February 24, 2022

	I. As Omicron Subsides, Credit Managers’ Index Edges Up
	II. Building Stronger Business Relationships Through Customer Visits

	III. Is Your Credit Department Ready for the Automated Business World?
	IV. Make Your Virtual Meeting More Productive

Diminishing Omicron cases provided some relief to businesses in February, as reflected in the February NACM Credit Managers’ Index. This month’s combined score rose 0.7 points to 57.8.

However, credit managers continue to navigate inflation, supply backlogs and labor shortages, said NACM Economist Amy Crews Cutts, Ph.D., CBE. “Many of the CMI respondents indicated that these issues continue to negatively impact their businesses with no end in sight.”

The combined index of favorable factors gained 1.4 points (66.8). With a 3.4 jump, new credit applications improved the most (64.0), regaining some of last month’s lost ground when the index fell 7 points. Sales grew one-tenth of a point (71.3); dollar collections, 0.7 points (63.2); and amount of credit extended, 1.5 points (68.7).

The combined index of unfavorable factors improved 0.3 points (51.8) month on month, its highest reading since September. Within the index, all factors improved except for dollar amount beyond terms, which dropped 2.6 points (50.9). Accounts placed for collection gained 1.6 points (52.7); filings for bankruptcies, 1.2 points (56.4); and rejections of credit applications, 0.8 points (52.3). Customer disputes and dollar amount of customer deductions both remain in contraction territory, despite gaining 0.2 points (48.6) and 0.4 points (49.9), respectively.

“The rise in new credit applications—demand—and the reduction in denials of credit applications—supply—indicate good financial conditions for businesses,” Crews Cutts said. “At the same time, we are seeing the effects of supply constraints in production and transportation through the back end, as customers dispute more accounts, demand higher deductions and pay less timely. These constraints could diminish over the coming months.”

What respondents are saying:

• “Supply chain disruptions are affecting our ability to get paint cans and aerosol cans. Demand is still strong; but until these issues are resolved, our sales will suffer.”
• “We have seen price increases, logistics issues [and] products availability issues.”
• “Keep your powder dry—inflation is real and it's having a negative impact on everyday Americans.”
• “Customer disputes from mass retailers have significantly gone up and are harder to resolve.”
• “Parts, components and product shortages continue. Orders are up, sales are down (huge back orders).”
• “Supply chain issues continue to be a problem for manufacturing. Customers are stocking more inventory than needed to cover back log.”

If you would like to participate in the monthly CMI, sign up to receive survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the February 2022 report. CMI archives also may be viewed on NACM’s website.

Visits to customers are an essential practice for credit professionals who want to build stronger business relationships with them as well as learn more about how their business operates.

Credit is a relationship business, said Mark Zavras, CICP, director of credit for Sub-Zero Group, Inc. (Scottsdale, AZ). “When I go on customer visits, I try to learn and understand a little bit more about their business while addressing any issues we might have.”

Growing connections with customers is an invaluable practice, and visits can address multiple priorities, said Kevin Chandler, CCE, director of financial services for Zachry Group (San Antonio, TX). Chandler visits customers to:

• Address problems
• Build relationships
• Support customers
• Assist the sales department’s efforts

Start your visits with conversations that focus on how that individual is doing—not just business. Create two-way communication. Be prepared to receive questions about yourself and your family, he added. “You want to be a positive ambassador for your company, your industry and yourself.”

Ask employees about how the business started or for general background of the company, Zavras said. Do your homework and gather information from your sales department to establish an agenda for the meeting. “Try to meet with the customer’s internal AP staff because they generally are the ones who will be working directly with you.”

Throughout your visit, pay attention to your customer’s operation, Chandler said. “What are the conditions they're working under? What are their challenges?” Take mental notes on what you are seeing, he added. For example, observe whether the parking lot is full of cars. Is there a receptionist at the front desk and live plants in the office? If you return two years later and find major changes, question what happened, he continued.

Ask for a tour of your customer’s operation, Zavras said. As the tour unfolds, ask yourself:

• Is the owner engaged in the business?
• Is the warehouse well organized and inventory stocked properly?
• Is the operation run efficiently by key employees within the organization?

“You learn a lot from these visits from a visual perspective, as well as trying to establish or renew the relationship that you have,” Zavras said. In addition, these visits ensure your company is establishing relationships with people outside of the sales process, Chandler said. “I'm dealing with the financial people, accounts payable departments, financial directors, VPs of finance and CFOs. Those people traditionally are not part of the sales cycle. However, if you establish relationships with them, you’ll cover the waterfront of the order to cash operations for that particular company. This helps differentiate yourself in an industry where it’s vital to stand out.”

Protocols worldwide are different, Chandler warned. For instance, if you go to Egypt, the first 15 minutes is often spent talking about your trip, your family and your life to build rapport. Learn about the culture before you visit. As travel restrictions ease, more opportunities to renew connections and establish new ones will arise, Chandler said. These relationships will make it easier for you to speak with key personnel when problems surface and vice versa, Zavras noted.

