November 4, 2021
In the News
|I. What Are Credit Professionals Looking to Improve over the Next Year?|
|II. Texas Attorney Prepares Credit Professionals for Statute Changes|
What Are Credit Professionals Looking to Improve over the Next Year?
Annacaroline Caruso, editorial associate
With the new year only a few months away, now is the time to start considering goals and resolutions for 2022. Maybe you want to get a gym membership, travel to a new country or read more books. But, as a credit professional, your resolutions will look a bit different.
In a recent NACM eNews poll, most creditors said reducing DSO was their top priority over the next six to 12 months. Improving cashflow and reducing overdue accounts receivable came in second and third place as most important, respectively.
For some other credit departments, their main focus for the next year is on improving teamwork. “My goal now is to figure out a way to safely and effectively bring everybody back into the office,” said Kenny Wine, CCE, director of credit at Joseph T. Ryerson & Son, Inc. (Little Rock, AR). “Then we can use teamwork to get a better DSO, expense reductions and other tasks a credit department is presented with anyway.”
Some credit professionals hope to tackle more personalized goals. For the last three years, Stuart Epstein, accounts receivable manager with NAPA Auto (Roxboro, NC), has been working to update information for existing customers. “Updating emails, phone numbers and addresses is so important because it will help the process of adding more automation,” he explained. “We also need accurate customer information if we have to go to collections.”
Other credit professionals have a broader goal of hoping to improve their department overall. “We want to streamline the credit department functionality and improve its efficiency,” said Christopher Roshong, credit manager with Graves Lumber Company (Akron, OH). Short staffing makes improving efficiency even more important, Roshong said.
“We continue to meet regularly with the CFO and company president to advise [them] of credit and collection trends we are seeing so we may communicate realistic short- and long-term expectations,” he added. “The ultimate goal is to stay productive and compliant in an ever-changing business environment yet to continue to meet and exceed our customer's goals.”
Texas Attorney Prepares Credit Professionals for Statute Changes
Bryan Mason, editorial associate
With changes to the Texas mechanic’s lien statute taking effect Jan. 1, Katy Baird, senior associate at Andrews Myers PC (Houston, TX), provides an in depth look at how subcontractors and suppliers should protect themselves.
During a recent NACM STS webinar, Texas Lien Statute: Preparing for the Changes in 2022, Baird provided a summary of the changes that will take effect for contracts signed next year:
- Elimination of the second-month notice requirement to general contractors (remains optional).
- Extension of lien notice and filing deadlines to the next business day (if deadline date falls on a weekend or holiday).
- Non-GC retainage liens due by 15th day of the third month from original contract completion.
- Statute of limitations for foreclosure on a lien shortened to one year from when the lien could be filed.
- Expedited discovery for information relating to the validity and removal of the lien.
- Design services, surveyors, landscapers, demo work and equipment rental will be subject to liens.
- Certified mail will be optional and no longer required. (However, Baird recommends doing it because a postal stamp is the easiest way to prove service.)
- Standardized form for third-month (fund trapping*) notice.
- Elimination of specially fabricated materials notice.
- No change to public-owned projects.
In addition to these revisions, this bill will slightly alter the requirements pertaining to Texas lien waivers. Section 53.281(b)(2) states: Although the basic template for Texas lien waivers remains the same, the waiver will not need to be notarized.
“The removal of the notary requirement simply makes it easier for subcontractors [and suppliers] to sign these documents and provide them to an owner without a notary present,” Baird said. “Keep in mind that owners or general contractors may still require you to notarize payment waivers so they don’t run into issues authenticating a subcontractor’s or supplier’s signature at a later date. You will need to read your contract to determine if the notary is still required by the parties upstream.”
One of the most impactful changes for subcontractors and suppliers is the removal of the second-month notice requirement to perfect your lien. However, subcontractors and suppliers still have the option to send it without penalty.
