December 7, 2023

The global economy faced severe headwinds in 2023 that tested its resilience—a banking crisis, tight monetary policy and some of the worst geopolitical tension seen in years. Many countries demonstrated strength while navigating these challenges and performed much better than expected, but others succumbed to economic instability. A recent eNews poll revealed more than two-thirds of credit professionals believe a recession is around the corner if we are not in one already, while 31% see the chance of a soft landing.

Let’s take a look at the events that shaped the financial landscape of this past year and what lies ahead.

Positive Economic Outlook?

Economists view the 2024 economy as a tossup with 50% recession odds, according to a survey from the National Association of Business Economics (NABE). Some are optimistic that the U.S. will avoid a recession again in the New Year while others fear the risk is too great.

“The U.S. economy defied recession fears in 2023 and made substantial progress toward a soft landing,” reads a report from Goldman Sachs. “The key surprise has been much stronger than expected GDP growth, though this has not prevented the labor market from continuing to rebalance or inflation from continuing to fall.”

The worst part of the storm of rate hikes and fiscal policy has likely passed. The Federal Reserve is expecting to cut interest rates in 2024 as inflation and the job market have cooled. “We think most of the impact of higher interest rates is already behind us, and the impact yet to come—in particular from the looming corporate debt maturity wall—will be modest,” according to Goldman Sachs. “It was fair to wonder last year whether labor market overheating and at times unsettling high inflation mindset could be reversed painlessly. But these problems now look largely solved, the conditions for inflation to return to target are in place, and the heaviest blows from monetary and fiscal tightening are well behind us. As a result, we now see only a historically average 15% probability of a recession over the next 12 months.”

Risks Remain

Despite this positive news, several risks remain that could change the economic path. Geopolitical conflict is a top concern for experts with the escalating Israel-Hamas and Russia-Ukraine wars. If tensions between China and Taiwan boil over, it could spell major trouble for the global economy—especially if any war leads to an oil crisis. "[T]he U.S. economic outlook over the next year or so is far from sunny. A full-blown economic storm may not develop, but storm clouds likely will dominate the horizon for the foreseeable future," economists at Wells Fargo said in their 2024 outlook.

Sovereign debt is also on the rise, and the House and Senate have nearly sent the U.S. into a government shutdown several times in 2023. “[Speaker Mike] Johnson has promised he won’t put another ‘clean’ funding bill on the floor, increasing the chances of a shutdown after the next spending deadlines on Jan. 19 and Feb. 2,” reads an article from Politico. “The House GOP is so bitterly divided that some lawmakers worry they’ll engage in the same last-minute self-sabotage that plagued them this fall.”

Commercial bankruptcies have skyrocketed since the historical lows during the height of the pandemic. In the third quarter of 2023, business bankruptcy filings rose 36% from a year earlier according to the United States Courts. Chapter 11 filings year-to-date through September are at their highest level since 2020, but if we look beyond the year the pandemic started, filings are at their highest level since 2013. The rise in business failures is expected to get worse in 2024 as companies grapple with a combination of weakening demand, sticky inflation and high borrowing costs. An NACM eNews poll revealed that 40% of credit professionals have seen an increase in the number of customers filing for bankruptcy in the last year.

Credit Professionals Should Prepare for All Scenarios

These last few years have proven that the economy can take a turn at any moment. Credit professionals must prepare for any and all scenarios in order to mitigate risk for their companies. In mitigating any type of risk, credit professionals should always refer to standard know-your-customer practices. Building a strong relationship with your customer is key to staying ahead of the curve in any circumstance.

“Draw your customer into deeper conversations about their business so that you learn about how their business is financed,” said Jay Tenney, managing director at Trade Risk Group (Irving, TX). “Know what the customer’s business plan is to address any possible difficulties in collecting in case of a slowdown in their market or how to manage the cashflow.”

Always take a proactive approach to risk mitigation. Creditors should take a closer look at their customers to figure out the amount of risk around tighter lending conditions and how that impacts customers’ ability to pay in a timely manner. “Growth and expansion of businesses is expected to remain in 2024, however, companies will still have to refinance debt and do so at higher rates,” said Martin Zorn, managing director of risk research and quantitative solutions at SAS Institute Inc. (Honolulu, HI). “Even if we see the Fed make a few cuts, interest expenses are going up. And because of higher rates, many banks were comfortable with excess deposits, mostly from COVID policies. Banks have become conservative with their lending.”

