February 16, 2023

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When a Colleague Becomes the Boss

Kendall Payton, editorial associate

You just received an email: Congrats! You got the promotion. You’re excited for the opportunity to move up in your career… but before too long, a feeling of awkwardness sets in. Will your peers be as happy about the news now that they are under your management? Opportunities and challenges tend to come hand-in-hand. How do you move forward and lead prior peers to success as their new manager?

Create a Transparent Environment

Creating a safe environment for your employees and colleagues will minimize the potential for conflict. Employees like to feel seen and heard. Clear communication between teams with set expectations and the opportunity for concerns to be voiced is essential.

“Before you communicate, listen,” said Henley Rowe-Anderson, CCE, CICP, revenue risk manager at Carrier Enterprise, LLC (Charlotte, NC). “Listen to the concerns your peers may have about how the dynamic itself has changed and facilitate a resolution. The worst thing you can do is disregard your employees and make decisions without taking their viewpoints into consideration.”

It’s also important to remember that not all colleagues will clap for you—and some may even think the promoted peer is undeserving of the spot, especially if one is chosen over the other. Address those concerns early so animosity does not grow instead of sweeping the issue under the rug in hopes that colleagues will forget with time.

“Some of my colleagues were not happy when I was promoted at first,” Rowe-Anderson explained. “Talking it through with them helped tremendously so they did not feel ignored. It did not change everyone’s mind, but it was better than avoiding the conversation.”

Gaining Trust from Your New Team

Being trusted as a peer is different than being trusted as a manager. It is essential to gauge what your employees expect out of you as a leader, and to learn the best ways to support them. A great way to learn your employee’s needs is by setting up one-on-one meetings instead of only talking to them in a group.

“I had close, personal friendships with some of the team members—and in order to build trust and to be perceived as a manager who did not show favorites, I had to work very hard to treat everyone equally,” said Val Hardesty, CCE, CICP, director of credit at Elevate Textiles, Inc. (Charlotte, NC). “I realized the perception was already working against me. I had to prove that I was capable of equal treatment for everyone, and that definitely took some time to overcome. That exercise alone opened my eyes to the importance of listening to others and doing what I said I was going to do.”

Hardesty asked her employees to share their vision for the team so everyone felt valued from the start. She also made sure to follow through on her promises. “I assured them that I was committed to incorporating their objectives in a way that would benefit not only the team, but each of them professionally,” she said.

Another way to gain trust is by encouraging the team to work together and to rely not only on you, but on each other. “Take the time to set the expectations as a team,” said Marlene Groh, CCE, ICCE, regional credit manager at Carrier Enterprise LLC (Charlotte, NC). “Let them have a say but then hold them accountable to the standards they set.”

Learning Your Leadership Style

Before you can help your employees, you must first help yourself. Take some time to learn who you are as a leader. “I had always prided myself on being self-sufficient, so learning how to delegate was not an easy task for me to do,” said Hardesty. “But as a leader, we must learn to lean on others for task completion, without micro-managing the process. Delegating certain responsibilities showed my team that I trusted them and valued their contributions.”

All credit professionals should strive for a strategic leadership style in order to gain recognition from the C-Suite. Credit professionals make dozens if not hundreds of decisions each day—decisions that play a massive role in the success or downfall of their company. Credit managers must adopt a strategic mindset and start making decisions that shape the company’s vision.

A strategic leadership style requires a skillset that is above and beyond average. If these skills were easy to learn, everyone would be a strategic leader. But only the most successful possess these qualities—think Steve Jobs, Oprah Winfrey or Nelson Mandela.

Make 2023 the year you begin the journey from operational leader to strategic leader at NACM’s 127th Credit Congress in Grapevine, Texas. Register for the new Strategic Leadership Track, focused on professional development. This track will be led by Chris DeVany, founder and president of Pinnacle Performance Improvement Worldwide, a firm which focuses on management and organization development.

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Chapter 11 Bankruptcies Are Up 70% Annually

Jamilex Gotay, editorial associate

Bankruptcy courts are getting busy as more large companies have filed for bankruptcy last month than in any January since 2010, according to Bloomberg. Bankruptcy filings were up year-over-year across Chapters 7, 11, 13, and 15 in January 2023, according to data from Epiq Bankruptcy. Total commercial filings increased 12% year-over-year, Subchapter V filings are up 49% and commercial Chapter 11 filings increased 70% … and insolvencies are only expected to pick up with a vengeance as we head further into 2023.

Several big-name stores made headlines in recent months as inflation worked its way through the entire economy—leaving no business untouched by its damaging effects. Several companies in the retail industry have collapsed, with the sector seeing bankruptcies pick up significantly. Tuesday Morning filed for bankruptcy this week for the second time in three years, Revlon filed for Chapter 11 in 2022, Party City filed bankruptcy in Texas just a few weeks ago and Bed Bath & Beyond is expected to file any day now. “I don't expect those to be the last retail bankruptcy filings of this year,” said Thomas Fawkes, partner at Tucker Ellis LLP (Chicago, IL).

