manager’s need for due diligence when approving new customers or managing current ones. Despite your best efforts, some customers will inevitably default on their payments, and you will need to take steps to obtain that crucial judgment against your debtor.

The first step is a demand letter on lawyer’s letterhead to the debtor advising that legal proceedings will be initiated against the debtor without further warning if the debt is not paid in full by the deadline (which should be no more than 15 days away.)

If the demand letter does not do the trick your only legal recourse is to resort to litigation. The Small Claims Court accepts claims up to $10,000 and does not require a lawyer to represent your company […]

The next level of Court in Ontario is the Superior Court of Justice, where there are the Simplified Rules Procedure and Ordinary Procedure. Larger collection matters are better handled in...

>>> Read more

THIS WEEK CREDIT ARTICLE

Bankruptcy corner

Summary Canadian and U.S. Bnkruptcy statistics for 2008

Statistics released for the calendar year 2008 by the Canadian Office of the Superintendent of Bankruptcy showed total bankruptcies and proposals were 123,234 an increase of 13.2% from the 108,830 recorded in 2007.

Liabilities were greatly increased, 27.4% to $18.489 billion from $14.511 billion in 2007. Business bankruptcies and proposals decreased by 2.2%: bankruptcies totalled 6,164 compared to 6,293 in 2007 and proposals totalled 1,281 compared to 1,319 in 2007. The dollar liabilities reported at the time of filing in the business bankruptcies and proposals hugely increased once again by 46.4% to $8.396 from $5.732 billion in 2007 and $3.901 billion in 2007.

Dividends (payments) to creditors...

>>> Read more

Credit manager’s corner

What causes business to fail

Part 1

Unless a company fails because of a planned fraud or only has one customer, most failures take months or even years to reach a point where there is no choice but to enter a restructuring or total failure mode. We often hear of companies running out of cash. In this article, the “cash burn” rate is explained. […]

:: CASH BURN RATE

Like cash flow problems, the “cash burn rate” is an effect, not a cause in itself. What is it? It is the rate that a company uses up cash. By looking at the rate and the cash on hand the analyst can determine how long it will take at the present rate until the company needs to refinance by either obtaining additional investment/capital, taking on debt or selling assets for cash. The burn rate is determined by...

>>> Read more

Credit news briefs

Amex offers $300 for high risk customers
to close accounts

American Express is making drastic changes to their portfolio. Aside from lowering credit limits and restricting ATM use with customers with low(er) credit scores, AMEX is offering $300 to a select group of high-risk customers to close their accounts. The program is designed to reduce the accounts that are a risk to default. Cardholders must have enrolled by February 28 and pay off the entire balance by April 30. If the card has rewards, consumers need to use the rewards before enrolling, because closing their account cancels accumulated rewards...

>>> Read more

Collector’s corner

Strengthening your collection procedures – Part 4

Effective collection practices: Selling your ideas

Effective collections involve selling. Selling can be defined as persuading someone to do what you want then to do. With collection work, the customer has both sides of the contract. They have your product/service and the benefit, you have nothing but a promise to pay (which is often implied since there is often not a specific promise). So the reason the customer has not paid is that the reason to pay is weaker then the reason to pay.

How do you change someone's mind? How are you going to sell this person on stopping whatever they are doing, and write you a cheque (or getting someone else to do it)? How are you going to overcome the customer's natural resistance to change?

:: SOME ELEMENTS OF SELLING (AND COLLECTING) […]

Think about this - why hasn't the customer paid the bill? Philosophically, the reason the customer hasn't paid is because the reason they have not to pay is stronger than the reason the collector has provided to pay. …

>>> Read more

Credit legal matters

Best practices during a credit crunch

Credit and capital are stretched tighter than ever and banks have toughened their lending practices. This decrease in bank credit means that businesses place greater reliance on trade creditors as a source of finance. As a result, accounts receivable have become a key concern for many companies as they try to settle their outstanding accounts. Some debtors try to ‘slow pay’ and delay the payment of invoices in an effort to hold onto their limited working capital, and others look for ways to extend or improve the terms on their own accounts payables, while at the same time guarding against an increase in their customer defaults. Inevitably, this leads to many businesses being paid later for their goods and services, as well as an increased risk of payment defaults and insolvencies.