The November Credit Managers’ Index (CMI) revealed credit managers are growing increasingly concerned about the state of the economy, citing more delinquent accounts, poor application quality and more bankruptcy filings. “I think bankruptcies are going to continue to rise in the next year,” said NACM Economist Amy Crews Cutts, Ph.D., CBE. “A lot of business loans are short-term loans. Now they are coming due, and a lot of companies simply cannot repay them. The bankruptcies are being driven by the companies who have overextended themselves and can’t possibly get the loans refinanced.”

The December CMI is NOW OPEN. Complete the CMI every month for the next 12 months and automatically be entered into a drawing to win a gift card worth between $100-$250 in 2024. Sign up to receive monthly CMI survey participation alerts. For a complete breakdown of manufacturing and service sector data and graphics, view the November 2023 report. CMI archives also may be viewed on NACM’s website.

A mechanic’s lien is a tool to secure payment across all states. However, each state has adopted their own unique set of rules or statutes which must be followed to preserve and protect rights. Nearly 10 years ago, statute laws in Iowa changed, developing a registry for filing preliminary notices on residential projects.

Changes in the statute have also impacted commercial and public projects in Iowa. For example, if a lien is filed on a property, the contractor who put the lien on the property can also file in court to enforce the lien, leaving the court to decide if the property will be sold to pay off the amount owed. Also, if the contractor did not complete the work up to par, you can object to the amount of money that the contractor claims is owed.

“It’s essential to be able to understand what a mechanic’s notice and lien registry entails,” said Chris Ring of NACM’s Secured Transaction Services. “If there is a project where a preliminary notice needs to be served, it must be done through the mechanic’s notice and lien registry for residential projects in Iowa. Commercial projects are not listed on the mechanic’s notice and lien registry, but to maintain your lien rights, you must serve the preliminary notice within 30 days of the first version.”

Another important aspect of mastering mechanic’s liens in Iowa is knowing the difference between unpaid balance lien states and full-price lien states. In a full-price lien state, your lien rights will be intact if all processes are done timely and accurately for the statute, regardless of the amount of money owed to the general contractor. In an unpaid balance lien state, if the owner can prove that they paid the general contractor prior to the lien being filed, then the owner has a defense to that mechanic’s lien. Iowa is listed as an unpaid balance lien state because once the preliminary notice is served on commercial jobs or through registry on residential jobs, it can trap unpaid funds, turning into a full-price lien. However, late trades like paint and flooring face a dilemma if there are costs that overrun. Even though the preliminary notice is served or registered, there may be limited or no funds owed to the general contractor.

“For Iowa, I would look at it compared to most of the other states that require a first furnishing notice,” said Issac Kotila, Credit Support Manger at Insulation Distributors (Chanhassen, MN). “You have to let the owner and general contractor know you’re supplying material to the project or providing a service and that you do intend on getting paid after performing the work. It gets that initial notice out of the way instead of doing that on the backend when payment hasn’t been received.”

Liens are typically required to be filed within 90 days of the last furnished material. In Iowa, if you miss the 90-day window, you can still present your reasoning in court, which is an option for recourse not available in many other states. “It’s nice for suppliers to have that back-up option in case the lien is filed incorrectly,” said Kotila. “The biggest impact of securing or maintaining lien rights in Iowa is the security you obtain on the funds you have out for that project. We as credit professionals work daily on collecting funds and maintaining these balances on these projects, so having those lien rights to fall back on in the event of non-payment is a great tool at our disposal to ensure those funds are paid.”

Iowa’s mechanic’s lien can be used as an efficient process for credit professionals to collect because it provides as a supplement to the contract in the state, being an additional remedy. From a legal perspective, it is especially important to pay attention to any waiver language included in contracts. “Though it is on a case-by-case basis, the new statute has created a major number of open questions for lawyers to litigate,” said John Fatino, attorney at Whitfield & Eddy, PLC (Des Moines, IA). “Immediately figure out what the paradigm is, whether public, residential or commercial and then try and get to the statute as fast as possible. Reach out to counsel and move quickly within 90 days.”

Interested in learning more about mechanic’s lien laws in Iowa? Be sure to register for NACM’s upcoming webinar on Mastering Mechanic's Liens in Iowa: Distinguishing Commercial, Residential and Public Projects on Dec. 14. You can learn more about the intricacies of mechanic's lien laws in each state by purchasing the 2022 Manual of Credit and Commercial Laws Volume III.

