HEARTLAND

HEADLINERPUBLISHED BY NACM HEARTLAND UNIT, INC.

Navigating the Hazards of an Incomplete Credit Application

Once again, you sit at your desk reading an incomplete credit application. The applicant hasn’t filled in an email address, and worse yet, he has crossed out two critical points in your terms and conditions.

What do you do?

WINTER 2011

The sales team will likely tell you this is going to be a great account and don’t worry about it. But you should worry about it. Your credit policy was designed to spell out to your customers what your expectations are when you extended a line of credit to them. It also spells out the actions you may take if the account becomes delinquent. Incomplete information makes it more difficult, and in some cases, impossible to collect on the debt.

Have you had any push back on the following?

The personal guaranteePerhaps the most difficult element of the credit application is the personal guarantee. Many clients simply refuse to sign a credit application when this is part of it. If you ask your customers to provide a personal guarantee and get push back, the easiest way to deal with it is to simply remind your

potential client that they are asking you to stand behind their company, and you are merely requesting they do the same.

ReferencesIf a potential customer is hesitant to provide references, this is should be a red flag that all may not be as it seems. In addition, actually contact the references. Simply having them on file isn’t going to help determine whether the applicant is creditworthy. And, if the references don’t call you back, let the applicant know so they can either provide alternate contact information, or help prompt a return call.

Financials/Bank InformationAgain, if an applicant doesn’t provide this information, this may be an indicator of problems to come. Another increasing obstacle happens when banks charge fees to review this information. It is important the applicant makes arrangements with financial institutions to provide you the necessary information to assist in your decision, especially if they are seeking a high dollar (as defined by your company) credit line.

Credit ReportsWhile credit reporting data is increasingly used to determine the acceptance of a credit application, for smaller vendors this information might not be deep enough to

HOW ARE YOU GETTING PAID? Does your credit application require your potential customer to indicate how they are going to pay? If not, then you are losing the opportunity to plan appropriately for how and when you will be paid.

This is important for a few reasons:

•There is a cost, especially for credit card processing. There is no doubt that many of us appreciate the points we accumulate by paying by credit card, but it does cost to pay with a credit card. Plus, many businesses use a credit card to pay because business credit cards come with robust reporting capabilities that allow organizations to track how money is being spent. All that said, it still costs you to process the transaction. If you know the customer plans on paying this way, you can provide pricing and terms that not only cover the fee, but explain how the transaction will work.

•You know if the check is in the mail … or the money is deposited directly into your checking account.

•You demonstrate all the ways your customer may pay, which may include payment online or over the phone.

•You know what to expect. Customers may not pay the same way every time, but if you understand their preference you know what to look for if a payment isn’t received or is delivered later than normal. This may help identify early signs of trouble.

make a fully informed decision. This is when the bank information and references can help provide a complete picture.

Signed ApplicationsMany applications are submitted without a signature because the applicant does not want to subscribe to your terms and conditions. Some applicants will submit their own “application” or a document that gives most of the information you request but without your terms and conditions. What can you do? There are at least two courses of action. First, you can send the application back, explaining that you need your own application filled out and signed by the appropriate people. The second course of action is to accept it, but you may explain that deliveries will be COD until a completed application, with acceptance of your terms and conditions, is on file.

Lined Out Terms and ConditionsAs a credit manager, you have worked hard to create terms and conditions that are fair and reasonable. However, everyone has their own view on what is fair and reasonable, which may be why one of the most common occurrences on a credit application is lined out items in the term and conditions section. This particular item is a gray area. Depending on what is lined out, you may think about following up with the applicant to discuss his or her concerns. Or, again, you may accept the application, but require COD over a certain dollar amount until a complete application is on file.

Time, Time, TimeOne of the reasons the sales team will hand you an incomplete application is because the order has either been placed or there is a quick turnaround. First, it is reasonable to request at least 48-72 hours to do a preliminary check based on the information provided on the credit application. It is likely that it will take more time to track down complete financial information, so decide how you want to move forward. Will you extend credit up to a certain limit? Will you request COD until the application has been fully processed?

There is no doubt the pace of today’s business gives the illusion that decisions can and should be made quickly. However, there are instances where patience is a virtue and the extension of credit is one. While you don’t want to take too much time, make sure you have the processes and procedures in place to get to know your new customer and create an environment where you both succeed.