When a credit crunch hits, the role of the credit manager is more important than ever. […]

Do not let your accounts receivables go on too long, and be aware of the age of past due accounts, as the old 6-year limitation period to commence an action to collect on outstanding debts has recently changed…

>>> Read more

Credit risk management

How do we determine credit risk in a recession?

In this serious and deepening recession, it has become truly evident that not all traditional sources of credit information are reliable. If you weren’t doing it before, your due diligence should now include checks from several sources. And if you were only using a customer’s payment performance as the sole criteria, good luck to you.

The major cause of serious problems can be directly linked to lax credit standards (in some cases – no credit standards), poor risk policies or a lack of attention to changes in a customer’s circumstances that lead to deterioration in either payments or outright default.

Credit risk is simply defined as the potential or likelihood that a customer on its own or as a bank borrower or even a customer’s customer will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maintain credit risk exposure within acceptable parameters. All credit grantors need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credit or transactions.

The main goal is a financial one, but company image and reputation are also affected by the standards of professionalism that exist.

:: DETERMINING A COMPANY’S RISK APPETITE…

>>> Read more

Credit news briefs – Canada

Business mood turning even more pessimistic

Canadian business executives are readying themselves for a prolonged downturn by cutting spending, hiring and marketing as they brace for a recession that could be long and deep.

The latest quarterly C-Suite was conducted in late January and early February for the Globe and Mail Report on Business and Business News Network by the Gandalf Group. Executives from 150 companies responded…

>>> Read more

Credit feature story

Watch for some customer payments to slow even further

Although Canada has thus far escaped the worst of the global credit crisis, due to prudent government policies and a strong banking system, many foreign-owned Canadian companies will be subject to cash management and cash sweeping policies of their parent companies. Some examples: […]

:: OTHER CASH MANAGEMENT TECHNIQUES MOST OFTEN USED BY PARENT COMPANIES…

>>> Read more

Credit news briefs

Buy American Program could destroy Canadian businesses

On January 27, 2009 the U.S. House of Representatives Appropriations Committee voted 55-0 approving an amendment to the stimulus bill requiring U.S.-made steel be used in construction projects financed by the new spending, and another pushing higher wages for workers on such projects.

The bill, which passed very quickly, contains $64 billion to repair U.S. roads, bridges and waterways. The “Buy American” provision covers steel used in government infrastructure contracts for airports, bridges, canals, dams, dikes, pipelines, railroads, multi-line mass transit systems, roads, tunnels, harbors and piers. […]

The “Buy American” provisions could encourage countries such as Canada…

>>> Read more

Credit time management

Time management tips checklist

Imagine there are 82 five minutes periods in the average working day. How is that time spent? Repetitive clerical work? Calling customers and leaving messages. Much of the day may be spent in non-productive tasks. And since time is finite and workloads may be increasing, it makes sense to organize time as effectively as possible. Here are some tips for credit and collection staff: […]

:: REMEMBER TIME MANAGEMENT BASICS... […]

…Credit professionals don’t waste time…

>>> Read more

International credit

A world economy in crisis, with no prospect of stabilizing before the end of 2009

OVERVIEW

The global economy is going through a totally unprecedented crisis, begun in 2008 and continuing in 2009. Economic conditions worsened to such an extent in the last part of 2008, in particular after the fall of Lehman Brothers, that the macroeconomic lows of Q3 2008 will be largely exceeded not only in the fourth quarter of the year, but also at the start 2009. Finding a way out of crisis is still possible in 2009, but any hopes of this rest essentially only on two sources of growth. One of these is disinflation. The other is the exceptional raft of measures taken on the budget and monetary policy fronts, although there is a considerable risk that these will not prove to be as effective or as rapid as hoped. The recovery is not likely to come before H2 2009 and should remain difficult, given the extent of imbalances to be reabsorbed. In the end, any recovery will not prevent 2009 from posting a clearly worse result than 2008, with the Organization for Economic Cooperation and Development (OECD) countries in recession (-0.5% GDP growth) and growth in the emerging countries slowing sharply (+3.6%).

UNPRECEDENTED CRISIS

The shock undergone in the world economy is exceptional, given its both great intensity and global scale. The crisis is simultaneously acting in both the real economy and in the financial sphere, each feeding into the other in a dangerously recessionary spiral. It is also a total crisis: spreading to all parts of the world (North and South America, Europe, Asia…), affecting every major category of economic agents...

