January 11, 2024

All credit management responsibilities stem from one essential skill—the ability to form strong relationships. Business relationships have many layers, all of which credit managers must master. In global trade, credit professionals should try to understand the cultural differences of their customers overseas to ensure a successful relationship.

From each region’s business style to etiquette—all components are important to consider when working with customers from a different background. The first and foremost step you must take is doing your due diligence on the customer’s country. For example, some countries won’t use a handshake to formally greet others but instead they may bow when meeting for the first time. It can come off as offensive to others if you are not aware of the basic formalities of another country.

“Kissing on the cheek in Latin America can be off-putting to Americans when they do that, but it is very common in Latin countries,” said Darrell Horton, ICCE, director of revenue and credit at AGS LLC (Las Vegas, NV). “It’s crucial to know what to expect when you walk into another country and learn when and if to give those formalities back. Knowing someone that has experienced a country’s culture and is willing to explain it to you is beneficial as well.”

In Latin American countries, businesses have a hierarchical structure, with decisions made from a top-down approach. Developing trust and gaining respect in the business environment depends on building and maintaining good relationships. This often includes lots of socializing and meetings. “Our Latin American counterparts love facetime or face-to-face interaction,” added Horton. “Having intense business meetings over dinner and drinks is very common. By the time we are winding down for the day in the U.S., they’re just getting started. In some Latin countries, they’ll start their days later around 11 a.m. and work until maybe 9 or 10 p.m. so setting a meeting for 8 a.m. may not make them so happy.”

Understanding culture is important from a formality and business standpoint. Countries in the Middle East, such as Kuwait, run business from a more family-oriented perspective. “It’s a corporate structure, but the hierarchy is still there,” explained Ezzat Annous, CICP, senior SME relationship manager at BLOM BANK (Lebanon). “There are also names that translate differently in English. For example, some people do not have last names, as their last name will be their father’s first name. So, when you enter the meeting, you won’t call someone Mr. and then their last name. In Lebanon, you must respect the last names and their significance for the client-facing approach.”

From an economic perspective, sanctions have had an impact on customer payments in Lebanon. Within recent years, the economic meltdown in Lebanon led to having five currency rates, like Argentina. “You need to address these types of issues early on for a client who is not familiar with having several currency rates,” Annous said. “It was difficult for us to work with those who were not familiar. The whole banking system in Lebanon has been on its knees regarding sanctions and scrutiny has gotten tighter over the past four to five years which impacts ability to pay.”

Language proficiency is another key concept when working alongside counterparts from different regions. Although translators can help, language and communication have an impact on the efficiency of your negotiation skills. “Language is an example of visible aspect of culture,” said Anni Lautaoja, CICP, credit risk analyst at UPM-Kymmene Corporation (Helsinki, Finland). “Another important aspect in my culture is punctuality. But it is acknowledged that in certain cultures, there might be different norms around timeliness and enforcing punctuality can even be perceived as inconsiderate. To accommodate these cultural differences, I have scheduled longer meeting times to allow participants to join according to their business customs.”

As you experience more cultural differences in business, remember that all relationships are built over time—so implementing strong communication and respecting different customs and cultures are vital to business success. It is imperative to do your research on the countries you intend to conduct business with for seamless interactions and to get paid.

Here are examples of cultural facts to be aware of when doing business in five popular countries for trade, according to the World Trade REF:

China

Business deals in China tend to move more slowly than Westerners may be accustomed to. Formal introductions from an inside contact are usually required to even begin a working relationship; due to the political makeup of the People's Republic of China, bureaucracy typically delays most business transactions.

For a Chinese businessperson, saying “no” could result in losing face or causing embarrassment to their employer and family. Chinese people typically send intermediaries to give bad news, as they want to soften the blow to preserve the relationship, and do not want to risk losing face.

Direct eye contact is generally favored in a business setting, but it is a show of respect to lower one's head for an elder. Visitors should never pat, slap or put arms around a Chinese contact. Body posture should remain formal, yet calm and relaxed, to display a sense of self-control and attentiveness.

Italy

In Italy, appearance is everything. The way you dress, your manners and even the look of your presentation materials contribute to your image and can make a huge difference in your ability to forge relationships and secure business deals.

