eNews May 13
In the News
May 13, 2021
|I. NEW! NACM Thought Leadership Groups to Further Knowledge Base|
|II. How to Get the Most Out of Preliminary Notices|
NEW! NACM Thought Leadership Groups
to Further Knowledge Base
Annacaroline Caruso, editorial associate
Credit experts emphasized similar motivations for serving as part of NACM’s new thought leadership committees: developing and disseminating information that’s timely, on point and practical for NACM and FCIB members.
Professionals passionate about furthering and supporting the field of business-to-business credit are meeting in small groups, similar to think tanks, to deliberate on and delve into topics such as construction, metrics and technology.
This NACM Board of Directors’ initiative is in the infant stages, but former chairman, Ty Knox, ICCE, said members can expect more seminars, programming, webinars or certification opportunities to grow out of these discussions.
“My vision was that we would, as a Board, start working on strategic plans on how we wanted to drive the association to better assist the membership,” Knox said.
Today’s business environment is constantly changing. As new regulations, technology and risks evolve, the credit industry must keep pace so that credit management practices align with these changes. These thought leadership discussions are one way to pull together information and best practices on a variety of credit-related subjects to share with members through offerings such as online workshops. Participating in these think tanks will expand knowledge, Knox said.
These discussions also prepare experts to field new questions from members as they face different challenges in the credit world, said Frederik Matell with Kloeckner & CO SE, (Duisburg Area, Germany), and one of the thought leaders who explores the intersection of credit and technology driven by our global FCIB members.
“By sharing knowledge as much as possible about automation and technology, we can actually bring good value to the members,” he added. “We know that companies are spending enormous amounts of time and money to find the right opportunities for automation and technology.”
As these experts brainstorm together, they figure out what members need, what they’re struggling with and where they need more support, Matell explained. It’s a way to stay ahead of emerging technology.
“There are some new technologies out there that most credit managers probably have no idea about, even those that are quite tech savvy,” he said. “There are some interesting concepts coming up that might be useful.”
NACM’s thought leadership groups share critical insights about the challenges facing today’s credit professionals, said Nate Hutton, CICP, global credit manager with Donaldson Co (Minneapolis, MN), and contributor to the metrics think tank. As they discuss cutting edge best practices among themselves, the NACM team can develop editorial content or educational content that will immediately resonate with its membership.
How to Get the Most Out of Preliminary Notices
Bryan Mason, editorial associate
Whenever starting a new construction project, subcontractors and material suppliers should always verify state requirements for securing mechanic’s lien rights.
In most states, the process starts with sending a preliminary notice to the owner and general contractor. Start by determining whether the state in which you are working requires them. Requirements vary by state so it’s always important to verify the requirements using a tool such as the Lien Navigator, said Chris Ring, of NACM Secured Transaction Services (STS).
According to NACM STS’s Lien Navigator, 14 states are direct to lien states and do not require a preliminary notice. However, that doesn’t mean you shouldn’t send one in those states, Ring advised. Preliminary notices promote transparency and elevate subs and materials suppliers in the minds of the parties that receive them. These notices can serve as preemptive measures. With multiple tiers sometimes between an owner and a supplier, the visibility that a preliminary notice provides can strengthen the chances of getting paid before having to file a lien.
“They let the property owner know you are on the job,” Ring said.
On the other hand, Ring doesn’t recommend serving these notifications for every scenario and every customer. “That wouldn’t be a good strategy. You’re going to upset some customers; you might even drive some customers away because you’re doing things that’s not required by statute.”
Consider each project on a case-by-case basis, Ring underscored. “There are advantages to sending preliminary notices even when they are not statutorily required.”
In a recent webinar, Preliminary Notices – Having to Serve Them vs. Should be Serving Them,” Ring highlighted different scenarios where they can benefit your business.
Among the reasons for using a non-statutory notice, Ring outlined several situations:
- A new customer with questionable credit
- Existing customers with high DSO
- Returning customers with poor payment history
- Customers that recently filed Chapter 11 bankruptcy
Ring also explained how subs and suppliers can turn some unpaid lien states such as Colorado and New Hampshire into full paid lien states by serving a preliminary notice. In these states, if the preliminary notice is not filed, subs and suppliers still have lien rights but if the owner can prove it has made payments to the general contractor it has a defense to fight the lien. In a full lien state, regardless of how much money has flowed between the owner and general contractor, subs and suppliers maintain full lien rights, Ring explained. In both situations, however, subs and suppliers must follow the laws of the state for filing in order to maintain their rights.
