BCJ November-December 2013

NACM Oregon Business Credit Journal

November/December 2013

7931 NE Halsey, Suite 200 Portland, Oregon 97213 Tel 503.257.0802 Fax 503.257.0247 www.nacmoregon.org

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Customer Payment—Term-Pushback Strategy (Formal and One Offs): How Customers (Solvent and Otherwise) Are Unilaterally Extending Credit Terms and the Credit Team’s Response—Part I by Scott Blakeley, Esq.

In This Issue

Customer Payment— Term Pushback .........1

Member Profile ..........2

Honors & Awards .......4

NACM Oregon Member Open House ..............5

Chair’s Message .........6

President’s Message ...6

Key to Success ...........8

NOF Scholarships .......10

International Corner ...11

Consumer Corner .......12

DSO 3rd Quarter ........14

Credit Learning Center ................................15

Contacts ....................21

AbstractThe credit team’s assessment of a customer’s ability to pay on terms often involves evaluating a number of factors, including a complex scoring model and calling on various sources of financial, bank and trade data, along with internet searches. Notwithstanding the involved credit evaluation the credit team employs to get the tightest bead on customer credit risk, since 2008 vendors have found many customers ignoring a vendor’s credit terms and unilaterally extending these terms.

The terms pushback strategy (TPS) may be classified into two baskets: the formal terms pushback program, the Customer Payment-Term-Pushback Program (CPTPP), is rolled out to all of the customer’s vendors, while the ad hoc or informal terms pushback program singles out certain vendors. TPS presents customers a less-expensive financing option, while improving their working capital. Both strategies are being adopted by the solvent and financially struggling customers, alike. It is the credit team’s objective to determine the customer’s motivation.

With both the formal and ad hoc TPS, the credit team’s threshold evaluation is: (1) Will we get paid? If so, can we afford the increased costs that come with delay?;

and (2) If we may not get paid, what strategy can we adopt to reduce the risk of loss? The “new normal” facing the credit team seems to be the customer attempting to dictate credit terms to suit their working capital needs or cash flow constraints (think 45-75 days). This article considers the reasons for the uptick in TPS, examines the impact on vendors, and offers thoughts on how the credit team may deal with the pushback strategy.

The Supply Chain and Trade CreditBusiness Credit as Driver of the Economy The importance of business credit in supplementing companies’ working capital cannot be overstated. Absent trade credit, customers face a cash flow drain as they are forced to pay vendors for their goods and services in advance of the customer’s sale of the finished product or service to the end user. To ease the cash constraints that come with cash-in-advance and cash-on-delivery purchases, the customer may qualify for bank financing, but with interest and fees. Further, the bank’s financing is conditioned on the customer pledging all of their assets, and future assets, as well as the principal personally




Member ProfileWCP Solutions

by Jake Faris

Oregon NACM member WCP Solutions—formerly West Coast Paper Company —began as an idea planted in the mind of Dick Abrams in the late 1920s. Abrams worked at a small paper supply company in Seattle, Washington, when the company went bankrupt. The job of liquidating assets and collecting debt fell to Abrams, who distinguished himself in his handling of the affair. Both the customers and suppliers he worked with gave him their highest recommendation: he should open a business of his own. Abrams took their advice and opened what would become WCP Solutions on March 1, 1930. He supplied his customers—mainly merchants in Seattle’s public markets—with packaging material like brown wrapping paper, twine, and bags. In 1933, WCP diversified into supplying printing paper when they received a franchise to distribute Butler Brand printing paper from the

legendary J.W. Butler Paper Company. Supplying commercial printers still makes up half of WCP’s business. The most impressive aspect of WCP’s inception, diversification, and initial growth is that it occurred during the backdrop of The Great Depression. From those beginnings, WCP Solutions has been owned by the same family and has concentrated on the same successful principles. They don’t just sell products, they develop relationships with their customers and offer solutions at fair prices. From their headquarters in Kent, Washington, WCP Solutions reaches across the northwest through its independent divisions in seven different states, including Oregon, where Carol Ross is the Credit Manager. A native of Peru, where she worked for a Spaniard bank, Ross has spent her career working in credit management. She worked

for Washington Collectors in the Tri-Cities area before heading down I-84 and joining Portland’s Sysco offices, where Ross worked as a credit analyst. When Sysco consolidated its credit division, Carol followed the job to Dallas but quickly realized the move would be short-term. “I knew I needed to get back to the northwest.” It was a challenging time—the height of the recession—and Ross knew prospects would be slim and hiring would be competitive. The stars aligned for Carol Ross about two years ago when she landed at WCP Solutions, filling the position left by the retirement of their long-time credit manager. Since it’s first move

towards diversification in the 1930s, WCP Solutions has continued to expend its product line to include envelopes, specialty packing supplies like wine skins and industrial janitorial supplies, equipment, and repair services. As Ross proudly puts it, “If we don’t have it, we’ll get it.” Carol’s approach to credit management is to understand both sides of the sales process. The sales department took some time to warm up to Carol’s hands-on approach, but in the end they were convinced. “I don’t think that a credit manager can run a business from an office,” Ross says. “We need to get back to the basics. Credit scores and reports are great. We rely on everything NACM provides, from working groups to seminars. But as a credit manager I need to work with [our customers], get to know their business. I really enjoy that part.” “If we say that we support sales, I think I also need to be out there in the field, getting to know our customers. I need to walk around town and know those economies. I don’t

Carol Ross, Credit Manager





Member Profile—WCP Solutions, continued from page 2

Jake Faris is a business technology consultant and sometimes-freelance writer who lives in the Portland area with his wife Charity and their two children, Harper and Xavier.

d

want to be surprised.” It didn’t take long for the customers to see the value of getting to know their credit manager before any issues arise. “I like to develop those relationships from the beginning. I need to get to know them when everything is going well, so when they aren’t going so well they are comfortable talking to me,” says Ross. Even before her philosophy could be proved an effective one, it was one her boss supported. “[That kind of support] you don’t see from a big corporation,” says Ross. “What makes a difference is that we’re locally owned. But we’re not a small company, by any means. Each division has it’s own credit manager. You don’t have to call California or India to talk to a credit representative.” WCP’s family ownership plays a large

part in the company’s comfortable environment. “The Abrams family has owned it from the beginning and when you walk through the building you get that family feeling,” says Ross. “The employees you see around the company are long-term,” she continues. The longevity of it’s employees is also tied to its success. “We feel that they embrace us as family members. We want the company to succeed because it’s our family”

WCP Solutions Sample Room

Ken Russon, Sample Specialist

CRF NewsThe Third Quarter 2013 Edition of the CRF News is now available.