>>> Read more

Collector’s corner

Strengthening your collection procedures – Part 3

Internal methods of accelerating cash inflows
and collections

Internal practices to maximize cash inflows greatly effect overall financial performance. Additionally, when accounts go bad, a good system of documentation - invoices, delivery slips, and notes on collection activities remove any defenses the customer/debtor may use in court proceedings. Some of the approaches only have incremental effects, such as looking at the "user-friendliness" of invoices. Others may have stronger effects, such as increasing the direct interactions with customers. But even the simple measure of ensuring invoices go out in as timely a manner as possible have an effect. […]

INVOICES AS COLLECTION TOOLS

The invoice should be properly designed to ensure that there are no misunderstanding about the terms of sale or discount. Many invoices are not "user-friendly" and can be a good source of excuses for non-payment of accounts. Aside from the often heard “We didn't get your invoice” excuse, the invoice can be difficult to read, and do not have terms of sale appearing prominently. If a discount for prompt payment is offered, how is an accounts payable clerk expected to know that an account is entitled to have a discount of 2%, if it is not stated clearly and prominently on the invoice? Here are several areas to consider the next time your invoices need re-printing: ...

>>> Read more

Bankruptcy corner

Canadian bankruptcies continue rising

The number of bankruptcies among consumers and businesses rose […]

The largest number of bankruptcies was recorded in...

>>> Read more

Credit news briefs – Canada

Canadian auto parts suppliers face further problems

Another critical problem speeding down the highway will reach auto suppliers by April.

Auto parts suppliers have had no production since December. Some auto plants have extended their shutdowns through February. As the automakers typically pay in 90-120 days, the suppliers (and their suppliers) will have no receivables by April.

Some will fail.

>>> Read more

Credit management – Credit resources

Credit checklist for suppliers

:: FOR SALES STAFF

When negotiating or quoting, is the sales staff trained to talk money/financing/terms as well as delivery and price when appropriate?

• Have they told the customer clearly the payment terms? […]

:: WHEN GOODS ARE DELIVERED OR THE SERVICE SUPPLIED

• Do you get proof of delivery or written acceptance from someone in authority? […]

:: FOR COLLECTING UNPAID SALES

• Do you have a timetable for collecting with defined steps at stated intervals? […]

:: FOR MONITORING EXISTING ACCOUNTS

• Do you have a process to ensure you are still dealing with the same owners as you started with years ago? […]

:: IF YOU ARE A DIRECTOR OR OWNER

• Do you monitor daily collections and correct bad trends promptly?...

>>> Read more

You now know that when it comes to researching companies, large and small, local newspapers and business magazines can be great sources. The value of local publications is evident in the number of premium products that aggregate these sources. A thorough company search takes time, so it may be wise to complement your research with a premium news service. This holds true particularly when there is a dearth of information from traditional sources and when the dollar exposure is large. […]

When you’ve got local newspapers covered, you may want to add information about your customer from local trade, industry and business magazines. Two databases in DialogSelect…

Credit manager’s corner

Will your credit forms stand up to a legal challenge?

Also: Ontario Small Claims Court –
Limit increase effective January 1, 2010

[…] A review of several company websites containing credit applications show many mistakes as well as the unanswered question regarding signatures and who should sign. (If your company wants to put a credit application on the website, it should be a PDF form, downloaded and properly signed to be safe.) One common mistake is placing personal guarantees on credit applications without separate signature or hidden in the body. A good lawyer would make mincemeat with an unforceable personal guarantee. Another common mistake seems to be the use of the word “attorney”, an American term, which tells you the form has been copied or came from a parent company. […]

:: THE DANGERS

There are a many traps which lay people (or lazy lawyers) can fall into when using standard form documents without taking the time to read them and consider their legal consequences…

>>> Read more

[…] The number of business that failed was by 2% from October to 506 in November but that was 4% less than in November 2007. It should be also remembered that Canada does not compile statistics on Companies’ Creditors Arrangement Act restructurings/ reorganizations as the U.S. does with Chapter 11.

Alberta business and consumer bankruptcies led the country in November, rising 37% compared to 2007. […]

Overall, businesses are closing in vast numbers but the numbers of business failures are not showing up in the bankruptcy statistics yet, at least so far in the recession.

