May 18, 2023

As one of the most popular forms of communication in the work world, email provides an instant way to get your message across and conduct business. Several advantages come with email communication and almost all workplaces use the tool to communicate internally and externally. In fact, 75% of credit professionals said they use email as their primary form of contact with customers, according to an eNews poll—followed by phone call (21%) and text message or postal service (3%).

However, the email network is fragile. Most companies have had at least one employee fall victim to an email hack in the form of phishing or other security breaches—in some cases halting communication with the outside world entirely. In February, Microsoft Outlook experienced an increased number of Microsoft users whose inboxes had been flooded with spam due to its spam filters not working properly.

For credit professionals whose main point of contact with customers is email, it is crucial to ask customers to list their company domains as allowed so that messages are received to maintain open communication, ensure positive relationships and to get invoices timely received.

Always check your spam and junk folders. Some companies have policies in place to report or delete suspicious messages altogether. “Security wise, we have automatic notifications from our IT department where any email headings sent from an outside network will come with an immediate warning,” said Wesley Belleville, CCE, CICP, director of credit at Helena Agri Enterprises, LLC (Collierville, TN). “It gives us a heads up on exactly who you are sending to or receiving from. All unknown emails go to an automatic spam folder created by our company that captures emails and places those into the folder.”

Not all emails may have an official or verified domain that can be automatically detected. “At the beginning of each day, I get an email summary that scans through all emails and I can decide whether or not I want to release those into my main folder or not,” said Belleville. “Sometimes emails from outside attorneys, for example, will get sent to spam. Without double-checking through, those kinds of emails will remain lost.”

Separate your emails by priority status. The more you understand how to use a function, the better you can master it, said Merry Duan, senior strategic account analyst at Bayer Corporation (Saint Louis, MO). “You can create auto rules for particular senders and flow emails to specific folders to review later in order to prevent getting buried under non-important emails,” said Duan. “For non-important notifications, it's helpful to unsubscribe altogether so they don’t come in your junk mail.”

Duan said she has four different categories for her emails—urgent-important, urgent non-important, important (non-urgent) and not important (non-urgent). It is easy to review an email and forget because it is no longer marked as unread, said Duan. “The best way to prevent forgetting about emails is to re-mark the notification as unread to come back and read it,” Duan added.

Set time aside to sort through emails. Another habit to develop is dedication to organizing your inbox during a time that does not interrupt productivity of your daily tasks. “We need to focus on task productivity daily and reading emails can reduce productivity if you get distracted from a notification,” said Duan.

Ask customers to put your email on their Safe Senders List. If your customers are claiming they are not receiving emails from you, it may be true in some cases. You will need to work with them to get added to their Safe Senders List or email address book. The issue also may be better resolved by your customer’s IT department, as their company could have security measures or firewalls in place that block certain outside emails. As a best practice, ask customers for a confirmation of receipt after each email you send to avoid uncertainty.

Could email become outdated? Email has been around since the 1970s—a long time in a world where technology changes rapidly. “As [Gen Z] gets older and enters the workforce, it’s certain to change the way email works, if not completely eliminate it as a means of communication,” reads an article from Chanty Blog. “In the future, email will have quite a few competitors, including social media and apps that Gen Z-ers favor over email.”

Some companies are shifting to other forms of communication—like online portals or Teams—to avoid the vulnerability that comes with email. Many credit professionals prefer to use Microsoft Teams as a primary means of communication both in-house and client-facing. Email is a great tool for summaries and reports, but some information can get lost in translation. Facial expressions, nonverbal cues and tone can become blurred, said Belleville. “The face-to-face aspect is really important to me,” Belleville added. “Important conversations that need to happen are usually done in person, but if not, it’s a Teams call or at least a phone call to say what I’ll be sending through email in order to assure the message will not be lost or mixed up with another.”