This edition includes articles related to: an attorney’s perspective on treating preferences according to an earlier version of the Bankruptcy Code, how vendors push back on creditors’ terms using provisions of anti-trust laws, the state of Credit and A/R compensation today, and a view of how the economy will perform in the near future provided by renowned economist Mark Zandi.

Now available in Flipbook format. The Flipbook version may be viewed on all Internet devices, including smart phones and tablets.

For those who can’t view Flash on their computers, a PDF version of the CRF News is available.

http://www.flipcity.com/fvx/ulib/417a8ac0-5ddb-40e7-8c8c-5301a0cc941c/11206/1/Web/flipviewerxpress.html

http://www.crfonline.org/publications/news.pdf




Honors & AwardsMeet the 2013 NACM Oregon Recipients of the Designation of Excellence Award

The NACM Oregon Honors & Awards Committee accepted nominations for local members of our affiliate to be recognized for the outstanding efforts they have made on behalf of the credit profession. The Committee presented recommendations to the Board, and we were pleased to recognize the following individuals:

The award recipients will be the NACM Oregon nominees for the NACM National Awards presented at the NACM Credit Congress in June 2014.

Congratulations Marilyn and Tawnya!

A CCE Designation of Excellence was presented to Marilyn Rea, CCE, Pacific Architectural Wood Products. Marilyn is a long-time supporter of NACM Oregon. She’s been especially active in conducting quarterly certification luncheons to help individuals understand the roadmap for achievement of professional designations.

A CBA Designation of Excellence was awarded to Tawnya Marsh, CBA, Columbia River Knife & Tool. Tawnya has been active with NACM Oregon for two decades, and has been especially active with the Portland Chapter of the Credit & Financial Development Division of NACM National.

Credit Ambassador Award

Congratulations also go out to Scott Blakeley, Esq., founder of Blakeley & Blakeley, LLP. Scott was the second recipient of the “Credit Ambassador” Award. Scott has published dozens of articles and manuals in the area of creditors’ rights, commercial law, e-commerce and bankruptcy in such publications as Business Credit, Managing Credit, Receivables & Collections, Norton’s Bankruptcy Review and the Practicing Law Institute. Mr. Blakeley speaks frequently to credit industry groups regarding these topics throughout the country and via webcasts. He was selected as one of the 50 most influential people in commercial credit by Credit Today.

Credit Ambassador Award

At the recent Membership Breakfast held on October 15, 2013, Marilyn Rea, CCE, and Tawnya Marsh, CBA, received special recognition as the NACM Oregon Designation of Excellence Award recipients. Along with these awards, Alice Knight, RGCP, VP of Finance & Administration, Paper Products Marketing (USA) Inc., is the third recipient to receive the award for Credit Ambassador. Alice truly believes in mentoring and giving back to the international credit community. She joined NACM Oregon and the International Industry Group in 1987. Her skill, knowledge, and contacts has been instrumental in bringing education to the international group members. In 2010, she was recognized with the Credit Executive of the Year Award for her many contributions. She currently writes for NACM Oregon’s Business Credit Journal and is listed as one of the “Experts” on our website for fielding questions from the membership. She currently resides on the Board of Directors of ICTF (Association of International Credit & Trade Finance Professionals). Thank you Alice for your support and willingness to give back!

NACM OregonMember

Open House

Wednesday, December 11, 20134 - 7 p.m.

NACM Oregon7931 NE Halsey, Portland

Appetizers, beverages, and fun!

Please RSVP to Shawna Kelly, skelly@nacmoregon or

971.230.1220 by Wednesday, December 4.




Message from the President Our Business Credit Principles class finished in September, and the Financial Analysis class is sprinting to the finish line in early December. Most of the students are working on national certification, and for those who qualify, testing will be held March 10, 2014, with a paperwork deadline of January 13. For those who are still working on the requirements, the next testing at NACM Oregon will be held July 28, with a paperwork deadline of May 27. If you plan to sit for the exam on either date, get your paperwork in! We have had excellent experience with CBA study groups. Over the last two decades, our pass rate is 100% for those who have participated in such a study group. Usually, these groups meet for ten weeks or so, for an hour to an hour and a half at a time, starting about three months before the exam. These groups often meet first thing in the morning; however, this depends on the participants and the CCE leader, who makes sure all of the appropriate material gets reviewed. If you have an interest in such a study group, please let Shawna Kelly in our office know (971.230.1202 or [email protected]) at your earliest convenience, and provide to her the date you intend to take the test. Also, if you need help with paperwork, please contact Marilyn Rea, CCE, at 503.943.2396 or [email protected]. We are here to help those individuals committed to the certification program. Please let us know if you need assistance. The holidays are almost upon us, and the Board and Staff of NACM Oregon thank each of you for your support this year. We wish you the very best for the holiday season and the New Year!