Public speaking—the ability to articulate ideas and topics to public audiences—is a skill that every professional should master. But the fear of public speaking is more common than you’d think. Even the most seasoned business professionals still get clammy hands or nervous sweats when presenting a speech. In fact, 75% of the population has a fear of public speaking; but, why?

Studies have shown the fear of public crowds comes from the human survival instinct of belonging to a group. For example, if you present something to your close friends, you are more likely to feel a sense of belonging with no detection of a threat versus presenting to a large crowd of strangers. Fear is etched into our genetic code as humans.

Public speaking is especially important for B2B credit managers to master because effective communication is essential when presenting financial information to executives and team members. Credit managers often need to articulate complex financial concepts or credit decisions, making public speaking crucial for conveying information clearly and persuasively. The ability to speak confidently enhances credibility, fostering trust and rapport with clients and colleagues. It also aids in negotiating terms, addressing concerns or advocating for credit decisions. “Your voice, tone and speaking skills are a direct representation of your company, level of professionalism and credibility as a credit manager,” said Brett Hanft, CBA, credit manager at American International Forest Products, LLC (Beaverton, OR). 

By following the 5 P’s of public speaking, you can learn to manage those nerves and deliver the perfect speech to any audience.

Preparation

Most individuals experience some form of a speech every day. Whether it’s virtual meetings with your internal team where you must present your ideas, in-person meetings that require everyone to speak and participate or even hosting a webinar, these are all forms of public speaking. The first and most important step in speech success is how you prepare.

Doing an extensive amount of research on what you’ll be covering helps in the preparation phase. Become an expert on the topic you are talking about, said Amy Cook, CCE, credit manager at McNaughton-McKay Electric Company (Madison Heights, MI). “The worst speakers we hear are ones who are given a topic to talk about and it’s obvious they did not come prepared to answer questions or facilitate the crowd,” Cook said. “If you are confident in the topic you’re speaking about, your nervousness won’t show as much, and you’ll go into autopilot mode. Professionalism is also important in public speaking.”

Practice

Once you prepare your notes and study the topic you’ll be presenting, the next step is to practice. Find a trustworthy individual you can present to as your test run and ask for honest feedback. Practicing out loud can also help you find the flow and cadence of your words and increase your comfortability with the material.

“If you find that honest person you can practice with at the very beginning of your journey who will tell you if you need to speak slower, faster, not fidget or walk around too much, it’s very helpful,” Cook said. “Recording yourself is also important because our voice when recording versus the one in our head is completely different.”

Some professionals like to practice and record their speech at the actual place they will be presenting to get comfortable with the space, stage and equipment. It’s a lot easier to speak to virtual square boxes than life-size humans, said Heidi Lindgren-Boyce, CCE, NACM Board director and senior credit manager at Star Rentals, (Kent, WA). “Start small and work your way up,” Lingdren-Boyce added. “Allow yourself building blocks and practice as much as you need.”

Polish

After you get through the first few rough drafts, it’s time to polish it up. It is important to study yourself closely and avoid the same mistakes each time you practice. Lingdren-Boyce said she organizes her seminar speeches with an introduction, the middle (problem) and end with solutions (conclusion).

“In PowerPoint, I bullet point my notes and use them as reminders of the main points of what I want to talk about instead of reading the whole paragraph on the slide,” she said. “On both personal and professional levels, you must know what you want to say without saying everything. It makes the speech clear, to the point and organized without all the fluff.”

Pause

Taking your time is another essential in performing a great speech. Pauses between your thoughts will eliminate any unclear statements or using famous crutch words such as “umm” or “like.” Forcing yourself to stand up in front of a crowd and cover a topic can naturally make anyone stumble over their words or make mistakes, but pausing to collect your thoughts can make you choose better words to get your point across. “Pause and think about what you’re going to say next,” said Cook. “It gives you a sense of courage you don’t think you have, especially in front of upper management or larger crowds.”

Present

Understanding your audience is essential to how well your speech will be delivered and touch others. Consider who your audience is and tailor your speech to their level of understanding and interest.