One downside to using email as the only or main form of communication is the inability to truly build rapport with a contact, said Emily Noice, accounts receivable manager at Health Care Logistics, Inc. (Circleville, OH). “Sidebar information will come out during a call that may not be given within an email. In the collections world, some of that sidebar conversation can include important information related to the business.” Noice asks her team to send emails and then follow up with a call. “If it is a customer new to e-billing, we call within a few days of invoices being sent through email to ensure receipt,” she added. “Don’t just rely solely on email.”

Teams has a more visible and automatic tracking record as well. You can see when someone received or read a notification, as well as the thumbs up or reaction tool to acknowledge receipt of messages. “Teams has almost replaced our phone call,” Belleville said. “Instead of getting on the landline phone, my calls going out and coming in are on Teams now.”

Rebuilding a credit department or becoming credit manager at a new company is no easy task. Where do you start in addressing issues and improving efficiency? Do you hire internally or externally? How do you improve department culture? Start with these seven steps to get your credit department on the right track.

#1 Meet with Senior Management

To avoid feeling overwhelmed, start by meeting with upper management in order to establish clear expectations. This way you will be able to create a priority list of what must be improved first. If you start making changes before meeting with senior management, you could create unnecessary tension.

#2 Define the Problem

In order to rebuild or lead a new credit department, you must understand what currently is not working and why. This means completing a thorough evaluation of staff, culture and credit policies. From there, you can decide what changes need to be made.

Part of the evaluation process is assessing the strengths and weakness of your credit team. “You have to understand the credit team to see if they can effectively carry out the goals and tasks and if they can’t, you have to replace them and find people who have the ability to do that,” said Jason Mott, CCE, NACM Board director and corporate credit manager at MFA Incorporated (Columbia, MO).

#3 Establish and Align Goals

After evaluating the credit department, establish the main goals for improvement such as hiring new people, improving DSO or implementing more automation. Once the goals are established, make sure everyone understands—including salespeople, vendors, customers and other departments within the company. “Both customers and vendors deal with companies like yours so they know what works and what doesn’t,” said Kevin Stinner, CCE, CCRA, credit manager at JR Simplot, Inc. (Loveland, CO).

Aligning goals is especially critical when undergoing massive changes, like a merger or acquisition. “I merged three regions and each region worked differently despite having the same policy and vision,” said Marlene Groh, CCE, ICCE, regional credit manager at Carrier Enterprise, LLC (Salisbury, NC). “Get the buy-in before you make changes so that everyone will be on board with you. Otherwise, you’ll keep hitting barriers along the way.”

#4 Prioritize Leadership, Not Management

Management is when an individual oversees and controls a group of individuals in order to achieve a specified objective, while leadership is when an individual influences, motivates and enables others to contribute to the success of an organization. If reshaping a credit department is your goal, a leadership mindset is key. “I think it’s all about vision and the approach you take,” Mott said. “As a leader, you’re willing to go into the trenches with the team instead of delegating and monitoring tasks for them to do like a manager does. A leader leads by example and shows their team how to efficiently complete their tasks.”

#5 Incentivize the Credit Team

Credit professionals can incentivize their credit team to improve performance and efficiency. By setting performance metrics like call volume, dollars collected or AR percentage, the team has a goal to work towards and a reward for reaching that goal.

You can even be creative and have each member enter a raffle with a chance to win a gift card, said Martine Dyer, CCE, CCRA, credit and collections manager at Restaurant Equipment Service Group, LLC (Addison, IL) during a Credit Leadership Thought Discussion. “How do I motivate the credit team? It’s always with incentives or money.”

#6 Document and Communicate Your Plan

In your plan, state what processes need to be changed, what needs to be done to make those changes and a clear timeframe. Documentation is helpful to avoid misunderstanding once the changes start being put in place. “I also include a flowchart that lists the people and their tasks, resources and any backups to reach that end-goal,” Groh added.

#7 Be Flexible

Don’t be disappointed if your original plan doesn’t work. Changes are inevitable, and at times unpredictable. So, it’s important to be flexible when the time comes. “If you are too rigid, you lose good employees and run into a new set of issues,” Stinner said during a Credit Leadership Thought Discussion. “Being flexible means changing as the situation changes and developing a plan with a loose outline that may have to change as you encounter different situations.”

