Credit Card AP Programs and B2B Credit

Posted by on May 1, 2014 at 3:01 pm. No comments

By Rudet Fountain, VP, United Tranzactions

Do you like your credit card rewards program?  For the majority of us, the primary reason we use our credit card as a form of payment is the rewards program.  It is not because we cannot pay the bill with a check, or from our bank portal, or from the merchants webpage…we simply want the rewards.  Of course, in the business to business (B2B) process, customers’ logic is no different. 

When we consider the various payment technologies in the market place today – cash, checks, ACH, wire transfers, EDI, credit cards – we must come to the realization that credit cards are the only payment technology that your customers can be incentivized for using.  Today, in the retail market, credit cards use typically exceeds 90% of a merchants total revenue.  However, in the B2B marketplace, they only represent about 3-5% of all receivables.  Due to the extremely high levels of use in the retail market, we must realize that the “green grass” for the card networks is in our backyards.  VISA, Master Card, Discover, and AMEX are all seeking greater market share, and there is very little way for them to successfully hit their sales goals without penetrating the B2B markets.  Let’s not forget that they are now public companies that need to show a nice return for stockholders. Therefore, the card networks are aggressively pursuing your customers with new incentives for the B2B merchants.  B2B rewards are most often ‘kickbacks’ of some percentage of dollars paid with purchasing, corporate, commercial, or business cards.  Federal Reserve data shows that card usage is up growing almost 14% each year and our statistics supports these numbers.  

Perhaps you have received many more inquiries from customers — or perhaps the bank that issued them their credit card – wanting to pay with a credit card number.  Both VISA and MasterCard have released new Accounts Payable programs that generate a great deal of efficiency for AP departments.  Perhaps more importantly, because of the “rewards,” these programs permit the monthly AP process to become a revenue stream for your customer.  Thus, the battle continues to rage between your customer’s AP department and your AR department.  And we all know, AP represents the customer and the customer is “always right”.  Therefore, merchants are often forced to accept cards when they certainly would prefer not to because of the price.  

A little good news: the interchange rates associated with these AP programs can be quite favorable when compared to traditional B2B rates.  Additionally, when payments are generated out of the Credit Card AP programs, merchants will receive the remittance information and the transactions are very secure.  Lastly, no special data input is necessary. (We will speak further about this in future articles)  

As the card networks seek more transactional volume in the B2B market, it is more important than ever that we learn more about the dynamics of processing.  The card networks do not help you reduce your price by implementing best practices or giving you “do overs” when you overpay on processing.  It is incumbent upon us to learn, implement, and put into practice the best possible solutions.   

If the card networks are successful and hit their sales goals, imagine what your costs will be if they double their volume.  Amazingly, they hope to hit 10-times the volume in the next decade.  Are you ready? They are.

Overruled!

Posted by on April 2, 2014 at 3:05 pm. No comments

By Melissa Mickelsen, CCE, Geneva Rock Products, Inc.

Most likely, we’ve all been asked by upper management to sell to a customer we normally wouldn’t approve. Hopefully, these types of situations don’t happen often. But when they do, they can be frustrating and irritating.

Sometimes we may be tempted to pout when our decisions are overruled, or we may secretly hope for the opportunity to say, “I told you so!” Although occasionally tempting, such reactions aren’t going to help us or the company gain success. Instead, we need to figure out how to work as a team with upper management to ensure positive outcomes in difficult situations.

First, before these types of situations even occur, it is critical to work on developing a good relationship with upper management. This relationship should be built on mutual trust, effective communication and positive results. Of course, in some situations this type of relationship is more difficult to cultivate than in others. But a positive working relationship between credit and upper management can be invaluable in promoting success.

Next, when these situations do occur, ensure that upper management understands that you have reservations about the customer and/or the sale. State your position clearly and concisely without compromising sensitive information or divulging confidential information. Consider presenting alternatives to the extension of credit terms that will allow the sale to occur. Read full article 

5 Steps for Dealing with Mistakes at Work

Posted by on February 13, 2014 at 3:55 pm. No comments

by Melissa Mickelsen, CCE, Geneva Rock Products, Inc.