BUSINESS FAILURES ACROSS CANADA

We are beginning to see a new development in insolvency in Canada. A pre-emptive court protection. What is interesting is the company has $2.5 billion in cash. Is it insolvent? In the U.S., a company does have to be insolvent to enter Chapter 11, which may be why the U.S. firms sought protection first, then Canada. In the second example below, BA Energy was not in default, but considering it might be later, filed for protection…

Credit manager’s corner

Understanding the financial controller’s case for not paying bills on time

Take your “credit hat” for a few minutes to understand why so many businesses have chosen to pay their bills slowly over the past few years.

The objective is to show the case made for better working capital management through accounts payable, and thus show readers that it makes good economic sense for customers to push their suppliers. And.... that we, as credit people, sometimes have to push back. Customers may choose not to pay their bills for many reasons. What used to be recognized as a danger signal has grown to a grudging acknowledgement that managing suppliers and the supplier relationships is becoming a more formal business science. Software is now available to disburse payments according to customer-tolerated parameters. The "grace period" given by most suppliers (the difference between stated terms of sales and real terms) is often not a strategy but a function of inability to get to overdue accounts promptly.

The objective of receivables and inventory management is to reduce collection and holding periods. In the case of payables management, the opposite best serves the company when average payment time is increased.

:: BASIC RULES OF CASH MANAGEMENT…

>>> Read more

Bankruptcy corner

Did you receive payments just prior to a customer’s bankruptcy?

A common issue that arises is whether a given payment is for current services, or as a preferential payment to a creditor. If it is found to be the latter, it is deemed “fraudulent” by s.91 and 95 as well as s.100 of the Bankruptcy and Insolvency Act (BIA) as follows:

Section 91 of the BIA permits “settlements” to be overturned if made within one year of the date of bankruptcy. “Settlements” can include…

>>> Read more

Collector’s corner

Strengthening your collection procedures – Part II

Developing appropriate and efficient collection procedures

As every credit and collection person knows, there are several maxims that are true in all credit situations:

1. The collection process begins when the account is opened;
2. The older an account becomes, the harder it is to collect;
3. Accounts receivable do not appreciate in value over time - they depreciate. After a period of time dependant on the margins, there is no profit left in the account, it is a matter of pursuing dollars empty of profit.

Many common credit tools are also collection tools. The credit application/ agreement are collection devices. The person responsible for having the forms filled out, the invoice and the “welcome” the new customer receives - these are all collection devices. A position is created as to the important and professionalism of the credit grantor.

:: HERE IS A CHECKLIST OF AREAS TO CONSIDER BEFORE ACTUALLY DEVELOPING COLLECTION TACTICS…

>>> Read more

Credit manager’s corner

The recession reaches Canada:
What can the credit manager do?

An economic tsunami breached Canada's breakwall in December, and many business owners and employees are feeling a strong sense of impending doom. Despite resilience and strong fundamentals, in the end nothing could entirely protect Canada from being drawn into the U.S./global mess, which many experts believe has not bottomed out. Only two months ago, we were told Canada would not go into deficit and many experts told us repeatedly that the country would escape a recession. Now, layoffs are announced daily, plants are closing or downsizing, car showrooms are empty and retail margins are dropping. Interestingly, even though there is still demand for the fantastic deals for a new car, car dealers are reporting 25% of sales are declined financing by banks, the opposite of what banks are telling us.

Canada had a budget deficit of $0.6 billion in October 2008, compared to a deficit of $0.5 billion in October 2007. Although business bankruptcies were not increasing in Canada and may be a lagging indicator, it was a totally different story in the U.S. (The U.S. year end is September). The Administrative Office of the U.S. Courts announced that in the 12-month period ending September 30, bankruptcy filings in federal courts increased more than 30% compared to fiscal year 2007. There were 1,042,993 September 2008 filings. Business filings for the period totaled 38,651, up 49% from the 25,925 filed in September 2007. Chapter 11 filings were up 49% to 8,799. It is anticipated that Canadian business failures will follow this trend in 2009.

:: THE FOUR FOREMOST PROBLEMS FACED BY CREDIT DEPARTMENTS

[…]

:: WHAT CAN THE CREDIT MANAGER DO?

The seven areas that should be assessed to provide ideas…

>>> Read more