Rod Wheeland, CCE, CAE Direct: 971.230.1158 [email protected]

Message from the Chairman Thank you to all who attended the Membership Breakfast. John Mitchell did his usual excellent and informative talk looking into the crystal ball on economics. It was also my pleasure to announce the Designation of Excellence Award winners. Tawnya Marsh, CBA, was honored with the CBA Designation of Excellence award and Marilyn Rea, CCE, was presented the CCE Designation of Excellence award. Alice Kight received the Credit Ambassador award. Tawnya has been an active member of CFDD and NACM for more than 20 years. She is currently serving her second term as Chair of the CFDD Portland Chapter. Tawnya is bright, creative, and very-well organized. She is willing to serve when asked and always agrees with a smile and can-do attitude. Congratulations Tawnya! Marilyn Rea, CCE, is also a long-time member of CFDD and NACM. She served as Chair of the CFDD Portland Chapter. She currently hosts and presents the Certification Roadmap sessions at NACM. Not only is she a strong supporter of the certification process but she follows up, gently but regularly offering encouragement and assistance. Congratulations Marilyn! Both Marilyn and Tawnya will be NACM Oregon’s nominees for the National Awards in their classifications at the 2014 Credit Congress. Anyone involved with the international credit world in Portland knows Alice Knight. To say she is a legend is to underestimate her influence in this important part of the credit world. She’s a regular contributor to Business Credit and the Business Credit Journal. She served on a variety of committees on a national basis and is a guiding force in the NACM Oregon International Trade Group. She is a wealth of knowledge and is always happy to answer a question. She truly is an Ambassador for NACM Oregon. Thank you to the Award Committee, Brett Hanft, CBA, Chair, Barbara Davis, CCE; Doug Jacobson, CCE; and John Hardy for your excellent work. The second Meet and Greet was lots of fun. I enjoyed meeting with those of you who attended. NACM Oregon will be hosting its annual Open House in December and I look forward to seeing all of you there. Wishing all of you a wonderful Holiday Season and a Happy 2014.

Marsha Johnson, CCE TEC Equipment, Inc. [email protected]

mailto:marilynm%40pacificwoodproducts.com?subject=

mailto:rwheeland%40nacmoregon.org?subject=

mailto:mjohnson%40tectrucks.com?subject=




Within the past few years we have realized an unprecedented increase in productivity and efficiency in business processes due to ongoing advances in business process automation. Many components of business operations that were previously done manually have given way to electronic processes.

However, despite these advances, payment systems in the B2B environment remain antiquated as paper based invoicing and check payment remains the norm in the vast majority of business-related transactions. Recognizing this, the Federal Reserve Banking System has engaged in an all out effort to implement adoption of electronic payments in lieu of a paper check based system. The Credit Research Foundation is a major player in this initiative, representing the interest of the accounts receivable function for businesses engaged in commerce throughout the U.S. and worldwide.

As standards are proposed in the adoption of B2B electronic payments, the Federal Reserve System is looking to CRF for guidance to assure that these standards are compliant with common business practices as it relates to accounts receivable systems and processes. As you might recall, CRF recently engaged in several joint surveys (with AFP representing Treasury Management, and IFO representing Accounts Payable) in an effort to gather input directly from business practitioners to assure a smooth transition in the adoption and implementation of these electronic payment standards.

As we are on the precipice of electronic payment adoption, it is imperative, as a receivable manager, that you gain a thorough understanding of what the future holds in payment process automation. To attain this end, the Federal Reserve Bank has developed a paper detailing this initiative, and asked CRF to share this paper with the

Future of Electronic Paymentsreceivable management community. You will find this valuable update attached. The paper not only explains the efforts being made to assure a smooth adoption to B2B electronic payment processes, but once again seeks your input to assure that your needs as a receivable manager are met. We strongly encourage you to click on… http://www.fedpaymentsim-provement.org/ and provide your valued feedback. Responses may be submitted by December 13, 2013.

Feel free to contact CRF with any questions, opinions or suggestions related to this issue.

Lyle Paul Wallis, CCEVice PresidentCredit Research Foundation1812 Baltimore BoulevardWestminster, MD 21157443-821-3000www.crfonline.org

FTC Issues Guide For Businesses and Organization on the Red Flags RuleThe Federal Trade Commission released a new guide entitled Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business to help businesses and organizations determine whether they are subject to the FTC’s Red Flags Rule and how to meet the Rule’s requirements.

http://www.fedpaymentsimprovement.org/

http://www.fedpaymentsimprovement.org/

http://www.nacmoregon.org/files/Fighting%20Identity%20Theft%20with%20the%20Red%20Flags%20Rule%20-%20A%20How%20To%20Guide%20for%20Business(3).pdf

http://www.nacmoregon.org/files/Fighting%20Identity%20Theft%20with%20the%20Red%20Flags%20Rule%20-%20A%20How%20To%20Guide%20for%20Business(3).pdf




Key to Successby Jake Faris


“Everyone will say ‘I never planned on a career in credit,” says Steve Porter, CCE, Controller and CFO at First Aid Only, a first aid supply company in Vancouver, Washington.

Professional serendipity is a consistent theme when talking to credit professionals, and one Porter knows a little about.

Steve studied Business Administration at Warner Pacific College and thought after graduation he would become an accountant. A job with a CPA prompted Porter to reassess his options and he quickly found a position as an Accounting Manager at Grain Terminal Association.

Later, working at Americold Corporation, Porter realized they were extending a significant amount of credit to their customers and yet there was no specific person responsible for managing credit. “There was a lot of room for improvement,” he says, “and that’s when I got involved with NACM.” There Steve found an excellent resource.

Porter found the credit profession was a unique one. “NACM played a key role in my career going forward,” he says. Steve was placed in charge of the credit department he created from scratch.

After receiving his CBA, Porter completed the requirements for his CBF and CCE in quick succession. “I’m a methodical, very linear person,” Porter says with a shrug and smile.

He noticed some significant differences after collecting the certification trifecta, both in how he was seen as a professional, and how he saw himself.

“It was a good feeling, a sense of accomplishment in my career and a faith in my abilities,” says Porter. “I didn’t fear going into a different area—I can do this.”