“The original contract is between the owner and the general contractor on the project,” Baird said. “As such, I would say that most subcontractors and suppliers should largely leave their current lien procedures intact and continue to send second-month notices in addition to third-month notices, as applicable, until the projects they are working on are predominately new projects, beginning after Jan. 1, 2022. If a lien claimant is too far down the chain of construction and is not sure when the project began, it makes sense to send a second month notice to protect your lien rights just in case you don’t have all of the relevant project information.”
When it comes time to send the third-month “fund trapping” notice, subcontractors and suppliers should ensure they meet the requirements that must be included within those documents. These requirements include:
- Key language heading/warning.
- Date of notice.
- Project description.
- Lien claimant’s name, contact person and address.
- Description of labor/materials provided.
- General contractor’s name and address.
- Party with whom lien claimant contracted (if different than general contractor).
- Claim amount.
Baird also recommends including invoices and billing.
*A fund trapping notice is a preliminary notice that parties not directly contracted with the owner send to preserve their right to file a mechanic’s lien in the event of nonpayment in Texas. Its purpose is to inform the party making payment so that sufficient funds are retained for their services or materials.
Kamakura Troubled Company Index: Credit Quality Remains Strong
Annacaroline Caruso, editorial associate
October’s Kamakura Troubled Company Index indicates continued strong credit quality with low volatility. Default probability also remains somewhat low. This month’s level shows that worldwide corporate credit quality is at the 99th percentile for the period of 1990 to 2021, with 100 indicating best conditions.
“The current short-term environment is quite benign, with low levels of default, compression among spreads and ample liquidity,” wrote Martin Zorn, president and chief operating officer of the Kamakura Corporation (Honolulu, HI). “The number of defaults through the end of the third quarter this year is down significantly from 2020.”
However, the positive score of the index does not mean credit risk is nonexistent. Of the 20 “riskiest” firms listed for October, 11 are in China, six are in the U.S., and one each in Brazil, India and Spain. The riskiest-ranked firm last month was Codere S.A., a Spanish consumer services and gaming company. Of the companies covered by Kamakura, three defaults occurred in China and one in the U.S.
The Kamakura Expected Cumulative Default Rate shows the one-year rate up 0.05% at 0.80%, and the 10-year rate up 0.43% at 20.04%. The expected cumulative default rate for 10 years exceeds the 10-year rate in September, 2008, the report reads.
“I noticed that banks, driven by low short-term default risks, continue to release reserves,” Zorn noted in his commentary. “That raises a scary question: Have central bank policies created a generation of ‘zombie’ firms that would have failed if not for fiscal and monetary policies of easy and free money?”
How to Break the 5 Habits That Hurt Ideation
Evans Baiya, Ph.D., Price Associates
Many companies find it hard to prioritize ideation. Here are five ways to break the pattern and gather a wealth of ideas for your organization.
In today’s rapidly changing world, it’s easy to think that most companies are innovation factories—full of ideas for new products, services and processes. They need to be, right? Unfortunately, the opposite is true. Most organizations only innovate when they are forced to do so. Many still rely on old knowledge or even guesswork to face challenges that arise.
To continue creating and delivering value for customers, organizations have to come up with new ideas. Ideas are the foundation for innovation, yet many companies struggle to ideate consistently and successfully.
There are many reasons for this, but there is always a solution. Here are five common habits that hurt ideation and how to break them to steer your company to success.
Habit #1: Not Prioritizing Time for Ideation
Ideation, like any other business activity, requires time, discipline and commitment. Most companies do not actually prioritize ideation unless there is an emergency! If you are waiting for an emergency to come up with new ideas, you are simply being reactive.
Rather than only ideating under duress, leaders should consistently set aside time in the calendar to generate ideas with their teams. Ideas should come from all employees and departments because it takes a multitude of ideas and viewpoints to face challenges and capitalize on opportunities. When ideation is not prioritized, organizations do not have enough ideas, let alone enough variety, to advance the business. Schedule regular time for coming up with ideas, whether through calendared meetings, structured brainstorming sessions, brownbag lunches, or online tools. After all, as my co-author Ron Price and I demonstrated in our book The Innovator’s Advantage, it takes thousands of ideas to generate a single marketable success.