Credit departments have increasingly turned to automation for help in the last two years. While the pandemic accelerated the shift toward automated processes, fewer credit professionals and more responsibility also have contributed to the change.

“[Automation] has really helped alleviate some pressure from our office staff,” said Nate Yagle, vice president of credit with Premier Companies (Seymour, IN). “Especially in a market where it is harder to fill positions and where wages are increasing, if we can utilize automations to increase efficiencies that allows us to redirect and better utilize existing team members and resources without having to significantly add more people or expenses, then I think that helps.”

According to a recent eNews poll, most of the respondents (67%) have either enhanced or adopted an electronic invoice delivery system in the last two years, and 47% have implemented an online customer payment portal. Yagle’s department has adopted both.

The electronic customer portal in particular provided customers with more convenience while also “cutting down call volumes for credit card payments, as well as the number of mailed in checks,” he said. “The customer can see most everything they need to in one place online and submit payments.”

Yagle’s company gained the most from switching to an electronic invoice delivery system. “We had a visible benefit on our accounts receivable,” he explained. “Emailing invoices really helped clean up some AR issues, prevent past-due payments and saved us a lot of time spent tracking down missed or lost invoices for customers.” 

However, the transition did not come without challenges. Switching to an automated system can generate a lot of calls from customers with questions, which may actually make the credit department busier at first. “Go into automation with the expectation that the first billing cycle might not be perfect,” Yagle said. “But eventually, everyone will get caught up.”

If there are any mistakes with customer information, they will come to the surface during the automation process. So, it is key to double-check documents at the very beginning. “When you set up an account, get all the information required for emailing invoices because it cuts back the frustration of constantly having to go back to the customer for corrections,” Yagle said.

Having the knowledge to smoothly integrate automation into the credit department is increasingly critical as the business world relies more and more on technology. “In 2022, it will be important for enterprises to invest in automation that is efficient and accessible,” wrote Rik Chomko, member of the Forbes Technology Council, in a recent article. “Amid a world of increasing digital touchpoints and massive amounts of data, investing in automation is no longer optional for enterprises to remain competitive.”

Note: Join us at Credit Congress, if you’d like to learn more about how technology can help bridge gaps from the perspective of a credit professional, during A Technology Discussion from Someone Not Selling Technology.

Virtual meetings have become a primary source of workplace communication. Communicating virtually, however, presents challenges to meaningful connections. So, finding strategies to leverage this space so participants can do their best work is important.

Nearly 50% of the people who participated in a Northwestern University poll indicated that virtual meetings are awkward, according to Leigh Thompson, professor of management and organizations at Kellogg, during an Insightful Leader Podcast. A third of participants noted these interactions were confusing.

Virtual conversations lack meaningful eye contact, which releases bonding hormones in our brains, said Jessica Love, the podcast’s host.

Virtual environments can create less cohesive environments than an in-person gatherings, leading to conflict. Thompson identified two types of conflict: people-focused and task-focused. People-focused conflict attacks the person and creates an unhealthy feud between colleagues. Task-focused conflict, however, provides opportunities for the team to improve.

“Task-focused conflict is where you don't attack the people—you're hard on the problem,” Thompson said. For example, if you do not agree with a point that was made on a slide show shared by a team member, offer to talk through it rather than criticizing the presenter, she explained.

Managers should make an effort to normalize this type of conflict, Love said. Start virtual meetings by stating how the group will be discussing a matter of importance that may create tension, and then check in several times throughout the meeting to see how others are doing, Thompson said.

Practicing task-focused conflict can help, Love said. Ask your team to debate topics with lower stakes or hire a debate coach to allow people to get comfortable with responding to other’s arguments, she continued. In addition, promote a virtual environment that allows for productivity and creativity. However, the downside of having large in-person groups brainstorm together is the tendency for louder voices to overtake quieter participants, Love said.

“If I'm running a brainstorming meeting on Zoom, I want to begin the meeting by saying, ‘I want everybody to express all of their ideas,’” Thompson said. Reinforce that blame and judgment will not be tolerated, and encourage everyone to come up with eight ideas in one minute. Focusing on quantity somewhat liberates people to get their ideas out there, she said.

“Give people the space to write down their ideas individually,” Love said. “Then, everyone shares them–anonymously if at all possible. This lets the most promising ideas, not the ideas from the most powerful people, rise to the top.”

Lastly, allow team members to connect on a level separate from business. This can come in the form of a virtual handshake—or short calls where people get to know each other through small talk, Thompson said.

Combining these strategies allow leaders to make the most of their virtual meetings while building a cohesive environment. As a result, team members may be more productive and innovative ideas can be shared through a comfortable virtual setting.