His courage inspired him to take his career in a slightly different trajectory. In addition to his credit certifications,

Porter also received his CTP (Certified Treasury Professional) from the Association for Financial Professionals.

At TRM Corporation, Porter was hired as a cash manager and found himself eventually promoted to Director of Treasury.

Slightly different than a Credit Manager, Steve describes a Treasurer —or a Cash Manager—as someone who manages cash, banking, borrowing, investing, and the collection or dispensing of cash. “In many ways it has become ‘risk management,’” says Porter.

Steve Porter was hired as First Aid Only’s Controller in 2007, where he




Key to Success, continued from page 8

Jake Faris is a business technology consultant and sometimes-freelance writer who lives in the Portland area with his wife, Charity, and their two children, Harper and Xavier.

was able to unify his experience in both cash and credit management. As Porter puts it, “Now it’s come full circle.”

He was excited to have the opportunity to holistically approach three distinct disciplines: accounting, credit, and treasury.

“The issue is that in some companies these disciplines are siloed,” explains Porter. “They don’t work well together. There’s a lot of what they do that goes well together. If they are able to work together they can do a lot more with less overhead.” As Controller, Porter ensures both credit and cash management are working harmoniously.

In his position as both a CCE and a company officer, Porter is able to reflect on both what the certification has meant to him and what it means to him as someone who may be hiring credit professionals in the future. “I’ve had the good fortune of

being offered just about every position I’ve applied for,” says Porter. He believes that having a professional certification had a lot to do with that. To him, “What a certification says is that I take my career seriously. If I’m interviewing someone and they have a certification, that says something about them. It almost doesn’t matter what the certification is in.” It signifies that a professional has taken it upon themselves to increase their knowledge and competency.

Though Steve hasn’t hired a credit professional since starting at First Aid Only, should the opportunity arise he is looking forward to hiring someone with a designation.

“I enjoy mentoring,” says Porter, “so even more interesting would be someone who doesn’t have a

certification but wants it.”

Again, Porter highlights another common theme among CCE holders: a love of mentoring up-and-coming credit professionals.

“It’s great to gain all this knowledge, wisdom,

and experience but if you can’t pass it on, what good is it?” Porter asks. “One of the best career experiences is to help someone to be better at what they do.”




NACM-Oregon Foundation Scholarships The NACM-Oregon Foundation grants scholarships to credit professionals for continuing education, professional designations, and conference expenses.

To apply for scholarship funds, or for more information, contact Lourdes (Lou) Rice, NOF Scholarship Committee Chair, Pacific Metal Company at 503.454.1051 or [email protected].

The Foundation manages two scholarship funds: the NACM-Oregon Scholarship Fund and the Phylliss Clark Memorial Fund. The Foundation offers scholarship to the following events:

Submit applications to:

Lourdes (Lou) A. Rice NOF Scholarship ChairPacific Metal Co. 10700 SW Manhasset Dr. Tualatin, Oregon 97062p: 503.454.1051f: 503.454.1065e: [email protected]

• All NACM Oregon educational courses

• Portland Community College courses within the Credit Administration and Advanced Credit Administration Programs in preparation for professional designation

• Self-study courses in preparation for professional designation

• Registration and exams fees for the National NACM Professional Designation Program

• CFDD National Conference

• National Credit Congress and Exposition

• NACM National schools such as Credit Management Leadership Institute, Mid-Career School, and the Graduate School of Credit and Financial Management

If taking a course or pursuing your certification seems like an expensive proposition, think again. These scholarship funds are a benefit to you as a member, so please take advantage by applying for next year.

2014 Credit CoNgress & expositioN

Join us next year

at the Rosen Shingle Creek

Resort June 8-11, 2014, Orlando, Florida,

for the year’s largest

gathering of business credit professionals in

the country.

NACM National is pleased to announce the launch of their newly-named job board: Credit Career Center. Even more exciting, the Credit Career Center is now a member benefit; members can post jobs for free, anytime.

http://www.nacmoregon.org/about/foundation.html

mailto:lrice%40pacificmetal.com?subject=

mailto:lrice%40pacificmetal.com?subject=

http://www.nacm.org/credit-career-center.html




International Corner, by Alice Knight, RGCP

I recently attended the Credit Research Foundation (CRF) Forum in Fort Lauderdale, Florida. Although the focus is domestic credit and accounts receivable management many of the topics also apply to international activities. One speaker, a Senior Vice President at the Federal Reserve Bank of Minneapolis, discussed corporate payment fraud. Small and large corporations are the target of these frauds from both inside and outside sources. Employee training, increased IT controls, and the close cooperation with and use of banking risk mitigation options are needed. A new area of concern is the rapid increase in the use of mobile devices for financial activity. During the question and answer time, one participant stated that they used to print banking information on their invoices but that their bank requested that they remove it for security reasons. This session raised a number of questions for international credit to discuss with Treasury, IT, and Finance.

1. What protections are in place to screen and prevent payment fraud on wire transfers, Letters of Credit, EFT payments, ACH, and similar channels?2. Who analyzes the risk/reward of allowing banking access from mobile devices? 3. What happens if such a mobile device is lost or stolen? 4. Many international customers request banking information on their commercial invoice. How do

Alice Knight is Vice President of Finance & Administration for Paper Products Marketing, Inc. Ms. Knight has more than 48 years' of experience in International Finance and is an active member of ICTF and NACM. She has served as Co-chair, Panel Member, and Presenter at Annual Global Conferences, and as President of ICTF Forest Products Group.

we safely and effectively provide payment information to our customers?