We’ve all made mistakes at work, some more serious than others. Because the actions we take when mistakes are made speak loudly about our character and integrity, it is important to handle mistakes professionally and honestly. The way we deal with failure can often set us apart from others and lead to greater respect in the workplace. The following steps may be helpful in dealing with mistakes at work.

1.  Own the mistake. Go to your boss and explain the situation – don’t try to hide it. It is always better to be proactive in taking responsibility. Then accept the consequences of your mistake.

2.  Apologize. Be sincere and avoid blaming others or making excuses.

3.  Present a plan to rectify the situation. Then commit yourself and work hard to make things right.

4.  Learn from your mistake. Analyze what led to the mistake and figure out what you need to do differently. Then implement those changes.

5.  Let it go. Accept that even the most skilled individuals make mistakes. Don’t berate yourself.  Refocus and move forward.

When mistakes happen, we often want to crawl under a rock and hide for a very long time. But, we can’t allow mistakes to limit our progress and growth. In time the sting will ease and we’ll be able to recognize that mistakes present opportunities to learn and improve. And, as we learn from mistakes and increase our knowledge, we demonstrate our commitment to growth and success.

Selling To Native American Tribes

Posted by on February 3, 2014 at 10:01 pm. No comments

by April Tanner, Kimball Equipment Company

Does your company sell to foreign nations? Your company may be taking this risk and not even know it. If you sell to a Native American Tribe –  with or without your knowledge of the tribal ownership of the company, then your company is selling to a Sovereign Nation and the normal credit rules don’t apply. The risk – yes risk – your company is exposed to is increased. . . unless you are prepared.

United States Indians, Canadian Indians and Alaska Natives are considered Native American Tribes by United States and Canadian law. In the United States, the tribes have their own laws.  These laws apply to their land, property, members and legal justice system. The Bureau of Indian Affairs in 2010 recognized over 300 tribes in the United States alone. Tribes ARE NOT normally subject to most United States laws. This fact will impact your business. These impacts will include your company’s ability to collect debt owed, repossess rented equipment, the safety of employees doing repairs to tribal owned equipment on tribal land, your company vehicles, and your employees/salespersons who enter tribal lands etc. 

Selling to tribes may also have an impact on your company’s relationship with your bank. Many banking rules and loan covenants have specific guidelines about reporting sales to tribes because of the high risk. Your company’s insurance policies also may have specific guidelines or regulations about selling to or having company employees or property enter Sovereign Nations Territory. Even our yearly auditors ask about our sales to tribes and how we control risk.

In the past 10 years I have noticed a huge increase in the number of tribes starting up companies and entering the business world. In some cases the tribe has leased their land to private US companies for use – further complicating legal issues. Many tribes are trying to utilize the assets they own in new and better ways to benefit the tribe . . . read full article

Easy Ways to Determine Customer Risk

Posted by on November 7, 2013 at 8:06 pm. No comments

Risk is an ever-present concern for credit professionals. Still, it’s not rare that an insolvency can put a creditor in a bad place. Regularly reminding oneself of risk warning signs will lessen the chance of a big loss, or being taken by surprise. Here are some tips gleaned from Credit Congress speakers for determining financial risk:

 

  • There is no silver bullet to replace due diligence: Sure, there are ratings, scoring models and all sorts of automation to help a credit manager, but over reliance on any of them can make you miss the big picture. Using a combination of tools and doing some research still go a long way despite technological advancements that might encourage you to use only one resource.
  • Heed the warnings, especially in the news: There have been plenty of recent incidents where warning signs about a company existed, but weren’t spotted or heeded. Blockbuster was a prime example. It had well-publicized disputes with movie and television show distributors regarding shipping and licensing agreements, as well as competitors, primarily Netflix, that had a much more evolved strategy and were quickly taking away market share. A better analysis of ongoing and publicized events would have helped such a case and many others.
  • Remember your education (or get educated) on understanding financial statements: They’re available for any publicly-traded company. Most privately-held customers are also willing to share, if asked. Financial statements contain much useful information that can predict where a customer is going. That is, of course, if you know what to look for and understands how to analyze the information properly.
  • Engage the sales team: While they don’t think like credit professionals, sales people can have the closer relationships with customers. They can provide an important perspective otherwise not seen by a credit manager, such as what a potential debtor’s jobsite looks like, or are able to take photos during a visit that reveal the conditions of the site. These details might be an important piece of the puzzle in determining the health of a customer.
  • Industry credit groups: It’s a fundamental rule in credit: know your customer. One way to do that is the exchange of information on customer behavior provided at credit group meetings. One piece of information obtained from a meeting could save your company thousands, if not millions. Knowing that a meeting monitored by NACM Affiliates, NACM-Canada and FCIB adheres to federal antitrust guidelines also gives you peace of mind that the information shared is legal.

