July 28, 2022
Credit Professionals Want More Collaboration Within and Across Departments
Annacaroline Caruso, editorial associate
It is not uncommon for an employee or single department to find itself working in a silo, especially when remote work is becoming more popular. However, trying to join forces with other employees and departments is the best approach to problem solving and tackling work-related tasks.
“Having a knowledge base and understanding of other departments in our business really helps the credit department understand the big picture of how we can truly maximize profits and minimize losses,” said Brett Hanft, CBA, credit manager at American International Forest Products LLC (Beaverton, OR).
Some credit departments already have a process for cross-functional collaboration at their company. But according to a recent eNews poll, 29% would like more cross-functional training within their company or department.
“I just think it is more important than ever, when so many businesses are dealing with being short staffed, to train employees on all aspects of the business,” Hanft said. “The better understanding you have of how other departments function, especially in credit when we manage such a large asset, really helps ensure that we are as profitable as we can be.”
For example, Hanft pays close attention to all the orders that flow through the credit queue to make sure each one has a purchase order number. If an order has been written up without a number, Hanft knows to alert the sales team. “That way we are only touching a document once,” he explained. “Everything you do costs money in your business, whether it is time or dollars out the door. So, if we only need to touch documentation once, it avoids any unnecessary delays in getting paperwork matched up so those invoices can be paid on time.”
Collaborating across departments also can help the credit team make more informed credit decisions, said Stuart Surnitsky, credit manager with Penn Stainless Products (Quakertown, PA). He uses the sales department as the eyes of the credit department when meeting with customers face to face.
“They are the ones that are out in the field and seeing our customers,” Surnitsky said. “We are in the office looking at paper, and it can be hard for us to get a gauge on a customer without knowing what the [physical space looks like]. Our sales reps go and visit to see what the company actually looks like. We also use our sales reps when we are having trouble collecting money from a customer—to go there and make sure they are still a functioning business.”
July CMI Drops to Lowest Reading in More Than Two Years
Annacaroline Caruso, editorial associate
The July NACM Credit Managers’ Index fell 1.6 points to 55.0—its lowest reading since June 2020. This is the third-consecutive month the CMI has deteriorated and could signal the start of a downward economic spiral, said NACM Economist Amy Crews Cutts, Ph.D., CBE.
“I think the CMI is nearing the tipping point between expansion and recession,” Cutts said. “I don’t think we are truly in a recession at the moment, but the economic winds are pushing us in that direction. What we don’t yet know is how this recession will look. For example, due to the tightness of the labor market we could see firms let positions go unfilled rather than engage in layoffs. There is no playbook for a pandemic economy’s behavior.”
The combined index of favorable factors dropped 1.2 points (63.6), down 5.0 points year over year. Three of the four favorable factors fell for the fourth month in a row, with new credit applications leading the decline with a 4.4-point loss (59.7). Sales slipped 0.8 points (65.8) and amount of credit extended dropped one-tenth of a point (67.6). The dollar collections category improved by 0.3 points to 61.2, yet several respondents noted that they are having to work harder to get these collections.
Falling below the 50-point threshold into contraction territory, the index of unfavorable factors lost 1.7 points (49.4). One unfavorable factor within the index improved: Rejection of credit applications saw a 0.6-point gain to 50.8. Dollar amount beyond terms led the decline with a 4.4-point drop (46.7), more than 10 points lower than last year. Accounts placed for collections lost 2.3 points (47.4); filings for bankruptcies, 2.1 points (53.7); dollar amount of customer deductions, 1.4 points (49.3); and disputes, 1.1 points (48.3).
“Looking for signs of recession in a volatile economic environment can sometimes be misleading, but it just feels like the economy is on weak footing,” Cutts said. “The Credit Managers’ Index is appearing to stabilize into a downward trend, not yet indicating a recession is occurring. But with all but two unfavorable factors in contraction territory and four to five months of declines in all favorable factors, I think we are seeing conditions changing for the worse.”
What CMI respondents are saying:
- “The company needs staff. We are having trouble finding a full-time collection person, and we need help in manufacturing, distribution and administration. We are falling behind due to the lack of people in all areas.”
- “Fuel price increases are a major factor driving financial distress for many of our customers.”
- “Much of our sales increase is due to prices being so high, not necessarily the number of sales being higher.”
- “Rising deductions are due to fines imposed by retailers—late delivery, out of stock, etc.”
- “We are starting to notice things are slipping a bit, which is odd for this time of year.”
- “Dollar amount of credit extended has more to do with increased prices than with increased orders.”
- “International transactions are taking longer to collect. We are seeing shipments delayed up to 60 days before they leave the port.”
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 July 2022 report. CMI archives also may be viewed on NACM’s website.
Challenging Outlook for Global Supply Chains as Costs Rise While Orders Fall
Diana Mota, editor in chief
Global supply chain activity slowed for the second-consecutive quarter, dropping by six points against the expected range, according to the latest Index of Global Trade Health from Tradeshift, a supply chain commerce platform, which facilitates digital trade transactions between B2B buyers and suppliers.
Second-quarter order volumes dipped below expectations, following a seven-point drop the previous quarter. “The lack of fresh orders is beginning to impact suppliers, which had only recently been struggling to cope with surging demand,” the firm’s analysis notes. The number of invoices submitted by suppliers dropped seven points in Q2, the most significant slowdown in a year.
According to an article in IndustryWeek, “a fall of this magnitude across both orders and invoices in the same quarter” has not occurred since the lockdown. “What’s striking about this quarter’s index is the near-uniform pattern of plunging transaction volumes across most of the world’s largest economies.”
Tradeshift’s analysis finds:
- Total trade activity in the U.K. and the Eurozone dropped by five points, with new orders and supplier invoices tracking below the expected range.