Another session featured Escheatment or Unclaimed Property Laws. A panel explained that in the United States these laws are at the State level. This means that there are wide variations between States. Several court rulings are the basis to determine which State’s law governs in different situations. Because of the economic slowdown many States are scrambling for revenue. Some have contracted with private companies to conduct their audits. Some of these companies are contacting other States and including them all in one audit. Since part of their compensation is based on a percentage of the audit fee accessed many of these audits are very aggressive. While many companies are assigning more resources to escheat management, international activities are often ignored. Say you issue a credit memo to an international customer or the customer accidentally overpays you. Time goes by and the customer does not take the credit. What do you do? If the customer resides in a country that has escheatment laws or something similar you are to follow those regulations which could mean turning that amount over to the proper authority in that country. If the country does not have a similar law you would be bound by the law of your State. We put great emphasis on clearing all credits that are 90 days or more in

aging. This can be an effective sales tool and a friendly reason to approach a customer. If the customer is no longer interested in purchasing we ensure that the money is returned. We are owned by an Australian Parent. The year-end fiscal checklist always includes “Are all unused credits written back to income?” and, I routinely tell them, “That is illegal in the United States.” Invariably we get a comment from someone in corporate or an Australian auditor saying “I’ve never heard of such a thing!” International business is often a balancing act between the laws of the United States and the laws of the foreign country. The hard truth is that we must comply with both sets of regulations and if we cannot, the deal should not be done.




Consumer Credit Education

Q: What is a security freeze?

A: Security freezes are designed to prevent a credit reporting company from releasing a credit report without the consumer’s consent. When a security freeze is placed on a credit file, creditors cannot access the credit without the consumer lifting the freeze, either temporarily or permanently.

Q: When should someone add a security freeze?

A: If someone is very concerned about becoming a victim of fraud or identity theft then a security freeze might be for them.

Q: How does a security freeze affect access to a credit file?

A: Using a security freeze to take control over who is allowed access to the personal and financial information in a credit file may delay, interfere with, or prohibit the timely approval of any subsequent request or application made regarding a new loan, credit, mortgage, insurance, government services or payments, rental housing, employment, investment, license, cellular telephone, utilities, digital signature, internet credit card transaction or other services, including an extension of credit at point of sale.

This material is for informational/educational purposes only and is not intended to replace legal counsel.

Security Freeze

Q: How is a security freeze indicated on a credit report?

A: “File frozen due to state legislation” is a common reported statement.

Q: How is a security freeze added/lifted?

A: The consumer must contact the bureau(s) directly to add or lift a freeze.

Equifax: https://www.freeze.equifax.com

Experian: http://www.experian.com/consumer/ security_freeze.html

Transunion: http://www.transunion.com/personal- credit/credit-disputes/credit-freezes.page

Q: What should a creditor do when a consumer’s credit file as been frozen?

A: Contact the consumer and ask them to have the freeze temporarily lifted so access to the credit file may be granted.

https://www.freeze.equifax.com

http://www.experian.com/consumer/security_freeze.html

http://www.experian.com/consumer/security_freeze.html

http://www.transunion.com/personal-credit/credit-disputes/credit-freezes.page

http://www.transunion.com/personal-credit/credit-disputes/credit-freezes.page




In an effort to protect the privacy of consumer information and reduce the risk of fraud and identity theft, a federal rule requires businesses to take appropriate measures to dispose of sensitive information derived from consumer reports. Any business or individual who uses a consumer report for a business purpose is subject to the requirements of the Disposal Rule. The Rule requires the proper disposal of information in consumer reports and records to protect against “unauthorized access to or use of the information.” The Federal Trade Commission, the nation’s consumer protection agency, enforces the Disposal Rule. According to the FTC, the standard for the proper disposal of information derived from a consumer report is flexible, and allows the organizations and individuals covered by the Rule to determine what measures are reasonable based on the sensitivity of the information, the costs and benefits of different disposal methods, and changes in technology. Although the Disposal Rule applies to consumer reports and the information derived from consumer reports, the FTC encourages those who dispose of any records

containing a consumer’s personal or financial information to take similar protective measures.

Who must comply? The Disposal Rule applies to people and both large and small organizations that use consumer reports. Among those who must comply with the Rule are:

• Consumer reporting companies • Lenders • Insurers • Employers • Landlords • Government agencies • Mortgage brokers • Automobile dealers • Attorneys or private investigators • Debt collectors • Individuals who obtain a credit report on prospective nannies, contractors, or tenants • Entities that maintain information in consumer reports as part of their role as service providers to other organizations covered by the Rule

What information does the Disposal Rule cover? The Disposal Rule applies to consumer reports or information derived from consumer reports. The Fair Credit Reporting Act defines the term consumer report to include information obtained from a consumer

reporting company that is used – or expected to be used – in establishing a consumer’s eligibility for credit, employment, or insurance, among other purposes. Credit reports and credit scores are consumer reports. So are reports businesses or individuals receive with information relating to employment background, check writing history, insurance claims, residential or tenant history, or medical history?

What is “proper” disposal? The Disposal Rule requires disposal practices that are reasonable and appropriate to prevent the unauthorized access to – or use of – information in a consumer report. For example, reasonable measures for disposing of consumer report information could include establishing and complying with policies to:

• burn, pulverize, or shred papers


Disposing of Consumer Report Information? Rule Tells HowThe following information is provided by the Federal Trade Commission website.

(http://business.ftc.gov/privacy-and-security/data-security) 11-1-2013

http://business.ftc.gov/privacy-and-security/data-security




Disposing, continued from page 13

containing consumer report information so that the information cannot be read or reconstructed; • destroy or erase electronic files or media containing consumer report information so that the information cannot be read or reconstructed; • conduct due diligence and hire a document destruction contractor to dispose of material specifically identified as consumer report information consistent with the Rule. Due diligence could include: reviewing an independent audit of a disposal company’s operations and/ or its compliance with the Rule; obtaining information about the disposal company from several references; requiring that the disposal company be certified by a recognized trade association; reviewing and evaluating the disposal company’s information security policies or procedures.