Italian business communities tend to be very closely knit, and Italians prefer to do business with people they know and trust, with whom they have a long history. The initial meeting or round of meetings will be more about getting to know you than making any serious business decisions. Be prepared to wait and never communicate a sense of urgency, as this is usually taken as a sign of weakness, which can damage your credibility.

Never suggest Italians from Northern, Central and Southern Italy are the same. Each of these regions has a distinct cuisine and culture. To Italians, there is a large difference between regions, and many Italians have passionate opinions about which region is preferable. As a foreigner, it's best to avoid this conversation altogether.

Mexico

In Mexico, most are very class-conscious. This affects Mexican business culture, as foreign visitors will be judged on their own social and economic statuses, which Mexicans will gauge by the visitor's choice of hotel, mode of transportation and appearance.

Family and friends are the most important things to most Mexicans, as they are at the center of the social structure. This value is also found in the business culture, and Mexicans must know a person before doing business with him or her.

Physical contact in the Mexican workplace occurs frequently, and the personal space between others is closer than many visitors may be used to. Arriving thirty minutes after the stated time for an appointment is considered on time for locals, but visitors should always arrive at the stated time.

Germany

German businesspeople operate in a structured, orderly fashion that places high value on professionalism and rigid separation between business and personal life. German businesspeople are detail-oriented, technically prepared and straightforward communicators.

Germans like to get straight down to business with little small talk. They don't need a personal relationship to do business, and they are mostly interested in your credentials and how long your business has been operating.

Wait and follow your German counterpart’s example before asking about or discussing personal subjects like personal income, marital status, or political and religious opinions. In the meantime, Germans' home regions, food, art or sports teams are great topics that may appeal to your counterpart’s sense of national loyalty.

India

The most common greeting in India involves pressing two hands together at chest level similarly to a Christian prayer position along with a slight bow of the head and the word namaste, which roughly translates as I bow to you.

Don't expect your Indian counterparts to move quickly into negotiations. Instead, expect several rounds of meetings, as well as opportunities for after-work socializing as your counterparts get to know you.

As meetings begin, Indians will often ask personal questions about your family and life at home; inquiring about someone's family is seen as a friendly gesture in India.

Consider joining FCIB to have unlimited members only access to the World Trade Ref, which also features information on travel security and restrictions in place for the specific country.

Housing starts rose to a 1-½-year high at 14.8% in November. According to a mid-December report from the U.S. Department of Commerce, permits for future construction of single-family housing in November increased to the highest level since May 2022.

A drop in mortgage rates in mid-December could provide a further boost to housing starts in the coming months as potential buyers are drawn back into the housing market. Despite the U.S. Federal Reserve signaling multiple rate cuts in 2024, the current average interest rate for a 30-year fixed mortgage is 7.04%, up 5 basis points over the last week. Greg McBride, Bankrate’s chief financial analyst, expects rates to fall gradually throughout the year, reaching 5.75% by the end of 2024. “Mortgage rates will spend the bulk of the year in the 6s, with movement below 6% confined to the back half of the year,” McBride told Bankrate. 

Why it matters: Increased housing starts can impact credit professionals as it signals economic growth, potentially reducing credit risks and improving borrowers’ ability to fulfill obligations. This means suppliers of construction material such as lumber, steel, concrete and windows will be in high demand. Requests for extending credit limits may also rise as construction projects increase.

What credit managers are saying: “We are definitely seeing the need to stretch existing credit limits when purchasing from our customers increases for new housing projects,” said Brett Hanft, CBA, credit manager at American International Forest Products, LLC (Portland, OR). “While we continue to receive more credit applications for new customers than we expect for this time of year, I don’t think they necessarily correlate to businesses focused on new single-family housing.”

Even if you haven’t seen an increase in customers or requests for credit line extensions, it’s important to prepare for when demand is high, and supply is limited as a material supplier. “Just like many other businesses in the industry, we are always looking for additional mills who have the ability to produce products we need to purchase so we can adequately fulfill the needs of our customers,” Hanft said. “While we have a tenured and seasoned administrative staff, we are always looking to add to our team as the need arises.”