Other industries experiencing a rise in bankruptcies include energy, technology, real estate and healthcare said George Angelich, partner at ArentFox Schiff LLP (New York, NY). As businesses continue to feel financial pressure and file for bankruptcy, credit professionals must be proactive in order to effectively mitigate risk.

Certain countries can expect to see more businesses experience financial distress, ultimately leading to insolvency. “The upswing in business bankruptcies is already a reality for most countries, in particular for the main European markets (United Kingdom, France, Spain, Netherlands, Belgium and Switzerland), which account for two thirds of the increase,” said Maxime Lemerle, senior insolvency research analyst at Allianz Trade.

Get back to the basics and reach out to customers, review terms and conditions and refresh credit applications. Then put additional protections in place, such as standby letters of credit, security agreements or credit insurance. “It’s better to do that now before the situation gets so severe that the customer is unable to provide those things to you,” Fawkes said.

When dealing with a customer who files for Chapter 11, credit professionals should consider joining a creditors’ committee. Committees are typically made up of three or more members and any creditor that has interest can submit their name for consideration. The committee, working with the debtor, can be instrumental in helping to formulate a viable plan of reorganization. 

Several committees were delayed in formation over the last few months because there was not sufficient interest, said Brian Jackiw, partner at Tucker Ellis LLP (Chicago, IL). “A U.S. trustee or bankruptcy administrator that’s forming a committee doesn’t have to pick only the largest creditors. So, if they get two of the largest creditors and one other creditor, they’ll form the committee with a smaller creditor. Any creditor interested should proactively reach out to the trustee’s office to join the committee.”

When your customer files for bankruptcy, consider whether you have the ability to get yourself into a critical vendor program, which may result in you getting paid some or even all of your pre-bankruptcy claim. The catch is that as a critical vendor, you may have to abide by specific pre-petitioned terms of the debtor. “So, if you were net-60, you’ll have to stay at net-60 and that’s where it becomes even more critical to make sure the debtor has the liquidity to pay you,” Jackiw said.

The good news is there are broader efforts to try to establish trust in the industry in the context of how commercial transactions work. “By leveraging the power of the Uniform Commercial Code, you provide greater certainty around commercial transactions in how you securitize those transactions and how creditor’s rights are affected in those transactions,” said Justin Kesselman, partner at ArentFox Schiff LLP (Boston, MA). “This is currently playing out across numerous states in order to implement legislation to adopt amendments to the Uniform Commercial Code both in Article 9 and other sections in addition to a new Article 12 to address these issues.”

You can learn more about what to do when your customer files for bankruptcy from Angelich, Jackiw, Fawkes and Kesselman during their educational sessions at Credit Congress from June 11-14.

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Making Smart Credit Decisions with Limited Customer Information

Kendall Payton, editorial associate

When customers provide thorough information, it makes the job of a credit analyst much easier. However, customers are more reluctant than ever to hand over financial information and often withhold documents that are vital to assess credit worthiness.

Roughly three in every four credit professionals say financial statements are the most difficult piece of information to obtain from customers, according to an eNews poll. Bank references, trade references and retail tax certificates are also difficult to get, but not nearly as much as financial statements. Each document serves a special purpose and offers a different snapshot into the financial health of your customer.

“We ask all of our customers to sign a credit application in order to get information regarding financial statements, bank references and trade references—but getting customers to complete the credit application itself is a challenge,” said Kenny Wine, CCE, director of credit at Joseph T. Ryerson, Inc. (Little Rock, AR). “We’ve driven our customer base to an online portal, which makes the customer sign pieces of the document before being able to move to the next screen. Customers won’t be able to set up their account until they agree with the terms and conditions of sale, and bank and trade references are included in that agreement, so we’ve seen success in that.”

Every piece of information fills a hole in a customer’s bigger financial picture. But often times, credit professionals are trying to complete the puzzle with limited pieces. So, if you can’t get financial statements from a customer, it is time to look at other options, said Brett Hanft, CBA, credit manager at American International Forest Products LLC (Beaverton, OR). “I get customer information from as many different resources as possible. I rely heavily on NACM industry credit groups and other credit managers when financial information is limited.”

Google searches and social media are also useful when you can’t get information directly from your customer, Hanft added. “For example, if the owner of a business posts a picture of a new sports car but can’t pay their bill, that’s a red flag.”

Credit analysts have tons of other tools to gather information, like trade references, NACM credit groups and NTCR reports. Even driving by your customer’s physical business can provide more information than you might think. “I’ll have a salesperson drive past a business and look at the location to see if there are people working, if the grass is mowed and if the name of the business is on the front of the building,” Wine said.