The FTC says that financial institutions that are subject to both the Disposal Rule and the Gramm-Leach-Bliley (GLB) Safeguards Rule should incorporate practices dealing with the proper disposal of consumer information into the information security program that the Safeguards Rule requires (www.ftc.gov/privacy/privacyinitiatives/safeguards.html). The Fair and Accurate Credit Transactions Act, which was enacted in 2003, directed the FTC, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the Securities and Exchange Commission to adopt comparable and consistent rules regarding the disposal of sensitive consumer report information. The FTC’s Disposal Rule became effective June 1, 2005. It was published in the Federal Register on November 24, 2004 [69 Fed. Reg. 68,690], and is available at ftc.gov/os/2004/11/041118disposalfrn.pdf.

National Summary of Domestic Trade Receivables Results 3rd Quarter 2013 We have received the results of the National Summary of Domestic Trade Receivables (DSO) for the third quarter of 2013. The Credit Research Foundations (CRF) has been producing this valuable quarterly report for more than 50 years. DSO slightly decreased from the prior quarter to 39.78 from 39.79. A year ago the measure was 40.35. Best Possible DSO decreased to 31.00, as compared to 31.10 last quarter and 31.70 a year ago. Average Days Delinquency increased to 4.60 from 4.40, as compared to 4.80 a year ago. The percent reported over 90 days past due decreased to 0.40 as compared to last quarter at 0.50, as compared to 0.50 a year ago. Medians for 30 different industries are included in this summary. If any SIC code has less than three responses, it will not appear in the report. So to get more participation in your industry, please mention the survey to your colleagues, and in January when we survey the 4th quarter of 2013, pass along the link for them to participate. Please contact Customer Service or your Account Executive for a copy. Now that you’ve done the NSDTR, if you really want to see how you’re doing, you’ll want to participate in CRF’s comprehensive Benchmarking survey. You can do that at: http://www.crfonline.org/surveys/benchmarking/benchmarking.asp. To those of you that provided data we thank you again for your participation.

In Memory We are saddened by the passing of Sandra Farmer, Forest City Trading Group Inc. She was a 30+ year member of the CFDD Portland Chapter and a tremendous proponent of NACM and the credit profession.

In lieu of flowers, there are two organizations that were special to Sandy—

Marjies Fund - http://marjiesfund.org and The Children’s Cancer Association http://joyrx.org

www.ftc.gov/privacy/privacyinitiatives/safeguards.html

www.ftc.gov/privacy/privacyinitiatives/safeguards.html

www.ftc.gov/os/2004/11/041118disposalfrn.pdf

www.ftc.gov/os/2004/11/041118disposalfrn.pdf

http://www.crfonline.org/surveys/benchmarking/benchmarking.asp



http://marjiesfund.org

http://joyrx.org




NACM Oregon Education

Coming Soon!2014 EducationClass Schedule

Credit Learning Center

What is the NACM Credit Learning Center? The Credit Learning Center brings targeted, quality education to your desktop from the name and brand you’ve trusted for more than a century - NACM. Carefully selected, expert instructors present 60-minute audio/visual presentations on a wide array of topics. You choose what learning module you want to take, and when, and view it on your computer at your convenience. You may also work toward completion of a course or specialty certificate. The Learning Center will continue to expand as more modules are created and added.

How Do I Make a Purchase? The purchaser and the learner should be the same person - modules are purchased by, and sold to, individuals. The purchaser’s name must correspond to the user’s name. Companies wishing to purchase modules on behalf of multiple users should coordinate its purchase through the NACM Education Department. You can purchase a module today, and view it at any time – as your schedule permits.

NACM Event Calendar

Teleconference: Financial Statement Analysis November 18 12 - 1 p.m. PST

Webinar: The Electronic Credit Department November 20 12 - 1 p.m. PST

Teleconference: Risk Mitigation Devices When Dealing with a Troubled Company December 9 12 - 1:30 p.m. PST

Don’t forget to take advantage of your two complimentary webinars which are included in your Full Membership Package.

Those with Premium or Corporate memberships have unlimited NACM webinars/teleconferences.

To view the Event Calendar go to http://www.nacm.org/event-calendar.html.

© New Yorker Collection. Robert Mankoff. All Rights Reserved.

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Business Credit Reports

NACM Oregon offers a variety of options for business credit reports. Evaluating credit risk can be challenging. We strive to provide resources with as many data elements as possible to assist you in minimizing credit risk. The more information you are able to access, the better informed your decisions will become.

You may be asking, “Why not call my trade references on my credit application?”• It’s time-consuming. Often, you ask two or three times before you receive a reply. Time is the invaluable resource, and you can obtain a business credit report online instantly.• Customers will always provide their best references. You are not receiving the full story and should access a business credit report to get a broader indication of payment history. Who else is doing business with them and has a different outlook than that presented by their handpicked references? • Sales may be processed faster. Customers expect prompt handling of orders and shipment of products. Manually verifying references, in additional to giving a limited picture, is time-consuming.• What about public record information? Are you missing tax liens, judgments, collection accounts, and bankruptcy filings? All are important elements in your evaluation of risk and the decision process.

Do you already use another reporting agency?• Are you getting high quality, verified facts? Are you getting self-reported information? Do your current resources provide exceptional customer service?• Are there other resources that may better fit your needs?• You should have options for additional information to complete your evaluation. And the resources you use should take into consideration the size of the account or the order.

Do I need approval to access business credit reports?Unlike personal credit reports, which are regulated and may only be accessed with written approval of permissible purpose, commercial business credit reports do not require written approval of owners or officers and may be ordered as frequently as needed.

Reasons to consider accessing business credit reports:• Evaluation of prospective customers’ payment practices.• Updating existing client’s payment history.• Monitoring payment trends of key accounts.• Evaluating creditworthiness when your customer requests an increased credit limit.• Investigating lack of communication from your customer.• Evaluation of key suppliers.