A slight fluctuation in mortgage rates can frequently determine whether a project proceeds immediately, gets deferred to the next year or possibly doesn't materialize. “As payments decelerate due to delayed funding from projects and general contractors, suppliers confront a dilemma,” said Sam Smith, senior corporate and collections manager at Crescent Electric Supply Company (Hazel Green, WI). “Should we accommodate the customer's request for an increased credit line while their Days Sales Outstanding (DSO) rises, or maintain the status quo? Each situation presents its unique challenges and solutions. We’ve established regional distribution centers across the country, enhancing our ability to meet customer needs through improved inventory management and timely deliveries. With increased capacity and expertise, we are well-positioned to take on additional business.”

Yes, but: According to Smith, interest rates are not the sole factor shaping the housing market. Other influencing factors include:

• Employment rates
• Wage growth in relation to inflation
• Consumer confidence
• Availability of existing homes for sale
• Existence of open lots suitable for construction

“We're personally not seeing any effect from the increase in housing starts, but we've been pretty busy for the last couple years,” said Edward Olewnik, CCE, senior manager of credit services at CertainTeed LLC (Malvern, PA). “It may take some time for things to happen because by the time they plan out a site and they start building, it could take six months to a year before we actually see activity on our end.”

Mike Hill, CCE, NACM Board director and director of credit at MiTek USA, Inc. (Chesterfield, MO) whose company does home and residential construction remained in good standing for 2023 when it came to construction projects. “While we have not started seeing the positive impact yet, we are counting on it since there is usually a delay of a few months,” Hill said. “As for personnel resources, we have hired more people. However, we are trying to attack that area more in terms of automation and increased efficiency. I believe the latest increase in housing starts possibly means more than previous jumps. Perhaps it indicates that we will avoid a serious recession and just go through more of a market correction.”

The bottom line: High home prices and low inventory continue to challenge first-time buyers. Credit professionals must balance demand with the risks of extending credit limits.

What’s next: Credit professionals should look at existing customers needing larger credit lines or new customers coming on board because of the large amount of building that's going on, said Chris Ring of NACM’s Secured Transaction Services (STS). “In addition to considering the ability to fulfill orders, credit professionals should also assess whether they have the necessary warehouse capacity and credit staff to handle an increase in demand.”

Leadership is not just a title; it's a commitment to steering the course of an industry that is ever evolving. The National Association of Credit Management (NACM) proudly introduces its newly appointed chair, a seasoned professional with a proven track record of excellence … JoAnn Malz, CCE, ICCE, director of credit, collections and billing at The Imagine Group LLC (Shakopee, MN). As a dedicated credit professional and NACM member, Malz has big plans and a strategic vision for the future of the industry and our association.

Q: What inspired you to pursue a career in B2B credit management?

A: I love being able to problem solve and fix things for internal and external customers. In credit, no two days are alike and there are always challenges and opportunities to keep learning and growing. Like many others in the credit profession, I landed into credit and fell in love with it. My entire career of 38 years has been in the credit and collections field spanning different industries such as business equipment leasing, agriculture, manufacturing, dental distribution, printing and visual communications. I have been fortunate to work for companies that invested in me and rewarded me with fulfilling career growth. 

Q: What attracted you to become part of the NACM family?

A: The entire NACM National organization, FCIB and all NACM affiliates, are some of the most professional and dedicated people I have met in my lifetime. They live and breathe their purpose of serving members and always go the extra mile to deliver. I became a NACM member back in 1987 as encouraged by one of our team leaders who was very active in NACM North Central. For me, it was the education aspect of NACM that attracted me to membership and active participation. You just don’t learn how to manage credit in secondary education programs. But NACM, FCIB and NACM affiliates provide members with what they need to learn about global and domestic credit and collections. If you need a wider network (which we all do), join NACM. It is a life changer!

Q: What inspired you to pursue a leadership role as National Chair for NACM?

A: NACM is responsible for my career growth, and I wanted to give back to the organization. I am passionate about NACM and couldn’t think of any better way to actively demonstrate that passion than by pursuing a leadership role. My career is in its final chapter. At NACM, we all feel so strongly about ensuring the entire organization is poised and ready for the generations now and those to come. I wanted to be part of that generational transformation.  

Q: Can you share a defining moment or experience from your career that significantly shaped your leadership style?

