February 17, 2022

	I. Poll Shows Electronic Payment Processes Help Decrease Days Beyond Terms
	II. Outsourcing: How to Reap the Benefits

	III. First Timers Gear Up for NACM’s 2022 Credit Congress
	IV. Changes to North Carolina Construction Statutes Set to Take Hold Come March

Nearly 46% of credit departments currently have lower days beyond terms (DBT) than they did two years ago, according to a recent eNews poll. However, the reasons why differ widely.

“Being a private manufacturer with little competition and loyal customers that date back to the 70s helped us retain these terms,” said Betsy Rhodes, CCE, treasurer for Metal Specialties, Inc. (Odessa, TX). In addition, companies may have benefitted from government support programs that provided them with a means to pay their employees as well as their business partners, Rhodes added.

In a follow-up eNews poll, 61% of participants indicated that customers’ move from manual payment processes to electronic payments led to the decline. With companies working remotely, mailing a traditional check became difficult, said Juanita Reyes, credit manager for Eastern Quality Foods (Ponte Vedra Beach, FL). “Customers who were against EFT started sending payments electronically because it became an attractive way to process payments with their new environment.”

Furthermore, customers are getting paid faster, giving them quicker access to cash that they can use to pay us quicker, Reyes said. Combined, technology, strong demand and adjusted processes have helped improve overall DSO, she added.

Respondents also credited DBT decreases to:

• The collection department’s adjustment to the remote working environment (44%).
• The customer’s AP department becoming more efficient at working and processing payments remotely (33%).
• Extensions in payment terms (6%).
• Company’s aligning terms with customer payment habits (6%).
• New automation technology (6%).

While some respondents credited the extension of payment terms for decreases in DBT, that could present a false positive, warned Val Venable, CCE, ICCE. At the start of the pandemic, more companies may have extended terms to help support their customers, Venable said. However, that could affect other metrics negatively because one metric does not tell the whole story, she added. “Days beyond terms can be down; but if days sales outstanding is up, it could still result in reduced cash flow. Is it taking longer to turn the sales into cash, despite the ‘false positive’ good news of reduced days beyond terms? If the terms have not been extended, then this is really good news. But, without knowing the why and what changed, we can only speculate.”

Managing exposure risks can attribute to lower DBT as well, Reyes said. Credit professionals do not want to take on the risks of going above the customer’s credit limits because the data they collect shows how much their customers can afford. Customers need products and they need to pay quicker—sometimes ahead of terms—to avoid disrupting future orders for both parties, she continued.

Tighter oversight on your accounts receivables department is another strategy that helps lower DBT, said Christopher Roshong, credit manager at Graves Lumber Company (Akron, OH). Due to longer lead times and inflationary pricing, cash flow may be tight. Therefore, credit professionals must be conservative with customers, do their know-your-customer due diligence and act based on the communication they are having with their customers, Roshong said.

It is no secret that the many demands and functions of the commercial credit department can be time consuming, and a shortage of staff makes it even more difficult to get the jobs done. Outsourcing is one way to help fill gaps in the credit department, but there’s often a stigma around it.

There is a right way and a wrong a way to go about outsourcing. The first step is deciding which tasks to turn over and which ones to keep for yourself, said Ben Turner, member of the order-to-cash team at SPX Flow Europe Limited (United Kingdom).

“More administrative tasks, like unblocking orders, running reports and data entry, are perfect for outsourcing,” he said. “But tasks like analyzing risk and setting limits should be saved for the skilled credit professional."

Using an external team for more mundane tasks frees up time for the internal credit team to focus on high priority items that only it has the knowledge to handle, Turner added. “Outsourcing has the stigma that it causes people to lose jobs and doomsday scenarios, but it actually helps streamline everything if you have the right people working on the right tasks.”

Establish a set of goals early on in the outsourcing process so that you can work on a timeline to help achieve those goals. Start with an action plan that outlines the steps for implementation, including the timeline, so that everyone is clear on responsibilities.