FEBRUARY

2.9 NACM Webinar – Analyzing Financial Statements

2.10 FCIB Teleconference/Webinar – Gaining Control on Global Credit & Collections

with Dashboards & Analytics

2.11 NCS Webinar – Understanding Lien Waivers

2.11–13 NACM Workshops – Rick Mitigation Workshop

2.11 NACM Heartland Board Meeting – Johnston, IA

2.17 NCS Webinar – Protect and Collect: The Basics of the Lien & Bond Claim Process

2.17 FCIB Teleconference/Webinar – International Credit Applications

2.18 NACM Webinar – Trust But Verify: How to Use Construction Trust Fund Statutes to

Get Paid

2.22–26 Financial Statement Analysis 2 – Credit and Risk Assessment

NACM National, Columbia, MD

2.23 NACM Webinar – Better Credit management Today

2.26 NACM Heartland Construction Meeting – Johnston, IA

MARCH

3.2 NACM Webinar – Better Credit Management Today

3.3 NCS Webinar – Protect and Collect: An Advanced Look at the Lien &

Bond Claim Process

3.4 NACM Teleconference – Battle of the Forms

3.5 NACM Heartland Lunch & Learn – Agricultural Lending

3.9 Nationwide Certification (CBA, CBF, and CCE) Exam Test Date

3.10 FCIB Teleconference/Webinar – Predicting Cash Collections: How to Effectively

Use Analytics to Modernize the Global AR Department

3.11 NACM Webinar – From Less Paper to Paperless: Paperless Initiatives in the

Credit Department

3.12 FCIB Teleconference/Webinar – Letters of Credit 101 - Basic

3.16 NACM Webinar – Bankruptcy Rumblings: How to Best Position Your Company

in Advance of Customer Bankruptcy

3.17 NCS Webinar – Implementing a Lien/Bond Claim Program: Overcoming Obstacles

3.23 Paperwork Deadline for Certification (CBA, CBF & CCE) Exam at Credit Congress

3.25 NACM Webinar – Mediating to Win

3.26 NACM Heartland Construction Meeting – Johnston, IA

APRIL

4.7 NCS Webinar – The Credit Research Foundation & NCS Team Up –

“The New Account Process”

4.8 NACM Heartland Board Meeting – Johnston, IA

4.8 NACM Teleconference – SOX Compliance Update

4.14 NCS Webinar – Lien Tracker NTO

4.15 NACM Teleconference – Unclaimed Property Compliance Process

4.16–17 FCIB Teleconference/Webinar – Letters of Credit – Advanced

4.22 NACM National Teleconference – More Debt, More Problems: DIP Financing

and Cash Collateral Arrangements in Bankruptcy

4.23 NACM Heartland Construction Meeting – Johnston, IA

4.27–8.14 Accounting – Online Course

4.28 NCS Webinar – Equipment UCC Filings

Calendar of Events

continued to back page >>

>> Navigating continued from front page

HEARTLAND HEADLINER • WWW.NACMHEARTLAND.COM HEARTLAND HEADLINER • WWW.NACMHEARTLAND.COM

As reported first in our December update, the NACM Heartland Board of Directors announced that Rebecca Dick, credit manager for WSM Industries in Wichita, was awarded the 2015 Credit Congress Scholarship. The scholarship covers a full delegate registration.

Rebecca Dick Receives 2015 NACM Heartland Credit Congress Scholarship

The board has provided the scholarship for the past several years to NACM members who are seeking to further their professional skills. Rebecca said she expected Credit Congress to help her in a number of ways.

“As a new credit manager, I am constantly learning about the credit world. I am eager to gain all the education and experience I can to become a better credit professional. My knowledge of credit is growing but still limited and I feel that attending Credit Congress can further enhance my education … Additionally, the educational sessions will enhance my development as a credit manager and enable me to apply the knowledge I gain from the ses-sions to my daily tasks in credit.”

— Rebecca Dick, 2015 NACM Heartland Credit Congress Scholarship Recipient

Rebecca noted that she attended her first Credit Congress in 2014 in Orlando, where she met many new people, as well as sat for her Credit Business Associate designation. She looks to build upon those experiences, as well as use the Expo to research software her company is looking to purchase.

As a member of NACM Heartland, you have an opportunity to access ICE, a proprietary credit information management system.

ICE Updates

ICE is an industry leader in the credit information industry for providing a secure, innovative solution that offers better data. How? Our credit exchange groups use ICE to share factual information about shared clients, and other customers use it in a variety of ways including leveraging the ICE credit score and the service center.