NACM Oregon provides the following credit resources: NACM National Trade Credit Report Experian Dun & Bradstreet Equifax International Business Credit Reports All three national consumer agencies – Experian, Equifax, and Transunion

NACM Oregon also recommends participation in your industry credit group.

Credit Reporting Services




Denying Credit To a BusinessIf you pull credit reports, you will need to send your customers a letter letting them know if the application was denied or approved. We’ve included a sample Declination Letter for your review.

SAMPLE DECLINATION LETTER

Date

Applicant’s NameApplicant’s AddressCity, State Zip

Dear Applicant:

Thank you for your recent application for open account privileges. The application has been given careful consideration. We regret we are unable to extend credit privileges at this time for the reason(s) indicated below:

Insufficient credit experience or length of time in business Insufficient credit references Unable to verify credit references Delinquent past or present credit obligations Our previous credit experience with your business Record of account(s) placed with a collection agency Record of tax or other liens Bankruptcy Items of public record Other:

Thank you for considering us.

Sincerely,

NameTitle

Notice: the Federal Equal Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract): because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any public assistance program; or because the appli-cant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with the law is the Federal Trade Commission, Consumer Response Center, Room 130, 600 Pennsylvania Ave., NW, Washington D.C. 20580. See also www.ftc.gov/credit.

Please note: This sample and the information herein should not be construed as legal advice. Every effort has been made to assure this information is current as of the date of publication. This sample should not be used to replace the advice of your own legal counsel who can review your specific circumstances and provide you with legal advice tailored to the general circumstances and where required in individual cases.




Customer Payment Term Pushback, continued from page 1

U.S. Private Companies

Period Ending January 2013 December 2012 January 2012Sales % Change 9.0% 8.9% 10.2%

Net Profit Margin 8.1% 8.2% 4.6%

Average Probability of Default 3.1% 3.1% 4.6%

Gross Profit Margin 53.6% 53.8% 55.4%

Debt to EBITDA 6.0% 6.0% 7.0%

Accounts Receivable Days 45.3% 46.0% 37.9%

Source: Sageworks, Inc. The Private Company Report (January 2013)

Customer Benefits of Adopting TPS From the customer’s point of view, TPS is attractive as it allows the customer to increase its liquidity by reducing cash tied-up with its vendors as well as reducing its reliance on more expensive third-party financing (bank, bond, etc.). Trade credit is an interest-free loan for customers. TPS is also now viewed as a best practice, with consultants advising of the benefits inuring to a company that adopts the strategy. Adding to the mix is that more European and Asian companies, which are more accustomed to extracting extended terms from their vendors, are now operating in the U.S.

Many large companies are adopting a CPTPP to free up working capital. An example of CPTPP is Procter & Gamble Co., which announced plans to increase vendor payment terms from 45 days to 75 days. Experts estimate that this move could free up as much as $2 billion that the company may then use to re-invest, buy back stock, and support dividend payouts in an economy of lackluster sales and weak profit margins. Other companies employing CPTPP


guarantying the bank debt. When a vendor delivers goods or provides a service to a customer on credit instead of cash-in-advance or cash-on-delivery, however, that customer can withhold payment until the goods or services are paid for by the end user, resulting in positive cash flow. This is a key reason that accounts receivable, which totaled over $17 trillion in 2011, is the largest asset class in the U.S. credit market, even exceeding bank loans and mortgages.

The Origin of the Term Pushback Strategy (TPS) The credit crunch of 2008 drastically changed customers financing options. Since then, many customers (middle market companies in particular) have experienced years of down sales, impacting their creditworthiness and making it difficult to secure financing from traditional sources. Rather than finance exclusively with banks, which are tending to enforce balloon payments and have increased their willingness to foreclose in the event of a default, customers have turned to their vendors to supplement their financing needs by adopting a TPS.

The customers move from bank financing has been accentuated by increased federal banking regulation. Since 2008, regulators from the Office of the Comptroller of Currency, the FDIC, and the Federal Reserve have called on their examiners to inspect more loans, question loan officers about credit standards and study other underwriter functions. As the federal watch has tightened, more businesses have turned to TPS, which is immune from this federal scrutiny.

Inverse Relationship: Companies Sitting on Record Cash Holdings Yet Increasing the Days to Pay Vendors Consider that from Q1 FY 2012 to Q1 FY 2013, private U.S. companies reported a 7.4 day increase in the average accounts-receivable days (37.9 days – 45.3 days) and an increase in their cash holdings.




Customer Payment Term Pushback, continued from page 18


to access cash otherwise tied-up in day-to-day operations include: Apple, Inc.; Wal-Mart Stores, Inc.; Ford Motor Co.; DuPont Co.; and J.C. Penney Co.

Vendor as Involuntary Working Capital Lender From the vendor’s perspective (especially the small- or medium-sized vendor selling to a large company), the TPS represents something else entirely. Large companies appreciate that smaller vendors likely need their business more than they need the small vendor. This allows large companies to dictate longer terms. Employing a TPS, however, has a major impact on the vendor’s DSO and cash flow. Often unwilling to lose such a large revenue stream, small vendors may perceive they have limited alternatives to complying with the TPS. But as a vendor’s DSO grows, so too do the gaps in a vendor’s cash flow; if the gap grows too wide, a vendor may be forced to borrow even larger amounts from third-party sources at costly rates. While larger companies can borrow from the bond market at an approximate 3.5% interest rate, small vendors are forced to endure anywhere from 6% to 20% interest on small business loans. However, the counterbalance to customers continuing to push back on credit terms is that their smaller vendors may be forced out of their role of supplying the customer. This could result in a smaller supplier base and lead to increased production costs for the customer.