Habit #2: Failing to Create Structure
Another reason that organizations don’t ideate is because there is no structure for the task. Do you remember the last time you were asked to a brainstorming session? Were the ideation activities organized to build upon one another? Or was it just an impromptu huddle? What happened to all of the ideas generated during the session? Were they collected and evaluated? Or did they disappear once everyone left the room? Brainstorming is often exactly that—a lot of ideas storming at each other in unstructured chaos.
There are many proven methodologies for successful brainstorming. The key is to have a clear plan for when to ideate and what to do with those ideas once they are shared. Once a system is identified, this will encourage and enable productive idea generation, and ensure all participants feel heard and that their ideas matter.
Habit #3: Omitting Incentives for Ideation
If employees do not feel valued or heard, they will not offer up their creative thinking to ideate for their company. Unfortunately, many employers take their employees’ ideas for granted. They assume since someone is employed, the company should get that person’s ideas. This is a fallacy. No employer has a right to an employee’s creative capacity. It is volunteered. Incentives are a great way to show appreciation and create excitement.
If an organization can create an environment that attracts, encourages, and incentivizes workers to contribute ideas, it will have a wealth of ideas. Ideation can be rewarded simply through words or other methods such as monetary gifts, extra time off, a special badge of acknowledgement, or being named to an elite group.
One of the best sources of incentive for employees is actually recognition from a customer. This goes a long way in motivating employees, not only to do good work, but to focus on even more ideas for solving the customers’ problems.
Habit #4: Not Using Idea Management Tools
Nothing is more frustrating to an employee than contributing a great idea that is never acted upon—or even worse, forgotten. One simple and powerful way to encourage ideation is through an idea management tool that allows the company to collect all ideas in one place, often online, for sorting, evaluation and monitoring. This way, employees can always see their ideas and when and how the company uses them. Without a management tool, leaders may not ask large groups of employees for ideas as there is no central place to store them.
Your idea management tool can be simple or complex, specific to idea generation or part of another highly used project management tool. As long as it creates transparency for employees, which in turn will encourage them to ideate. With these tools and systems in place, you can then teach your employees to be better idea managers.
Habit #5: Unsupportive Leadership
Organizations need leaders to prioritize and support ideation. An unsupportive leader—or worse yet, a leader who thinks he or she has all the ideas—can be a huge hurdle for ideation efforts. For innovation to be a success throughout the company, employees at every level should ideate.
There are many reasons that leaders don’t fully support ideation, whether because they don’t enjoy ideating themselves or don’t think their employees have the answers. Leaders should be a shining example for creative thought and regular brainstorming. Knowing how to guide employees to ideate, how to listen and question in a psychologically safe way, how to avoid judging ideas pre-maturely, and how to think futuristically are all crucial skills for leaders.
Breaking these five habits will give your company fuel to tackle any oncoming problem or opportunity with a bank of ideas to support you—and lead you toward successful innovation.
It will create an environment where employees feel it is safe to volunteer their ideas and that those ideas will be valued. When leaders show employees how to be creative and to think more widely and deeply about the problems and opportunities around them, it will excite employees about the future.
Evans Baiya, Ph.D., is an internationally recognized and trusted guide to business leaders and innovators. He helps businesses identify, define, develop, verify, commercialize and scale ideas.
Reprinted with permission by Price Associates.
Credit Congress Spotlight Session: Take Your Game
to the Next Level—Using Emotional Intelligence to Advance Your Career
Speaker: Jake Hillemeyer, Dolese Bros. Co.
Duration: 60 minutes
Credit Congress Spotlight Session:
When and If to Help a Distressed Customer
Moderator: Chris Ring, Speakers: D'Ann Johnson, CCE, A-Core Concrete Cutting, Inc. and Eve Sahnow, CCE, OrePac Building Products
Duration: 60 minutes
Get Yourself Ready for 2024: Goal Setting and Future Planning
Speaker: Hailey Zureich, zHailey Coaching
Duration: 60 minutes
Mastering Mechanic's Liens in Iowa: Distinguishing Commercial, Residential and Public Projects
Speaker: Chris Ring, NACM’s Secured Transaction Services
Duration: 60 minutes