- U.S. supply chains fared slightly better than the global average. Transaction volumes were four points below the expected range in Q2, but the volume of new orders remains low.
- Chinese trade activity had another challenging quarter as new lockdown measures in key cities contributed to another seven-point fall in transaction volumes against the expected range.
The IndustryWeek article warns, “This global warning is in danger of being obscured by an even bigger economic story: inflation. Orders might be softening, but Tradeshift’s analysis suggests costs have risen sharply since the beginning of the year. The average value of an invoice submitted on Tradeshift’s platform has increased by 11% since the start of 2022, compared to a more modest 3.5% rise in 2021.”
Many of the supply chain challenges—including inflation—stem from the pandemic, said Christian Lanng, CEO and co-founder at Tradeshift. “Some of these problems are transitory, but the bigger issues, including labor shortages, geopolitical tension and energy transition, are structural and risk becoming entrenched unless businesses take decisive action now.”
Declining demand also is leading to a cooling-off in activity across the transport and logistics sector, according to Tradeshift’s data. Transaction volumes across the industry dipped below the expected range for the first time in a year after a five-point fall in activity compared to the previous quarter.
Manufacturing and retail trade activity also remained below the expected range. Technology spending recovered sharply in Q2, with activity tracking well within the predicted range.
How Mentoring an Experienced Employee Works
Alaina Love, CEO, Purpose Linked Consulting
A multinational manufacturing firm had long neglected investing in talent development for several groups of outstanding employees. It was now beginning to feel the pinch from a competitor that was recruiting away its top diverse employees.
To address the issue, the newly appointed CEO recently committed to taking bold action to improve the company’s representation of women, Black and Hispanic employees at leadership levels. Among other initiatives, he instituted a mentoring program designed to fast-track participants to management levels and beyond. That meant some people would be mentoring an experienced employee.
Brenda is the longest-tenured participant in the mentoring program, having joined the firm seven years earlier than most of the other mentees. Despite her years of service, she had experienced minimal investment in her professional development from former managers. Brenda was excited about the opportunity to focus on her career and growth but wondered what it might be like interacting with a mentor at this stage of her career.
When I spoke to her mentor, Jason, I discovered that she wasn’t alone in her concern. “As her mentor, I’m happy to help Brenda in any way that I can,” Jason affirmed. “But what can I teach her about being successful at her job that she doesn’t already know after eight years with the company?”
Break away from the traditional approach
Jason was viewing his mentor role in a traditional fashion: one in which he envisioned meeting with Brenda periodically to discuss job challenges or examine future roles she might pursue. But they worked in different functional areas, so he felt his ability to add value was limited.
As we discussed his role, and the objectives of the mentoring program, it became clearer to Jason that mentoring an experienced employee had nuances he hadn’t considered. I suggested that while his role was to help Brenda be both present-centered and future-focused, mentoring her was more about gaining insights than discussing how-to’s. We reviewed five major focus areas that he and Brenda might explore together:
Often more tenured employees with greater life experience behind them feel that they’ve developed a high level of self-awareness. “By this stage in life, I know myself,” many will say, and Brenda was no exception.
I encouraged Jason to dig deeper. Did her level of self-awareness translate into a higher degree of confidence on the job? Was Brenda’s voice being heard in meetings? Were her ideas being implemented? Did her colleagues seek out her opinions?
Individuals who have truly matured in their level of self-awareness demonstrate a degree of authenticity that engenders respect and trust from others. As a potential future leader of the company, Brenda’s continued attention to developing her understanding of and comfort with her true self is an essential component for success.
Many organizations and mentoring program participants conflate mentoring success with promotion to a job at the next level. While Brenda was hoping for that same outcome, it was more important for Jason to focus on the factors that lead to professional growth. I encouraged him to help Brenda broaden her professional network and connect her with people outside of her functional area, so she can learn from others and develop contacts that might be helpful in the future.
It was also important to help Brenda strategize about positioning herself for special projects or assignments, ones that could expand her understanding of the company and allow her to build skills. Helping Brenda learn as much as she can beyond her normal role will allow her to demonstrate curiosity and commitment to her own development. That makes her a desirable candidate for promotion.
Learning is the road that leads to professional growth, and professionals should reinforce that idea when mentoring an experienced employee.
In the early phases of career, many employees spend time defining a path to success by observing individuals in leadership positions. What was their career trajectory? Which assignments helped those leaders make a name for themselves in the organization or the industry? What approach did they develop that can be modeled by others?
Mentoring an experienced employee means helping them move beyond the pursuit of title and power. It’s about encouraging the mentee to seek insights from their experiences that lead to greater wisdom. Wisdom about what matters most in life. Wisdom about how purposeful work contributes to well-being. Wisdom about the limitations of money and power when it comes to achieving fulfillment.
Jason’s goal is to help Brenda develop and share her wisdom with others so she can become a role model for servant leadership.
It’s never too early to begin helping a mentee think about their legacy. It’s not an exercise that should be reserved for the final years of one’s career; instead, it should be a constant guidepost that marks the way.
The important questions to ask your mentee are: What are the lasting contributions you want to make to the organization, industry and profession? What memorable impact do you want to have on colleagues and associates, both inside and outside of the organization? How will pursuing your legacy impact your personal life and relationships?
One of Jason’s most important mentorship objectives is to help Brenda define the legacy she wants to achieve so she can align it with the career and life decisions she makes. Mentoring an experienced employee is mentoring at a whole new level.
This article was first published in SmartBrief, June 2022.
Alaina Love is CEO of Purpose Linked Consulting and co-author of The Purpose Linked Organization: How Passionate Leaders Inspire Winning Teams and Great Results. She is a global speaker and leadership expert with Fortune 500 clients.
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