Even in less than favorable situations, Ring explained how preliminary notices provide benefits. For example, in Alabama, a property owner has the right to object to a sub or supplier stipulating the full price of a lien. For that reason, Ring suggests serving a notice at least 15 days prior to furnishing so that a creditor knows the situation upfront before the project receives its goods or services, and can make better credit decisions.
Financial Protection Measures
Make Debt Collection Challenging
Annacaroline Caruso, editorial associate
Approaching non-paying customers is more difficult now than ever due to laws put in place at the beginning of the pandemic. Maneuvering the current economic climate and trying to collect payment from debtors may require a specialized strategy.
The global average for days sales outstanding (DSO) is trending upward, according to data from the Bierens Group, a debt collection agency based out of the Netherlands. Average DSO worldwide was 66 days in 2020, a two-day increase from 2019, and is predicted to rise to 68 days in 2021. Bankruptcies are down on average, 17.2% globally, according to the same data.
DSO and bankruptcy rates are often used as a thermometer for the health of the global business economy.
However, bankruptcy and DSO data vary greatly across countries based on what financial support mechanisms were put in place to mitigate the impact of COVID-19. It also depends on the strength of the country’s economy pre-COVID and which industries a country relies on financially, pointed out attorney Alexandru Buzamet, of the Bierens Group, during a webinar for NACM and FCIB, International Debt Collection During COVID-19. “That gap will become even bigger with the effect of the financial crisis,” Buzamet said.
In response to the pandemic, countries put different bankruptcy protection measures in place. Some of those measures have gradually lifted in certain countries as vaccines roll out, but other protection measures have continued, which attorney Bart van Onna, of the Bierens Group, describes as an unsustainable approach.
“The numbers of bankruptcies are at an all-time low,” van Onna said. “The financial aid is enormous; so, for me, this is not a normal situation. It’s an unhealthy situation, but this is going to change when the government aid stops.”
Buzamet added that these protections “give more confidence to debtors to hide behind the corporate veil,” leaving lenders to deal with outstanding invoices and unpaid debts. “It’s a very debtor friendly environment,” he said.
That’s why standard debt collection procedures that credit professionals used pre-pandemic may not be as effective today. The lawyers recommended several steps to follow and a personalized approach for each debtor’s case.
- Ensure Written Confirmation of your Claim Keeping an organized paper trail will simplify the collection procedure and reduce some obstacles for debt collection lawyers, according to Buzamet. Written confirmation can come from a debtor through email or WhatsApp in most countries.
- Solve Open Payment Disputes Now Your debtor likely still has some reserves to pay; but after government aid stops, repayment may no longer be possible. “The golden rule in debt collection is the sooner you take action the higher the chance you have on collecting the claim,” van Onna said.
- Investigate Reasons for Non-Payment or Postponement Lenders should request financial documents to verify the reason a debtor gives for nonpayment. “The COVID card is being pulled out very quickly by companies that are hardly affected by COVID-19,” van Onna explained.
- Ask for Additional Securities Creditors can increase the chance of repayment by implementing safety nets like payment in advance, retention of titles and double-checking contracts.
- Make an Express Choice of Applicable Law and Competent Court This is something attorneys and creditors can work on together. Making the right choice of court and laws will give companies a strategic advantage and increase the chance of recovering costs.
Buzamet said lenders should keep in mind, “All companies have been affected by the COVID-19 pandemic so showing a bit of understanding might bring you a better result.”
International Debt Collection During COVID-19 is available on-demand.
One of my clients recently had difficulty letting go of some unfair comments from her supervisor. The comments were harsh because the supervisor thought the work was shoddy, but the supervisor had gaps in his knowledge and had overlooked the true quality of the work. My client knew she had to get past the comments, but they still hurt. There were two aspects to grapple with—the personal hurt and the professional relationship. My client had to be objective about the comments and build a more respectful professional relationship.
Instead of just letting the comments go, one way to move forward is hold one issue in limbo while focusing on another issue. In other words, suspend the belief that the supervisor had negative intentions when he made the comment and instead focus on the relationship.