A: I have to say it dates to my Cargill days. They were phenomenal in providing training to its leaders, especially females. I was leading a team shortly out of college with zero training and made tons of mistakes. Thankfully, my team was patient with me as I learned and grew into the leader they needed. I was never perfect, but I was always willing to work to improve and add depth to my leadership skills. We had so much to learn from each other and embraced the high-performance team methodology as we worked towards becoming a self-directed team. A few concepts stuck with me forever as the primary principles I work under, one being there is no single right answer to any challenge or any single way to effectively manage a team. 

Q: What advice would you offer to emerging credit leaders?

A: Engage yourselves with NACM and get involved in its education, resource offerings, industry and specialty groups, and network with other members. The credit industry is never boring, nor does it remain static. Businesses will always need credit leaders who can confidently assess risk and apply business judgment to manage risks. Credit has been a wonderful and fulfilling career for me. When you are in the credit organization of a company, you learn everything there is to know about that company and your customers, which makes you an invaluable team member and business partner. It provides a great foundation for role expansion and career growth.

Q: Are there any mentors or role models who have influenced your career path?

A: I have so many mentors or role models who have helped me through challenges and helped me to personally grow and become self-aware. But I’d like to think that everyone I encounter every day is somehow responsible for shaping me whether it is from simple support to challenging me to think in different ways to coping with conflict. 

Q: What are your plans for NACM in 2024?

A: I'm so excited for the future of NACM. In 2024, NACM National and our affiliates will be focused on positioning NACM for growth and transformation for future generations so that we remain the strong and viable organization we are today and to remain at the forefront of our profession. We will find new ways to reach our members and prospects. We will continue to be the go-to organization for the credit profession globally.

NACM members can learn more in the January issue of Business Credit magazine.

It looks like Congress made a New Year's Resolution of its own: getting its homework done on time!

Congress appears to have reached a tentative deal to keep the government open and fund it through Sept. 30. This is in stark contrast to the last two times (October and November of last year) in which a last-minute extension was passed with little notice and less than a day to spare.

So, the question is: what changed?

First, negotiations quietly began between Senate leadership last month. Previously, Minority Leader Mitch McConnell had been giving the Republican controlled House the reins in attempting to negotiate a deal that included more conservative priorities. As that approach has continued to fail and as we now enter the election year, McConnell taking over makes sense.

Second, as I’ve already alluded to, the looming elections tend to bring the parties together as they each try to avoid mistakes that voters are more likely to recall when they go to the polls. For example, even if we had shut down last year in October, if a bipartisan deal was reached in January this year, most voters would recall that Congress did its job, not the failure that occurred more than a year before they cast their ballots. That is far less likely to be the case if Congress shuts down the government this year.

Third, the sheer volume of bills that need to be passed this year demands that Congress step up and make some progress. Congress must pass a tax bill to be implemented before taxes are due in April. That’s because it is likely to include several retroactive provisions that businesses especially want to utilize. Also on the docket are the stalled Farm Bill and FAA Reauthorization, although most expect Congress to punt on the Farm Bill until next year.

Also in the forefront of Republican’s minds are the abysmal productivity statistics for the first year of the Republican-controlled House. In 2023 Congress passed just 34 bills into law, which is the lowest productivity in decades and less than half the number of bills that normally get passed under split control of the House, Senate, and Presidency. Of those, several were just the temporary government funding extensions passed to give Congress more time to get its work done. For those of us working in politics in DC, the year has felt unproductive, and it’s one part gratifying and one part depressing to see this reflected so clearly in the data.

Tax Bill Preview

While negotiators aren’t done writing the bill, Congress is expected to take up a moderately sized bipartisan tax package before the end of January. Specifically, Republicans are looking to once again make research and development costs deductible, as opposed to amortized as they are now. They’re also hoping to do the same for capital expenses. For Democrats, the increased Child Tax Credit of $3,000 for children ages six to 17 (up from $2,000) expired at the end of last year, and they are looking to have it retroactively renewed through 2025, when most of the Trump tax provisions expire, to give themselves more leverage during that debate.

The bottom line: Although these provisions don’t amount to what has historically been called a ‘fiscal cliff’, we are talking about more than $50 billion in tax cuts and incentives. This comes as welcome relief for most U.S. consumers and businesses who are still playing catch up from nearly a year of 6% or higher inflation, and it will likely have a net positive impact on the economy.

Of course, there is more than enough time for negotiations to break down and Congress to stall out, so we’ll just have to wait and see.