Lingdren-Boyce said when the audience comes in, she likes to welcome people in the aisles. It has a calming effect, she explained. “If you’re on the stage where everyone is staring at you, it can be much more nerve-wrecking. Work the crowd,” she added. “One of my mentors told me when you present, you shouldn’t act as someone you’re not. Be yourself and know how you present in stressful or nerve-wrecking situations.”

It's all about the ability to embrace flexibility and adapt. Practice as much as you can, but an audience’s live reaction will be different than how you imagined. The right preparation and confidence can take you a long way in mastering public speaking.

Hanft and Lindgren-Boyce will be presenting a live session on public speaking at NACM’s 128^th Credit Congress in Las Vegas, NV. Tomorrow is the LAST day to register with early-bird pricing. More information is available on our website.

In the ever-changing industry of B2B credit management, credit professionals are expected to stay informed and increase their credit knowledge to advance in their career—after all, knowledge is power. By attending NACM’s Graduate School of Credit and Financial Management (GSCFM), a hybrid program that covers four essential business and professional growth disciplines: Advanced Financial Statement Analysis, Legal Environment of Credit, Advanced Negotiations and Leadership, credit professionals will have the essential tools to excel in their career and become a master in their field.

#1 Gain Invaluable Knowledge

The GSCFM program arms credit professionals with invaluable credit knowledge from experts in the credit field. Ginny Overbeck, CCE director of financial services at William M. Bird & Co. (North Charleston, SC) is a recent GSCFM graduate and was able to get insight and solve a legal matter at work using the knowledge gained from the Legal Environment of Credit course. “I had been wrestling with a proposed sale and going back and forth in a contract with terms and conditions,” she said. “But the instructor and I were able to talk through my scenario and help me navigate it. It was so timely because then I went back and used what I learned to help my department.”

Even if you’ve been in the credit industry for a while, taking the time to relearn can inspire you to continue learning. “The experience encouraged me to review fundamentals and inspired me to take a step back and budget time for life-long learning,” said recent graduate Kevin Martin, CCE, CICP, senior credit analyst at The Mosaic Company (Lithia, FL).

#2 Learn or Refine Credit Skills

Credit professionals of all levels can learn or refresh various credit skills through the GSCFM program. Former student, Martin Smith, CCE, credit manager at Ash Grove Cement Company (Sumterville, FL) refreshed his credit skills just a few years ago after a 20-year-long break from the credit industry. “The Leadership course was helpful when managing people, especially since I didn’t do much of that when I worked in sales,” he said. “Now, when a customer is in distress, I have an opportunity to use negotiation tactics I learned in the Advanced Negotiations course. I’m also more able to handle a complicated financial statement after taking the Advanced Financial Statement Analysis course.”

Erin Stammer, CCE, vice president of credit at PNW Railcars, Inc. (Portland, OR), and this year's recipient of the peer-elected GSCFM Student Leader Award, found GSCFM to be an unmatched credit tool for her career, especially when it came to reviewing customer’s financials. “Having that deeper dive into financial analysis such as ratios helped me in better understanding my company’s financial health, especially when reviewing financial statements,” she said. “The instructor provided valuable case studies and insights that helped me dig deeper into my own customer accounts.”

#3 Build Lasting Relationships

GSCFM is an opportunity to form relationships with like-minded credit professionals in a safe learning environment. “As someone who is not the best at networking, the small class cohort was fantastic being able to build those relationships with peers,” Overbeck said. “I was able to compare notes and listen to perspectives from credit professionals in similar or different industries. The instructors were also very accessible and acted more as peer advisors than a professionals at a university.”

The newfound connections are catalysts for career growth and professional development. “GSCFM allowed me to get more engaged with the community of credit professionals in the U.S.,” said Stammer. “I seek out more information through NACM articles and podcast to sharpen my leadership skills. I learned a great deal from the program and the instructors, and I hope to continue to do so as time goes on.”

#4 Establish Credibility

GSCFM graduates are equipped with abundant credit knowledge and expertise, establishing a sense of credibility within the industry and your company. “After graduating in addition to earning my CCE, I gained additional credibility in my field,” Martin said. “I was able to be more involved in NACM and even got invited to join the Florida Improved Construction Practices Committee (ICPC) to help mold lien laws. When I go to Credit Congress, I have the ability to continue to expand my network of contacts. My advice to credit professionals is if you’re committed to a path of professional growth, getting involved in NACM and attending GSCFM is the way to go.”

Registration Deadline is February 1