Be sure to register for the Strategic Leadership Track at Credit Congress from June 11-14 in Grapevine, TX if you want the tools needed to help rebuild your credit department.

A company’s success is measured by its sustainability. With several environmental, economic and social challenges today, companies have to consider what steps to take now in order to prepare for the future—which is where ESG standards fit in.

What is ESG? ESG is the acronym for Environmental, social and governance, which are socially conscious standards used by investors to screen and rank investments. The goal of ESG is to bundle all non-financial related risks and opportunities presented to a company’s daily operations into one category. The term ESG was coined in 2004 with the publication of the United Nation’s global compact initiatives “Who Cares Wins” report.

The environmental aspect of ESG represents factors such as land-use concerns or whether a company uses recycled materials. Social aspects in ESG are based on how a company manages employee development and labor practices or reports on product liability and safety of a product. Lastly, governance could be based around shareholders rights or how compensation aligns with the company’s sustainability performance.

Why is it important? Several investors have started to incorporate ESG requirements into their investment decisions—which is why ESG has become more prevalent to secure capital. And the pressure on companies has slowly increased as ESG funds today are considered a multitrillion-dollar market.

You can look at ESG from a creditor default perspective in two ways. One is from a cashflow standpoint with a carbon tax lens, and the other is an investment standpoint from a risk of trapped assets or investment, said Martin Zorn, managing director of risk research and quantitative solutions at SAS Institute Inc. (Honolulu, HI). “ESG regimes have evolved globally with the concept of a carbon tax,” Zorn said. “It’s paying in the form of a carbon tax or what their production is. If you invest in a large project that includes the production of hydro carbons, ESG environment violations may result in investments not being able to get out of that project for future cashflows or refinancing.”

The impact of ESG also depends on what industry you are in. It is all about where you sell and who you sell to, said Jay Tenney, managing director at Trade Risk Group (Irving, TX). For example, the recent Bud Light controversy caused sales to deteriorate nearly 24%—with the social aspect of ESG and distributors being hit the hardest. “If that is your bread and butter and you’re losing 24% of your business, that has a direct impact on your cashflow,” said Tenney, “A lot of these companies jumped right into the deep-end on ESG and did not think what the real impacts are. The backlash against what the market perceived as an overreach on ESG has an impact.”

What should creditors know? A recent eNews poll revealed 93% of credit professionals do not ask customers if they have an ESG policy as part of due diligence. But as the world becomes more socially and environmentally conscious, more pressure will likely be added to assess ESG factors. “The United Nations-backed Principles for Responsible Investment (UN-PRI) also recognized that ESG factors can affect borrowers’ cash flows and the likelihood of defaulting on debt obligations,” reads an article from Deloitte. “Therefore, ESG factors have emerged as important elements in assessing the creditworthiness of borrowers.”

In the same way that the Sarbanes-Oxley Act (SOX) took some time to be widely accepted, or more recently the EU Supply Chain Act, ESG requirements have the potential to become more important in the future. “Furthermore, when ESG factors are incorporated as drivers into the credit ratings process, any downgrades may have an impact on lenders’ capital requirements, thus increasing financial risks,” according to Fitch Ratings. “Failure to address ESG issues could lead to poor reputation, misconduct risks, pricing errors and business development challenges, inter alia.”

Fitch Ratings’ 2021 ESG in Credit White Paper considers that of the three ESG factors, the lowest level of credit impact is currently attributed to environmental factors. “This is believed to be mainly driven by a low level of cost crystallization from environmental legislation and regulation to date,” per Fitch Ratings. “Over time, such regulation is likely to grow and we should see more environmental costs being factored into credit profiles.”

Because ESG is still a relatively new concept for many, the environmental aspect tends to be the most prevalent over social and governance—and this rings true especially when looking at credit. Any company that has high ESG standards is looked at as almost having a competitive advantage in the current business environment, said David Kinzel, vice president of Marsh, LLC (Denver, CO). “When making a credit decision, you can’t rely solely on a company’s ESG rating,” Kinzel said. “You still have to look at the financial statements and a traditional credit analysis because all criteria that is not captured in a financial statement can still impact future earnings of a company and should be incorporated into it.”