A customer’s expenses, profitability and debt are all laid out on financial statements, making them key to assess a customer’s financial performance and make strategic credit decisions. However, even if you have success in obtaining these documents, sometimes they are not accurate. “Financial statements are tough because a lot of times when you get the statements, they’re from QuickBooks or Excel,” Wine said. “The customer base I deal with are mainly mom-and-pop shops that do their own financial statements. It is so important to get statements that are audited.”

Some credit professionals have adapted to limited financial statements and learned to make credit decisions without financial statements at all. “Our department doesn’t look at financial statements too often because most customers are small independent restaurants—meaning the product we have rolls over so quickly that the terms are shorter,” said Kevin Freund, CBF, credit manager at Bix Produce (Little Canada, MN). “The most difficult piece of information for me to obtain from customers is retail tax certificates because they either don’t understand the forms, or claim they’re not tax exempt.”

Credit professionals who do not use financial statements when obtaining customer information tend to have more difficulties with bank references. Banks in recent years have charged fees for references, and can be vague with the information needed from customers. “Sometimes our customer will connect us with their banker and allow us to call the banker for more specifics,” said Wine. “From a big picture standpoint, you typically get the bank reference, but if you want to get any meat to the data, a lot of times you’ll have to call.”


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Automation and Technology Support the Credit Profession 

Jamilex Gotay, editorial associate

Credit professionals are under pressure to do more with less in today’s world. For example, credit managers are now in charge of tasks far beyond traditional credit functions, such as vendor vetting, cross-functional team projects, treasury, portal ownership and nearly every step in the order to cash process. But with the help of advancements in technology and automation, credit departments can spend time focusing on value-added tasks.

Some simple functions can easily be completed online, like credit applications. “We see this as a great efficiency gain because even sales organizations utilize this solution to proactively assess risk on business,” said Christopher Rios, corporate vice president at Dun & Bradstreet, Inc. (Short Hills, NJ). Dun & Bradstreet has an online credit application (OCA) platform that helps manage the customer relationship.

Dun & Bradstreet’s OCA has the ability to integrate with Salesforce, MS Dynamics or CRM to replicate information and customize the commentary of responses customers receive as to whether or not they’ve been approved for open credit terms. “So, the credit analyst can be at their desk monitoring their decision-maker inbox and can see the applications that have come in, been assigned a credit line and any credit lines that may not have met the needs of the applicant,” explained Rios.

Credit professionals who work with a high volume of customers need one place to access account information quickly. That’s where automating functions like accounts receivables (AR) can bring value to businesses. Solutions like SnapPay from Fiserv can integrate with ERP tools like SAP and Oracle, streamlining AR within the systems a business already uses. “Our team works closely with clients to integrate our software into their IT environments, which can digitize order management, invoicing and other important payment processes, ” said Jackson McIntosh, vice president and general manager of B2B solutions at Fiserv. “But once SnapPay is live, it runs on its own, allowing teams to focus time and energy on high-value activities beyond manual processing and chasing late payers.”

Artificial intelligence (AI) alleviates the pressure of analyzing massive amounts of data. AI is helping to advance the credit profession as the technology improves—going from “subscriptive to predictive,” said Aaron Lehew, 12C sales manager at Esker. “Along with anticipating controlled measures, AI has the ability to aggregate information from various sources, putting a greater emphasis on making quick informed decisions rather than data being manually analyzed,” Denning said. Key decisions can be made through real-time visualization rather than Excel spreadsheets that are manually maintained.

Technology and automation will only become more integrated in the credit profession as time moves on. For example, robotic processing automation (RPA) can be used for cash application or collecting remittances, leaving the credit department to decide how much financial exposure they want for a specific customer based on their risk profile, said Shyarsh Desai, chief executive officer at Carixa (South Plainfield, NJ). “So, the robots are pulling out data and documents from our customer’s websites instead of having creditor analysts do it manually, which helps in situations like customer disputes where creditors would need a proof of delivery.”

How can credit professionals make a seamless transition to implementing the new software? “Make sure you have a seat at the table with a vision of how a solution would impact you personally,” said McIntosh. “Understand that the anticipated changes should be socialized internally and what you anticipate this software will provide through the change.”

Meet these exhibitors and others at Credit Congress in the Expo Hall! Our exposition is the largest gathering of business credit and financial management service providers in the nation. Don’t miss this opportunity to speak with exhibitors one-on-one and see on-site product demonstrations.

NEW in 2023: Exhibitors will be presenting demos, corporate introductions, mini sessions and Q&A sessions in 20-minute segments. Choose the demonstrations you would like to visit during your time in the Expo Hall. Solutions Hub is a casual, small audience experience located in a specially designated area of the Expo Hall.

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  • JUNE
    3pm ET

  • Speakers: Bruce Nathan, Esq., Mike Papandrea, Esq.,
    Andrew Behlmann, Esq., Lowenstein Sandler LLP

    Duration: 60 minutes