Once you have a plan in place, Turner recommends taking your time to fully involve the outsourcing group in your credit work. “The more time you spend training these people, the better success you will have,” he said. “Four to five months will give you the time to really get to know these individuals.”

NACM has hosted Credit Congress for 126 years as an opportunity for business credit professionals to network and learn. For those who are new to the world of business credit, the conference is one of the best ways to get their toes wet.

“I didn’t want to jump in head first with certification programs and get overwhelmed, so Credit Congress is a great starting point,” said Trustan Temple, portfolio manager with Mspark, Inc (Helena, AL). “I can’t wait to hear from some amazing credit experts.”

Temple started working in business credit during the height of the pandemic. Credit Congress will be his first real opportunity to meet other credit professionals all in one place. “Networking is so important, and I am ready to develop those relationships with people who I can ask questions moving forward.”

In fact, Credit Congress will be the first in-person networking event for quite a few new credit professionals. “I’m really excited to broaden the horizons of my professional career,” said Britta Emerson with Kilgore Architectural Products, Inc (Spokane, WA). “I just started in business credit last fall so Credit Congress is really my first chance to meet people in the profession.”

Emerson and Temple are just two of the first-time Credit Congress attendees who took advantage of NACM’s buy one, bring one discount by registering with a seasoned conference participant who can help show them the ropes. This is the first time NACM has offered this deal.

Any fully paid delegate can bring a colleague who will be attending for the first time for only $126. (Both delegates must have separate rooms at the host hotel—The Galt House.)

Be sure to register here for the 126th NACM Credit Congress & Expo, taking place June 5-8, 2022, at the Kentucky International Convention Center in Louisville, KY. Register by Friday, Feb. 18, to take advantage of the "advance" registration rate.

New requirements for lien waivers and recovery of attorney’s fees on disputes in North Carolina will take effect March 1.

“The changes … render void and unenforceable provisions in construction and design-professional agreements requiring waivers of liens or claims as a condition for progress payments, unless limited to the progress payment actually received in exchange for the waiver; and modify the attorneys’ fees provision applicable in statutory lien actions,” according to a Smith Anderson article, Legislature Makes Significant Changes to NC Construction Law – Be Aware or Beware!

“Suppliers and subcontractors are often presented with one-sided lien waivers that they are required to sign in order to be paid,” said Byron Saintsing, partner at Smith Debnam Narron Drake Saintsing & Myers, LLP (Raleigh, NC). “Many times, these lien waivers come in the form of a ‘final lien waiver,’ whereby the supplier or subcontractor is required to waive any and all rights to file a mechanic’s lien against a project—even when the supplier or subcontractor is still working on the project.”

The change does not apply to “lien waivers or releases for final payments” or “agreements to settle and compromise disputed claims after the claim has been identified by the claimant in writing regardless of whether the promisor has initiated a civil action or arbitration proceeding,” according to the legislation.

These changes give subcontractors and suppliers leverage to pushback when presented with final lien waivers that are unwarranted and inappropriate, Saintsing said.

In addition, courts will no longer require lien claimants to do the following to obtain their attorney’s fees as part of a lien claim:

• Recover more than half of the claim asserted; and
• Demonstrate that the opposing side unreasonably refused to settle the case.

Instead, a host of factors will help determine the amount of attorney’s fees that the prevailing party will receive. “One of the many factors to be considered is settlement offers exchanged between the parties,” Saintsing said. “Therefore, whether the parties acted reasonably in trying to settle the case is still a factor to be considered.”

The new law regarding attorney’s fees can provide subcontractors and suppliers with a better way to collect attorney’s fees when litigating lien claims, Saintsing said. For example, subcontractors or suppliers often feel that they simply cannot afford to exercise their lien rights because of the sheer economics and costs of litigation. Owners and general contractors, however, are often more financially able to litigate disputes than smaller subcontractors or suppliers. The new attorney’s fees provision provides some “leveling of the playing field” when it comes to the economics of litigating construction disputes, he added.