NACM’s 118th Credit Congress & Expo, June 8 – 11, 2014, Orlando, FL  More information 

Letters of Credit v. Security Deposits

Posted by on November 5, 2013 at 11:29 pm. No comments

By Dana Farmer. Smith Knowles, PC

Some creditors find that maintaining security deposits for marginal customers is a convenient method to protect against default. However, security deposits are still considered to be the property of your customer and if the customer files bankruptcy the bankruptcy trustee has the authority to take the security deposit. Therefore, as an alternative to the security deposit, you can use a letter of credit. If your customer has enough money to give you to hold as a security deposit, then they could also deposit that money with the bank in exchange for a letter of credit.

Once the bank has the money, it can issue a letter of credit which you would be able to use to apply to any deficit. Since the money is then deposited with the bank, the bank bears the risk of losing the money to a bankruptcy trustee. Yet, since the letter of credit is between you and the bank, your customer’s bankruptcy . . . read full article

Could the Pick Up in the Economy Mean the End of the Rope for Some Companies?

Posted by on October 2, 2013 at 3:17 pm. No comments

By DeAnna Leahy, CCE, Sunroc Corporation

The United States economy is finally picking up, but unfortunately, for many businesses this may mean the end of the rope. Many of these companies barely survived through the downturn. During the economic tough times, they used up all of their cash reserves, sold all of their equipment, laid-off most of their employees, and reached the limit of their borrowing power. As the economy begins to gather pace, some companies will be able to recover and flourish. However, the weakest of these companies will find that the increased competition compounded with the shortage of cash will mean their ultimate demise.

Many companies are already showing signs of severe distress. A growth in activity means a growth in competition and an increased need for working capital. To compete for this new work, companies need to purchase new equipment, hire more employees, and purchase additional materials, yet they have used up their cash reserves and are at the limit of their borrowing power. Cash is so tight that it might not take much to finish them off.  Click here to read full article

Unlicensed Contractors in the Construction Industry

Posted by on August 30, 2013 at 11:11 pm. No comments

By Scott W. Lee, JD, CCE, VP NACM Business Credit Services

Certain types of work, such as laying artificial turf, don’t require a license. And, there is what’s referred to as a “handyman” exception to the licensing laws. This is sometimes thought to be the case for any job under $3,000. But UCA 58-55-305 lists a number of situations where the “handyman” exception doesn’t apply even though the project is less than $3,000. When a license is required and the purveyor of the service isn’t licensed, that person cannot maintain a mechanic’s lien. Neither can the person commence a collection action under contract theories (UCA 58-55-604.) If your customer can’t enforce payment, it is going to be difficult for your company to obtain payment.

So now you are thinking you will file a mechanic’s lien against the property. We all know mechanic’s liens are a helpful tool but they aren’t an absolute guarantee of payment. The question is whether you can enforce a mechanic’s lien if your customer is supposed to be licensed but isn’t. Utah Code Annotated (UCA) 58-55-501(17) states it is unlawful to aid or abet any person in evading the licensing laws. “Aiding and abetting” can be a fact sensitive issue. But, a smart lawyer trying to get your lien removed may be asking questions such as how long has this person been your customer? Did you have any reason to know the person didn’t have a license? Really, what did your sales person who is best friends with this person know? Should you have asked? Should you have looked it up on DOPL’s website? If you know the person needs to be licensed but isn’t and the product is going to a job where a license is required, you need to take steps to protect yourself. You don’t want to knowingly put payment at risk. The last thing you want to do is file a mechanic’s lien only to find that you can’t maintain it and that you may be subject to misdemeanor charges.  Read full article

Cooperation and Fairness When Dealing with Debtors

Posted by on August 2, 2013 at 8:15 pm. No comments

Melissa Mickelsen, CBF, Geneva Rock Products, Inc.