In fact, our credit exchange groups are seeing the biggest change. ICE is now able to accept a wide variety of files for uploading your credit data. For some of our credit exchange groups, this means no more manually entering data.

Other ICE updates include:

Pricing. We’re moving to a transactional pricing model where you pay for the level of service that your company needs. It will still be an annual subscription, but based on the ICE services you use.

Scoring. The ICE credit score is a real time score based on the information in our databases. You can create a score individually or in a batch. It can also be used as a stand alone number or you can roll it into an internal score bringing in other factors. The ICE credit score is becoming an important part of the decision making process for many credit departments.

ICE Direct. You now have the ability to hook up directly with the ICE database and have it populate right on your screen.

Portfolio Analysis. We are available to take a look at your portfolio of customers and identify areas of concern. This is a great way to identify unusual activity or revise credit limits.

ICE continues to evolve to meet the needs of an ever-changing, always demanding business world. If you have any questions or suggestions, please contact Maggie at Maggie@nacmheartland.com for more information.

Find all you need to know about this year’s event in St. Louis, including:

Information about more than 60 compelling and timely educational sessions. Ranging from the fundamentals to more refined, challenging subjects, our breakout sessions present material in the following educational tracks:

• Business and Technical Skills• Credit Management – Core concepts

to best practices, trends, practitioner experiences

• Credit and Technology• Financial Analysis• International Credit Concepts –

Global challenges, etiquette protocol, country-specific approaches

• Leadership and Management Legal Environment of Business Credit –

Legal updates, new case opinions, due diligence expectations

Early bird registration ends March 2.Check out the discounts on a full delegate registration, as well as the team registration.

View a complete listing of exhibiting

companies online and much more!

CREDIT CONGRESS UPDATES If you haven’t already, check out the 2015 Credit Congress and Expo webpage:

Forecast Picture Looks Better OverallOverall, the world economy should grow at about 3.5%, up from 3% over the last three years, with U.S. recovery driving the growth. The U.S. economy will continue to grow at about 3%, supported by strong recovery across all major areas for private-domestic demand. “The consumer is looking pretty good, home building we think still has quite a bit of upside, and capital spending is also settled into a nice groove,” Hatzius said. The economist described spillovers from the dollar’s appreciation and some weaker growth numbers in other markets as marginal negatives, ones being offset by the drop in oil prices. “That’s an important positive for growth,” Hatzius said of the oil price decline.

Japan and Europe will continue to grow at a slower rate, in the 1% range. These are somewhat better numbers than were seen during the last couple of quarters of 2014. Currency depreciation and oil prices will help both regions. Europe is still in the early stages of the post-bubble, post-crisis adjustment, and Japan’s postponement of the second stage of its consumption tax increase until 2017 will help its economy, Hatzius said.

Economies in emerging countries will create a mixed picture. While commodity producers are going to have a tougher time as prices drop, commodity importers will benefit. Authorities in China are expected to manage a deceleration in growth, but the firm’s economists are concerned that the drop could last for years.

This article was written by Diana Mota, NACM associate editor for the January 22 issue of NACM e-News. Visit NACM’s Knowledge & Learning Center to view Goldman Sachs’ 2015 Outlook: Global Economy video as well as some of its other economic forecasts and much more.

creditcongress.nacm.org.

The global economy in 2015 is expected to experience accelerating growth,

though unevenly among regions, said Jan Hatzius, Goldman Sachs’ economist

of Global Investment Research during its recent video forecast presentation.

Visit NACM’s Knowledge & Learning Center to view Goldman Sach’s 2015 Outlook: Global

Economy video.

River Bend Ag

Hydrite Chemical

Integrated DNA Technologies  

Dairy Farmers of America

New Members and Designations

DESIGNATIONS

CBA

Grant Johnson – Helena Chemical Company

Valerie Moore – Helena Chemical Company

Jake Plagge – Helena Chemical Company

Nealey Powers – Helena Chemical Company

Matthew Ramey – U.S. Commodities/

UBE Ingredients 

CBF

Laura Wills – Helena Chemical Company 

CCE

Daniel Eischen – Bayer Crop Science LP

Gina Garrison – Helena Chemical Company

Donna Mueller – Chanel Bio Corp. 

Congratulations to these members who sat for the designation exam on November 10 and passed.

NEW MEMBERS Welcome to our new members: