December 28, 2023

New Year’s resolutions often symbolize a fresh start and a commitment to improvement—a chance to become the best version of yourself in both your personal and professional lives. As we approach the New Year, credit managers are presented with limitless opportunities for growth and success.

Here are the top 10 resolutions chosen by credit managers for 2024:

#1 Process Improvements  

A recent eNews poll revealed that almost every credit manager hopes to focus on process improvements in the New Year. It’s an umbrella term that refers to the enhancement of existing workflows. Yesterday’s credit processes may not work for tomorrow and credit professionals across every industry must critically analyze current processes and identify bottlenecks or inefficiencies. Merry Duan, senior strategic account analyst at Bayer Corporation (Saint Louis, MO) is searching for process improvement opportunities to make operations more efficient. “Achieving these goals not only enriches my working experience and professional knowledge but it helps promote broader responsibilities, which adds value to support the customers internally and externally.”

#2 Automate More Credit Tasks and Explore AI 

Automating more credit tasks stands in second place as it frees up valuable human resources for strategic thinking and relationship building. As different forms of artificial intelligence (AI) gain popularity in the finance sector, credit professionals must become experts on how AI can support their role and simplify workflow. “We’ve invested in AI software that will reduce the amount of time spent on various credit functions, increasing productivity with the same headcount,” said Carl Davidson, director of credit and collections at Blue Water Industries LLC (Jacksonville, FL). “AI can review customer information, retrieve credit reports and references and prevent fraud by accurately confirming if a company is valid or not. AI also helps AR clerks with high volume workload such as application of checks day-to-day.”

#3 Clean Customer Data 

Clean customer data is crucial as it forms the foundation for accurate decision-making. In data-driven industries like credit, it is at the basis of risk management decisions. Dirty data can impose a significant risk to both your customer and company and can possibly have legal consequences. To prevent that, credit professionals must constantly analyze data to ensure it is up to standards. One way is making sure you are verifying customer data more often and involving others in the process. Krista McClain credit manager at Frenchman Valley Coop (Imperial, NE) has the salespeople do this every time they talk to someone. “I am going to do credit risk assessments more often to keep myself accountable for the debt that we do have,” she said. 

#4 Develop Leadership Skills 

Finding and developing your leadership style is a journey of self-discovery and continuous growth. By recognizing your natural tendencies while adapting your style to different situations and teams, you can develop a leadership approach that resonates with your authentic self while effectively guiding and empowering others. “Being positive and open-minded in embracing new ideas and opinions from others is critical as a leader,” said Duan. “Active listening and effective communication are very important soft skills in the credit management profession.”

#5 Lower DSO 

This last year experienced an economy branded by inflation, high interest rates and volatility—all factors that can negatively weigh on days sales outstanding (DSO). However, it is important to note that DSO is highly influenced by sales. When DSO is supplemented with other metrics—like average days delinquent, true DSO or weighted-average days to collect—it can paint a more complete picture of AR performance. If you must track DSO, use it in a way that sheds a positive light on the credit department. For example, DSO can provide the value in dollars that you are adding to the organization. Calculate the number of days in DSO your department has improved over a period and convert each days’ worth of DSO to a days’ worth of revenue for the company. 

#6 Gain Recognition from Upper Management 

Credit decisions play a massive role in the success or downfall of a company. To gain recognition from the C-Suite, credit managers must be strategic and make decisions that coincide with the company’s vision. Be sure to show upper management just how vital the credit department is to business success. “Without credit, less is available for growth and the strategic needs of the business,” said Andrea Bohr, CCE, chief financial officer at W.J. Sapp & Son, Inc. (Jacksonville, FL). “Without funding to invest in the best people and technology, innovation and creativity are lost. Creditors enable genius talent with funding needed to create, engineer and explore ways to improve our daily lives.”

#7 Earn a Designation and Invest in Education 

Whether you hope to secure a promotion, a raise or greater respect in the credit industry, it's crucial to demonstrate your dedication to your profession. By earning a designation through NACM’s Professional Certification Program, credit managers can elevate their careers and showcase their expertise. An independent study of NACM members revealed those who hold certifications average 6% higher salaries than those who do not, and many credit managers hold more than one certification. 

#8 Reorganize the Credit Department 

A credit department that remains static risks falling behind, unable to address emerging challenges in the ever-changing industry of B2B trade. Periodic reorganization provides an opportunity to assess the skills and expertise within the credit department. By aligning roles with individual strengths and fostering a culture of continuous learning, organizations can nurture a high-performing team. Change management, a systematic approach to dealing with the transition or transformation of an organization's goals, processes or technologies, is a way to implement strategies for effecting change, controlling change and helping people to adapt to any departmental, company or industry-wide changes. Workload also needs to be continually monitored to make sure it is evenly distributed because situations can change at a moment’s notice. 

#9 Strengthen Relationships with Customers (Inside and Outside Your Company) 

Building strong relationships with customers, both within and outside the company, is crucial for fostering loyalty, trust and a positive brand image, ultimately contributing to long-term business success. Working cohesively with sales is top of mind for credit professionals in the New Year, but as the traditional role of credit changes, other departments become important to collaborate with as well. “We work together with other departments in getting the information we need from customers to achieve our goals,” said Alisha Gray, purchasing manager at Orgill Inc. (Collierville, TN). “Communicating and collaborating with customers helps us to know what needs to be done to achieve our goals as well.”

#10 Prepare a Succession Plan Before Retirement 

The structural makeup of the labor force is about to drastically change as baby boomers are expected to retire at high rates. As older generations retire, deep industry-specific knowledge goes with them, a phenomenon known as the “knowledge drain” or “brain drain.” Building a succession plan will not only ensure that the next generation of professionals are prepared for the job, but the company is less likely to suffer from a loss of a tenured employee. “The responsibility of the older generation is to provide a foundation of knowledge and experience for the younger generation so they can incorporate their own personality and style into credit management,” said Diana Crowe, CGA, regional director at NACM Southwest (Coppell, TX). “Just because we’ve done something for decades and it’s worked fine, doesn’t mean there still isn’t a better way.”

Tips to Meet Your Goals in 2024

Keeping resolutions is easier said than done as credit managers are consistently challenged to meet their goals. “For any professional, I always recommend using the rule of what is obtainable versus what's impressive,” said Hailey Zureich, certified life coach and corporate trainer at ZHailey Coaching, LLC (Ferndale, MI). “Each goal must be clear and reasonable for the individual based on their limitations to be successful. And always be adaptable. A lot of things change for the better or due to circumstances outside of your control.”

Credit managers can stay motivated to meet their goals by following a cycle of productivity, a five-step process for completing a goal started by the conception of the idea or project. After that, the preparation period begins where you plan out what you're supposed to do to achieve that goal followed by the execution of those tasks.

The next two steps—which many people skip—are the celebration and reset periods, Zureich said. “By celebrating what you’ve done instead of breezing over to the next goal will help you remember what you've accomplished as well as provide evidence of what you’re capable of. It can be as simple as getting yourself a cup of coffee or leaving work earlier.”

Resting after accomplishing your goals is just as important. “More people are struggling with mental and physical health because they are constantly pushing themselves to stay productive,” said Zureich. “Failing to rest before moving on to the next project can lead to burnout where people are too exhausted to do the most basic things, which is one of the top reasons people are leaving jobs and switching careers.”

The world's biggest shipping companies are rerouting vessels away from the Red Sea as the global supply chain faces severe disruption amid conflicts related to the Israel-Hamas war. “The Iran-aligned Houthis of Yemen are playing an escalating role in the conflict in the Middle East, attacking shipping in the Red Sea and firing drones and missiles at Israel in a campaign they say aims to support Palestinians in the Gaza war,” reads a Reuters article. 

On Dec. 15, the Houthis struck two Liberian-flagged ships in the Bab el-Mandeb, part of their continued attacks on “merchant ships in the Red Sea before or after they move through the Suez Canal,” wrote Axios. As a result, the world's largest container line, Mediterranean Shipping Company (MSC), announced it will reroute its vessels away from the Red Sea. Energy major BP also followed suit while Danish shipping company A.P. Moller-Maersk (MAERSKb.CO) said it would pause all container shipments through the Red Sea until further notice. German container line Hapag Lloyd said it was considering a similar move.

Why It Matters: The Suez Canal, which connects the Red Sea to the Mediterranean, is the shortest route between Europe and Asia. About 12% of global shipping traffic normally transits the waterway, according to Deutsche Welle. Now, ships traveling from the far East to Europe will need to make a detour around the entire African continent via South Africa's Cape of Good Hope. “The journey will take more than a week longer and will add about 3,500 nautical miles (6,482 kilometers),” reads the article.

This disruption may echo the ripple effects of March 23, 2021, in which the bow of the containership, Ever Given, got lodged in the eastern bank of the Suez Canal. As a result, several shipments were delayed, particularly European imports from Asia. “The blockage held up some $9 billion in global trade each day, leading to time costs of the goods (i.e. economic depreciation, technical depreciation, and opportunity costs of capital),” reads a Port Economics article. “The Suez blockage further added to a constriction in shipping capacity and equipment and, consequently, some deterioration in supply chain reliability. Several weeks after the opening of the Canal, European ports experienced peaks in vessel arrivals, further increasing the pressure on seaport terminals, which was already high due to the peak in cargo demand induced by the COVID-19 pandemic.”

The Big Picture: Like the blockage of the Suez Canal, the rerouting of vessels will affect some business more than others. “It’s too early to understand the overall impact, but it will impact the ability to complete construction jobs since contractors will have to wait longer for building materials and supplies to be shipped and delivered,” said Shaun Papperman, CCE, CCRA, CICP, director of order fulfillment at Baltimore Aircoil Company, Inc. (Jessup, MD). “We’re monitoring the number of ships that are late and watching the ports to see if they're running their usual backlog of ships that are anchored waiting to unload or if we start to see that bottleneck in certain areas. I advise that credit professionals look one or two tiers down their supply chain to understand what's being sourced and how these disruptions might impact them as it impacts their ability to service their customer.”

Longer routes also raise the cost of fuel. “As these attacks have gone on, markets have taken more and more notice, so crude prices did end the week higher than they’ve been for the last couple of days or so,” Colby Connelly, a senior analyst at Energy Intelligence, a Washington-based energy information company, told Al Jazeera. “Especially as these attacks don’t look like they’re going to stop until there’s a stronger effort to actually stop them.”

Although U.S. shippers have several ocean routes, European shippers are looking to transport goods by air as an alternative. “While the Freightos Air Index daily rates for China to N. Europe shipments had been declining since late November, the push to air this week has fueled air freight prices,” Judah Levine, head of research at Freightos told CNBC. “This week they’ve increased 13% from $3.95/kg to $4.45/kg since ocean carriers made widespread diversion announcements, possibly reflecting an increase in air cargo demand from ocean to air shifts.” Cargo prices have skyrocketed since the rerouting of vessels from the Red Sea. “With 158 vessels carrying approximately $105 billion in ocean freight being diverted away from the Red Sea amid the risk of continuing Houthis’ attacks, cargo prices are soaring,” reads a CNBC article. 

Longer routes will raise fuel prices, insurance costs and payrolls, said Dev Strischek, principal at Devon Risk Advisory Group, LLC (Atlanta, GA). “Expect significant interruption to perishable and seasonal goods as well as more interest in nearby suppliers and manufacturers from Mexico, Canada and other sources not dependent upon the Suez Canal,” Strischek said. “Watch out for slowdowns through the Panama Canal because of the drought that has reduced the amount of water available to operate the Panama Canal locks.”

As a credit professional, you want to figure out which one of your customers could potentially be involved and reach out to them. “Have an open conversation about what the effects are, how your customers are handling it and what their concerns are,” said Kevin Chandler, CCE, director of financial services at Zachry Industrial, Inc. (San Antonio, TX). “In turn, you want to understand how it affects your company. If you are insured, does the insurance cover acts of war and or terrorism? Some insurances exclude acts of war or terrorism in some cases. If you can, avoid that kind of area altogether to minimize risk.”

What’s Next: On Dec. 26, the United States said it was launching a multinational operation to protect commerce in the Red Sea from Iran-backed Yemeni militants. That same day, the Navy destroyer Laboon and other U.S. assets shot down more than a dozen drones and missiles in the Red Sea, “just days after the ship took down four unmanned aerial vehicles in the same waters,” reads a NavyTimes article. 

Denmark’s Maersk is preparing to resume shipping operations in the Red Sea and the Gulf of Aden, the company said on Sunday, “citing the deployment of a U.S.-led military operation designed to ensure the safety of commerce in the area,” reads a CNBC article. “The shipping giant paused sending vessels through the Bab el-Mandeb strait earlier in December due to attacks against its ships. That rendered the Suez Canal, which is key to global commerce, unusable for most routes.”

General liability insurance, also known as business liability insurance, is pivotal in the construction world as it helps cover claims of bodily injury or property damage. But that may change in Illinois as the state’s Supreme Court held commercial general liability (CGL) policies can provide coverage in Illinois for damage caused by inadvertent construction defects. 

In Acuity, a Mutual Insurance Co. v. M/I Homes of Chicago LLC, the Illinois Supreme Court held that homebuilder M/I Homes may be covered against allegations that its subcontractors caused water damage “by using defective materials, conducting faulty workmanship and failing to comply with applicable building codes.” Accordingly, the Supreme Court held that property damage that results from inadvertent faulty work can be caused by an “accident” and therefore constitutes an “occurrence” for purposes of the initial grant of coverage under the insuring agreement.

Here’s What Happened: The Supreme Court dismissed the notion that there could be no property damage, as defined by the policy, unless the underlying complaint alleged damage to something beyond the townhomes that M/I Homes constructed. Although faulty workmanship is not considered property damage, the court held that under the language of a CGL policy, “resulting water damage to the interior of the completed units plainly constitutes physical injury to tangible property.”

The court also rejected the insurance company’s argument that “damage to any portion of the completed project caused by faulty workmanship can never be caused by an accident because it is always the natural and probable risk of doing business.” The court held that “the unintended and unexpected harm caused by negligent conduct” is an “accident” and therefore an “occurrence” that can be insured under a CGL policy. The court did not decide whether Acuity had a duty to defend M/I Homes in the underlying suit. Instead, the court remanded the case to the trial court to consider whether certain exclusions in the CGL policy may preclude the duty to defend.

What they're saying: “This decision reverses a previous tendency among Illinois courts to find no coverage for faulty workmanship either because it is inherently not accidental or because there was no damage beyond the insured defendant’s scope of work,” reads a Barnes & Thornburg article.

Why It Matters: A material supplier or a subcontractor might say the change doesn’t affect them since it's the GC’s insurance. But credit professionals should be worried about it because if the GC transfers insurance identity to the subcontractor, then it becomes their problem. In a process called transfer of indemnity, owners and general contractors (GC) mitigate risk by transferring the risk of liability down the ladder of supply, meaning that the other party's insurance will cover it if the GC's insurance policy won't be covered. 

“These problems are being forced upon them by language in contracts, subcontracts and purchase orders to name a few,” said Chris Ring of NACM Secured Transaction Services (STS). “In order to mitigate their risk, the GC is going to try to have the indemnity transferred down to other parties and indemnify them for any liability purposes on a construction project from the owner to the GC, to the subcontractors and then down to the material suppliers.”

Once a statutory change happens in one state, it’s not uncommon for other states to follow suit. “It’s good news for a material supplier because it grants coverage for someone else’s defect or fault,” said Ty Knox, ICCE, director of credit and risk at EFCO Corp. (Des Moines, IA). “The bad news is that if you are a heavy user of commercial general liability insurance, the premiums are going to reflect this additional risk because it is something that they historically didn’t cover. So, they're going to have to underwrite for or prepare for that moving forward with the Illinois High Court ruling. I can see this affecting material suppliers and the construction industry with increased premiums when we're buying commercial general liability policies.”

From a legal standpoint, the decision is only the beginning. “Essentially, inadvertent construction defects fall under the initial grant of coverage subject to possible exclusions which is not yet decided,” a legal correspondent shared.

In a year marked by innovation, resilience and dynamic shifts in the B2B credit profession, the National Association of Credit Management (NACM) has been at the forefront, delivering a wealth of insightful content and expertise. As we bid farewell to 2023, it's time to reflect on the profound impact of NACM's contributions—articles, webinars, podcasts, white papers and more—that have guided credit managers through challenges, uncovered opportunities and set the pace for success. Join us on a journey through the pivotal moments and top-notch insights from 2023.

Emerging Credit Leaders Will Shape the Future of Business

In this episode of NACM’s Extra Credit podcast, we invited five emerging credit leaders to share their experiences, lessons learned and plans for the future. An emerging leader refers to an individual who is in the process of developing and displaying leadership qualities, often in the early stages of their career. Emerging leaders are recognized for their potential to drive positive change within their organizations. They may not hold formal leadership titles but are often identified by their actions and attitudes. Unlock your leadership potential by joining NACM's new Emerging Leaders Thought Discussion Group today!

Artificial Intelligence: A Powerful Tool of the Trade in B2B Credit

All forms of artificial intelligence (AI) will continue to change the future of finance. AI can help credit professionals eliminate administrative and repetitive tasks so they can direct their attention to strategic issues and challenges. In the Business Credit magazine article, Artificial Intelligence: A Powerful Tool of the Trade in B2B Credit, members identify the tasks best suited for automation through AI. Read more about AI’s impact on Credit Hold Releases and Holds on Accounts, Customer Collection Priority Queues, Demand Letters, Scorecards in Credit Applications and more in the September/October issue.

The State of Accounts Receivable Automation 2023

The B2B credit landscape is set to evolve, ushering in an era of smarter, more agile and data-informed credit operations. By integrating automated tools, credit departments can better serve their organizations, customers and stakeholders. Discover current technology trends and what the future may hold for the credit department in NACM’s white paper, The State of Accounts Receivable Automation 2023, researched and written in partnership with BlackLine. BlackLine’s cloud-based solutions help companies move to modern accounting by unifying data and processes, automating repetitive work, and driving accountability through visibility.

Member Spotlight: Education Inspires

As a credit professional in the banking industry for more than 25 years, David Dedrick, CCE, director of commercial lending at Kohler Credit Union (Sheboygan, WI) decided to enroll in the NACM Graduate School of Credit and Management (GSCFM) to provide himself with a well-rounded knowledge base of credit from a banking perspective and from the trade side. “Between the other students and professors, I created connections that'll last my entire career,” Dedrick said. “After completing grad school, I decided to sit for the Certified Credit Executive (CCE) exam. Getting back into the study routine was a gradual process, but the wonderful staff at NACM helped me through every step of the way—and the lessons learned are permanent tools I refer to in my toolbox as my career continues.” Read the full member spotlight here. 

What Credit Professionals Can Learn from Social Media Influencers

In the modern-day world of social media platforms, influencers have become some of the most prominent figures within the marketing and advertising industries. It may be difficult to think that there are any similarities between social media influencers and credit professionals, but some influencer characteristics are key to becoming a leader in the B2B credit industry. Learn how to adopt an influencer mindset in order to get a seat at the table with upper management and listen to this episode of Extra Credit now!

When Management Objects to Filing a Mechanic’s Lien

Filing a mechanic’s lien can be a challenging process. It’s a way to try to secure your rights and receivables and allows flexibility to extend credit you might not typically extend. Several benefits come out of filing a mechanic’s lien. Firstly, it helps with legal protection and ensures payment from the customer. Mechanic’s liens also benefit subcontractors, customers, suppliers and all parties involved in the project—and can be a great way to maintain your customer relationships. Read the full eNews story here.

Take Your Game to the Next Level—Using Emotional Intelligence to Advance Your Career

You can find many articles about how EQ is more important than IQ in almost every role, and many times more important in leadership roles. Why? For one, emotions don’t stay home just because we head to work. Understanding and managing your emotions is the only way to get the most from each day while keeping a focus on where you want to go in your career. Although emotional intelligence seems to come naturally to some, our brain’s plasticity means we can increase our emotional intelligence if we’re willing to work at it. Watch the on-demand version of this webinar.  

Capturing Real Time Cash Flow and Financial Distress Problems

When Barron’s wrote about NACM’s CMI, they said, “in an age of information overload, some would argue that the last thing we need is another economic indicator. But, given the dismal track record of some dismal scientists calling market trends, there probably can never be too much data on the economy. The CMI captures real time cash flows and financial distress problems that companies have with their customers.” The CMI is a one-of-a-kind economic forecasting tool. Sign up to receive reminders to participate so that you can contribute to a collective pool of data that helps paint a clearer picture of industry trends, challenges and opportunities.

Unlocking Financial Trust: The Role of Bank References in Establishing Creditworthiness

Credit managers are the professional investigators of the financial world. Just like detectives, they meticulously gather data from various sources, such as credit reports, financial statements, and bank references, piecing together the financial puzzle. Download NACM’s white paper in partnership with Thomson Reuters Confirmation, Unlocking Financial Trust: The Role of Bank References in Establishing Creditworthiness, to learn how bank references are imperative in the credit investigation.

Position Yourself as a Strategic Leader in Credit

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. Yet their importance is not always recognized, often overlooked for promotions and not generally seen as someone who can play a strategic role. But in order to get recognition from the C-Suite, creditors must adopt a strategic mindset and start making decisions that shape the company’s vision. NACM members can read the full story in the February 2023 issue of Business Credit magazine. 

Member Spotlight: Gain Confidence with Certifications

Misty Menashe, CBA, credit supervisor at LaCrosse Footwear, Inc. (Portland, OR) recently earned her Credit Business Associate (CBA) to better introduce herself to her internal teams. “I was promoted to a supervisor role when all our departments were working from home and my interactions with our sales team, customer service team and other managers is limited to emails and Teams meetings,” she said. “The designation in my signature shows that I'm an active learner, engaged in my profession and have expertise in the subject.” Read the full member spotlight here. 

Dashboards, Duct Tape, Data and Beyond

Our credit department has a dashboard, now what? SRS Distribution’s Chris Arrington, CCE, and Charles Edwards, Jr., CCE, explored dashboard and data analysis best practices in this webinar. They also discussed ideas for continued development of dashboards and how to establish a culture of innovation and continuous improvement in their on-demand, Credit Congress Encore Presentation.