The NACM Canons of Business Credit Ethics state that “Cooperation, fairness and honesty must dominate in all insolvent debtor proceedings.” Further, the Canons state that “Creditors must render all possible assistance to honest debtors who become insolvent.”

As credit professionals, do we ever struggle with this pledge? Do we occasionally want debtors to pay, and not just in the monetary sense, for the problems they have caused? Are we guilty of holding a grudge or harboring anger? Or are we guilty of reluctance when it comes to cooperating with honest debtors who have found themselves in trouble?

Human nature demands fairness, but unfortunately, in the credit profession, we may not always feel that our definition of fairness has prevailed. For example, it is not fair that we provide supplies or services promptly, but are often not paid promptly. It is not fair when we are not paid the full balance owing to us due to a debtor’s insolvency. And, it is not fair that some of those debtors, the ones who may not be so honest, simply do not care that they have not paid for what they have received.

But, it is our responsibility as credit professionals to look past these mental stumbling blocks and behave in a manner that is beyond reproach. As a group, we must act in a way that distinguishes us as the professionals we are. We must overcome feelings of anger and frustration and cooperate with honest debtors to ensure the best outcome for all parties.

Generations at Work

Posted by on July 2, 2013 at 3:59 pm. No comments

June 2013 ICEL Meeting Recap by Janae Jeffs, CCE, Muir Enterprises, Inc.

June’s ICEL meeting was presented by Lynn Richardson SPHR, CCF, a former Vice President of Human Resources for SOS Employment Group. He is currently retired. His insight and experiences made for a very informative meeting.

In the workplace there are diverse generations that need to be managed. Lynn started his presentation by explaining traits of the different generations. He listed many traits but his approach in the area of “Respect For Management” provided an interesting new perspective.

1) Traditionalists -Though there are few still working, we need to understand their values. They respected the Chain of Command as a matter of course. Job hopping was not an option – if you didn’t put your time in, there would be no pension at retirement. The team is more important than the individual. Work only; families didn’t count. Face-to-face communication is preferred.

2) Baby Boomers – Most managers are from this time period. They were the “WHY? Generation.” They challenged the status quo and introduced technology in the workplace. Phone & direct communication is their preference.

3) Xers – This is the first generation to learn technology in the home as they were growing up. They prefer straight–to-the-point communication style (emails).2) Baby Boomers – Most managers are from this time period. They were the “WHY? Generation.” They challenged the status quo and introduced technology in the workplace. Phone & direct communication is their preference.1) Traditionalists -Though there are few still working, we need to understand their values. They respected the Chain of Command as a matter of course. Job hopping was not an option – if you didn’t put your time in, there would be no pension at retirement. The team is more important than the individual. Work only; families didn’t count. Face-to-face communication is preferred.1) Traditionalists -Though there are few still working, we need to understand their values. They respected the Chain of Command as a matter of course. Job hopping was not an option – if you didn’t put your time in, there would be no pension at retirement. The team is more important than the individual. Work only; families didn’t count. Face-to-face communication is preferred.

4) Millennials – They want meaningful work and new skills. They ask questions to get ahead. Multitasking is easy for this group. They prefer indirect communication (texting).

A new way to manage all these different types of people is called “Emerging Paradigm Shift.” Lynn Richardson talked about ways to implement this approach. As a manager, you need to understand what will create success in your company. The Emerging Paradigm Shift uses success factors such as: in what way you can inspire people and monitor the process. It will show that effective motivating is good leadership.

Department heads and bosses must become leader-managers. A leader influences and a manger is responsible for getting the work done. One way to be a good leader-manager is to be a people developer – inspire your team and create loyalty. Lynn discussed the variances of using intrinsic rewards vs. extrinsic rewards. Intrinsic rewards are achievements, individual recognition, career advancement and personal growth. Whereas extrinsic rewards are competitive pay, benefits, and job security for the individual worker. As a manager, we need to know which type of award is best for each individual and their generation. Diverse awards for a diverse group will encourage all age levels to stick around for a longer time.

We need to invest in our companies greatest assets: its workers.