Lien rights grant legal authority for contractors, subcontractors and suppliers to file a mechanic's lien against the owner’s property or, in the case of a government project, the right to make a bond claim. It is also a security to force payment. But statutory changes like with Texas’ recent property code make it harder to protect those lien rights. In order to protect their lien rights, credit professionals must inform their customers of statutory changes immediately.

Why It Matters:

Many customers are not aware of the Texas statutory change and are reluctant in providing job information to credit professionals. The new statute does not only protect your lien rights, but also prevents project or payment delays. “Thanks to NACM, I used the new statute in the legal process in order to retrieve information from a customer who owed us half a million dollars in Texas,” said Heidi Watkins, office manager of credit at Alecom Metal Works, Inc. (Euless, TX).

But it’s important to differentiate which contracts apply to the new statute. Any general contract signed prior to Jan. 1, 2022 falls under the old statute and any general contract signed after Jan. 1, 2022 falls under the new statute. "People must understand which statute they are following to protect their lien rights," said Chris Ring of NACM's Secured Transaction Services. “Sharing this new statute will help them divulge the necessary information. You can also use it as a training tool for sales reps as they are often tasked with collecting this information.”

Texas Property Code Change:
Section 53.159
Obligation to Furnish Information

As of Jan. 1 2022, a Texas statute went into effect that allows for request for contract and job information. The statute states that:

(a) an owner, on written request, shall furnish the following information within a reasonable time, but not later than the 10th day after the date the request is received, to any person furnishing labor or materials for the project:

(1) a description of the real property being improved legally sufficient to identify it;

(2) whether there is a surety bond and if so, the name and last known address of the surety and a copy of the bond;

(3) whether there are any prior recorded liens or security interests on the real property being improved and if so, the name and address of the person having the lien or security interest; and

(4) the date on which the original contract for the project was executed.

(b) An original contractor, on written request by a person who furnished work under the original contract, shall furnish to the person the following information within a reasonable time, but not later than the 10th day after the date the request is received:

(1) the name and last known address of the person to whom the original contractor furnished labor or materials for the construction project;

(2) whether the original contractor has furnished or has been furnished a payment bond for any of the work on the construction project and if so, the name and last known address of the surety and a copy of the bond; and

(3) the date on which the original contract for the project was executed.

(c) A subcontractor, on written request by an owner of the property being improved, the original contractor, a surety on a bond covering the original contract, or any person furnishing work under the subcontract, shall furnish to the person the following information within a reasonable time, but not later than the 10th day after the date the request is received:

(1) the name and last known address of each person from whom the subcontractor purchased labor or materials for the construction project, other than those materials that were furnished to the project from the subcontractor's inventory;

(2) the name and last known address of each person to whom the subcontractor furnished labor or materials for the construction project; and

(3) whether the subcontractor has furnished or has been furnished a payment bond for any of the work on the construction project and if so, the name and last known address of the surety and a copy of the bond.

(d) Not later than the 30th day after the date a written request is received from the owner, the contractor under whom a claim of lien or under whom a bond is made, or a surety on a bond on which a claim is made, a claimant for a lien or under a bond shall furnish to the requesting person a copy of any applicable written agreement, purchase order, or contract and any billing, statement, or payment request of the claimant reflecting the amount claimed and the work performed by the claimant for which the claim is made. If requested, the claimant shall provide the estimated amount due for each calendar month in which the claimant has performed labor or furnished materials.

(e) If a person from whom information is requested does not have a direct contractual relationship on the project with the person requesting the information, the person from whom information is requested, other than a claimant requested to furnish information under Subsection (d), may require payment of the actual costs, not to exceed $25, in furnishing the requested information.

(f) A person, other than a claimant requested to furnish information under Subsection (d), who fails to furnish information as required by this section is liable to the requesting person for that person's reasonable and necessary costs incurred in procuring the requested information.