Miscommunication is not uncommon. Conflicts arise because of lack of clarity and confusing purpose. Jumping to judgment about what people say is not helpful. Slowing down or suspending your judgment about their intent and seeking clarity can help de-escalate the tension. For example, when you hear something that surprises you, resist the temptation to judge. Stop yourself, suspend judgment and seek to understand. This allows for time to check the intent.
Taking this approach changes the dynamic and opens up space for a different type of dialog by modifying your communication behavior. This can be hard if you are influencing up. Still, do it. If you are a leader with a resistant team member, the same concept applies.
The goal is to have direct and open conversations. When it comes to highly effective teams, psychological safety is required for this to occur. Large-scale surveys at Google, Brene Brown’s Dare to Lead and Amy Edmondson’s new book, The Fearless Organization, all emphasize that safety is key for honest interactions and feedback. That doesn’t mean the conversations are absent of conflict. You want people to be able to speak out and argue if needed, but in the end, decisions are made based on evidence. Once there is at least general agreement, everyone goes in that direction, even if they disagree. Shutting people down because you do not like them does not promote safety. As a leader, your job is to make the team members feel safe.
Here are some techniques to suspend judgment, change up the conversation and work toward building trust:
Ask good questions. Open-ended questions are excellent to use here. They can provide you with context and help you see others’ perspectives. Some examples:
- I am not sure I am clear on what you are asking.
- Where do you see this happening?
- What ideas do you have that I could do to improve the thing you are talking about?
If the person repeats himself or herself, the open-ended question is too open and not clear enough. Clarity is key. A more specific approach could be:
- I want to be clear about my next steps and how we might work better together.
- Is it this or the other thing that is bothersome to you?
- What exactly are we talking about that I seem to be missing, and what ideas do you have to help the communication between us?
Take a pause. Let the person talk and wait for more information. Ask, “What is it you are looking for? What else?” Suspend your reaction and try to keep it from escalating. Let them add detail. Keep them talking about reflecting on their observations with an ear for what they are missing. Then you can offer your thoughts about a plan for improvement. Or ask for theirs. If you feel your emotions are running too high to give a coherent answer, it is OK to say, “I will get back to you about a plan.”
State Intentions. Be prepared, direct and clear. State your intention of providing a clear picture of the situation with observable evidence. No conflating here. This is not a criticism of the other person. Carefully lay out why you are upset, the gap between what you are doing and what they may have missed. Talk about expectations and any differences that might exist. Then shift to suggestions for improving the professional relationship.
As a part of being direct, it is also fine to say you were hurt by their statements. Do not get defensive, and stick to the position that you want to improve things so you can move forward.
Switch Roles to Find Solutions. Working toward solutions will take both parties. Switch the roles by asking, “What would you like to do to improve the communication? How would you solve it if you were me?” This requires a different type of thinking for them. Be honest about how some of the expectations might be misplaced. Then encourage more dialog going forward. In fact, schedule additional conversations.
As a leader, the key to balancing emotions, tasks and expectations is not to immediately judge. This provides the safety needed for people to express their ideas. If you know your employees well, it makes the conversations easier. A connected leader already knows much about their employees and is able to bridge such gaps more quickly.
Fortunately, my client did have a direct, honest, and detailed conversation with her supervisor. Starting with observable behavior, she was able to suggest solutions, and as a result, both now understand each other’s views about the situation. This transparency, openness and safety that is required of leaders today.
Reprinted with permission from Price Associates.
|Mechanic’s Lien, Bonds & More Power Tools for Getting Paid in Virginia
Speaker: Brian Loffredo, Esq., Offit Kurman, P.A.
|NACM and FCIB Present Author Chat: Jeremy Graves
Author: Jeremy Graves
|Best Practices for Modernizing Check Acceptance
Speaker: Deborah Withorne, Fiserv.
|The Softer Side of Credit Management:
The Importance of Soft Skills in An Analytical-Driven World
Speaker: Craig Simpkins, CCE, CICP, Johnson Controls
|Alternatives to Bankruptcy:
What Trade Creditors Need to Know
Speakers: Bruce Nathan, Esq. and Michael Papandrea, Esq., Lowenstein Sandler LLP