Vendor Strategy for Dealing with TPSKnow the CustomerA cornerstone of credit management is that the credit team scores the customer’s ability to pay on terms. Now, a credit policy may also require that the credit team consider whether a TPS is in place before an order is released. Given the added carrying cost of the receivable, as well as the credit risk where the customer attempts to treat the vendor more like a lender by adopting a TPS, the credit team should negotiate the sharing of financials with the closely held

company. Trade references (especially industry group members), bank references, third-party credit providers, and customer visits all become essential in evaluating the risk of credit default in the face of a TPS.

The vendor should also consider where it fits in the customer’s supply chain. Is it a critical supplier providing an indispensible product or service? Or is the vendor providing a commodity with multiple competitors in its niche? Vendors who supply directly, or are known for superior quality and service, may find that they have much more leverage in the trade relationship.

Customer Announcing a TPS and Conflicting Terms The CPTPP may be in place when the vendor initially scores the customer for terms. Alternatively, where there is a pre-existing trade relationship, the customer may notify the vendor (via email, letter, or the sales team) of the adoption of a TPS. Where the customer has placed a PO coupled with the TPS announcement, the vendor should be mindful of the risk of the battle of the forms between the PO, the TPS, and the invoice. Ideally, the vendor has a credit application that requires the credit team’s express consent for a change in terms.

The chart below considers the credit team’s steps in dealing with TPS.




Customer Payment Term Pushback continued from page 19

Financially-Sound Customer If a vendor is dealing with a customer that is scored as financially-sound and is adopting a TPS, the vendor may consider the following tactics to keep the customer within terms. As a start, the vendor should understand the financial impact of the TPS. The credit team should revaluate its DSO and CEI. DSO calculates in days how long on average a vendor’s receivables remain outstanding. CEI, on the other hand, identifies, as a percentage, the total receivables collected compared as to what was available to collect over a period of time. Additionally, the vendor should consider how its bottom line is impacted by a TPS. The cost of a TPS might appear minimal, especially where the vendor has a large profit margin. However, longer term, the TPS erodes the vendor’s working capital and impacts its ability to expand.

Strategy to Keep Customer within Terms 1. Early-pay Discount To incentivize early payment, the vendor may offer to discount the invoice if the customer pays by a certain date, say 10 days from issuance of the invoice.

2. Increase Price to Account for Delay in Payment The vendor can increase the invoice price in order to account for delay in payment and the increased risk of default. A way to structure this negative incentive against extended terms is generating two price lists. The first list prices the product of service according to normal terms. The second list provides an increased pricing for extended terms. However, the vendor should take note of the possible application of the Robinson-Patman Act, which requires giving similarly situated customers comparable pricing, subject to exceptions.

3. Credit Hold The vendor may attempt to withhold product or service to keep the customer within terms.

4. Late Payment Penalty Like the price increase for extended terms, these are disincentives imposed by a vendor to discourage the customer from paying outside of terms.

5. Call in the Team The customer and vendor benefit when they work closely, in the interest of mutual benefit. Negotiations regarding payment terms should include the vendor’s sales team and customer’s purchasing team. The customer’s procurement team has a different focus than their payables or finance team, whose chief focus is working capital.

6. Project Billing This is an alternative payment method, under which the customer pays the vendor’s invoices in stages rather than a lump sum. This is common in the construction industry.

7. Supply Contract Terms Should the vendor and customer be parties to a supply contract, the vendor may respond to the TPS by advising that the customer is bound by the provisions of the supply contract for its duration. The contract should refer to the credit terms.

8. Credit Application Terms Should the vendor have documented the credit relationship with a credit application that contains terms and conditions, the vendor may respond to the TPS by advising that the customer is bound by the credit application as to the P.O. With subsequent P.O.’s, the vendor would have to continue to insist that credit terms are as provided in the new account letter.

9. Robinson-Patman Restrictions The vendor may respond to the TPS by advising that the federal antitrust law, the Robinson-Patman Act, bars extending more favorable terms to one customer without extending comparable terms to like customers.

Watch for Part II in the January 2014 issue.

Scott Blakeley is a principal of Blakeley & Blakeley LLP where he practices creditors’ rights and bankruptcy law. His email is [email protected].

mailto:seb%40blakeleyllp.com?subject=




Board of Directors NACM Oregon

ChairmanMarsha Johnson, CCE TEC Equipment, Inc. [email protected]

Vice Chair Linda Bishop, CCE, ICCE Tektronix, Inc. [email protected]

CounselorJohn Hardy Emerson Hardwood Co. [email protected]

Directors Steve Amiel Tektronix, [email protected]

Raeann Binau, ICCE, RGCP Columbia Machine, Inc. [email protected]

Jacqueline Bloom, CBA Wright Business [email protected]

Will Campbell Standard Supply [email protected]

Tony Ceniga Industrial Finishes & [email protected]

Lori Jones, CCE [email protected]

Scott Smithhisler US Bank Global Trade Service [email protected]

NACM National Director Rick Weisman, CCE Graybar Electric Co., Inc. [email protected]

PresidentRod Wheeland, CCE, CAE NACM [email protected]

Customer Service/ Credit Reporting971.230.1220 [email protected]

Data ContributionShannon Abnal, CGA 971.230.1166 [email protected]

Member Services Kathy Linscott, CGA 971.230.1164 [email protected]

Member Services Account Executives Clara Nemeth, [email protected] Kendall Sun 971.230.1178 [email protected]

National Account Executive Caroline Anderson, CGA 971.230.1168 [email protected]

EducationShawna Kelly [email protected]

Industry GroupsRichard Browning, CGA 971.230.1188 [email protected]

Kristen McBride, CGA 971.230.1176 [email protected]

Collection ServicesDennis [email protected]

BillingMarmie Carpenter971.230.1146 [email protected]

Meeting Room RentalShawna [email protected]

Newsletter EditorBarbara Salazar971.230.1182 [email protected]

Building Suites Lisa Rogstad971.230.1160 [email protected]

Contacts

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BCJ November-December 2013

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Transcript of BCJ November-December 2013