eNews June 21, 2018

NACM Rolls Out New, Free Business Credit App

Tired of waiting in line for your turn to read Business Credit magazine? Don’t let management hoard the office’s lone magazine copy. Be proactive and wait no longer by downloading the new, free Business Credit app from the National Association of Credit Management.

The new Business Credit app has been live for a couple weeks, following its official rollout during the General Session at the 122nd annual Credit Congress in Phoenix earlier this month. The app is designed for convenience and gives readers easier access to NACM content.

“First and foremost, the app version of Business Credit magazine puts the information at my fingertips. It’s simply more accessible,” said Jay Snyder, CCE, ICCE, NACM-National Board of Directors immediate past chair. But, it’s not just the magazine articles that have made their way into the electronic universe. NACM’s weekly newsletter (eNews), FCIB’s Week in Review, blogs and the daily Strategic Global Intelligence Briefs by NACM Economist Chris Kuehl, Ph.D. are also available on your mobile and tablet.

Some of you may even be reading this very article on the app. Thank you for taking the time to download it to stay up to date and informed on commercial credit topics. “I spend a lot of time on the road, in airports, etc. The app gives me the flexibility to read and catch up on industry news at my convenience,” said Kenny Wine, CCE, NACM-National chairman of the board. However, Wine is still “old school” and likes the idea of having a magazine or newspaper in his hands.

“I think I will be able to read more of the magazine quicker now, because typically, I leave it on my desk and forget to take it with me on some of my trips out of town,” said Wine. Snyder said without question he will use the app more than the paper copy of the magazine.

“I can read the magazine and scroll back several issues if I want to reread something,” added Wine. You can now carry hundreds of articles with you at one time in your pocket rather than worry about exceeding the carry-on or checked bag weight limit on flights with back issues of the magazine.

“I really like it and think NACM has done a great job putting this product out for the members,” concluded Wine.

The app is available for Android users through Google Play and in the App Store for Apple products by searching for Business Credit.

—Michael Miller, managing editor

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Construction Sector Needs Tech to Thrive

“I prefer the old-fashioned way.” We’ve all said this about something, whether we’re referring to face-to-face conversations versus texting or handwriting deposit slips versus completing deposits digitally. Some credit managers will say technology is evolving too quickly, many of whom work in the construction industry and refuse to abandon their manual recordkeeping processes.

The old-fashioned way may never completely disappear, but management consultation experts are encouraging the construction sector to embrace the latest tech wave in order to thrive in the 21st century business world. New York-based McKinsey & Company global management consulting is one of the latest firms to report on technology’s advancements, its importance to the industry and how digital data collection lowers cost and risk.

Last year, the consultation firm published an article, Construction: The Next Great Tech Transformation, that provided commentary on the construction sector’s start-to-finish financial processes during projects. According to the report, under-digitalization and fragmentation were the most prevalent and foreseeable detriments to the construction sector—a significant number of companies reported they still use older methods, including for data collection. The article stated old technology, or lack thereof, amounted to a decline in productivity and the construction workforce as well as housing demands outweighing supply.

Trackvia software company performed an in-depth analysis of manual versus digital data collection methods earlier this year. The survey and report titled, Manual Processes in Construction and Engineering, delved into technological methods in construction and engineering. One of the most notable findings was nearly half of the 500 managers and construction and engineering executives surveyed said they still use manual data entry for critical data. Although comfortable with the manual process, employees are then finding themselves redoing work or purchasing or replacing supplies, materials and/or equipment that may or may not have been necessary.

In addition to saving money, the survey concluded respondents were also saving time, as respondents reported spending 1,300 hours per year, at minimum, to assemble data manually. More than half of respondents (52%) said digitizing data collection may alleviate such issues.

“Foremost among [the stagnation] is the lack of technology investment by construction firms,” wrote Michael Marks, the author of the McKinsey & Company article. “In 2016, 70% of construction firms dedicated 1% or less of their revenue to technology, [as cited in a report by JBKnowledge technology solutions for construction and insurance]. The lack of technology is also pushing up construction prices worldwide, even amid falling commodity prices.”

However, numerous forecasts this year are predicting a 40% increase in construction technology startup funding between 2014 and 2017. For example, in January 2018, Bloomberg reported SoftBank Group Corp.’s $865-million investment in construction technology startup Katerra, Inc. The article included data from CB insights research firm, which reported this investment as “the sixth biggest for a U.S. venture-backed company” since January 2017. The company is expected to use funds to complete projects faster and cheaper from the design through construction phases.

Marks suggested the construction sector should take a page from the book of the automobile and electronics industries, where companies are successfully integrating technology. This requires developing a sector-specific model, “bringing design, manufacturing, material sourcing and construction together into one streamlined system.”

—Andrew Michaels, editorial associate

FCIB Has the Best Tools for Global Business

FCIB Worldwide Credit Reports

FCIB Credit Reports go beyond the numbers, providing in-depth personal and operational information about your customers and prospects that is vetted, validated and verified. FCIB adds value by using multiple providers—in fact, the best provider, on-the-ground in a region. FCIB checks to see that the subject is who they say they are. The more you know, the better your credit decision will be.

PRS Country Reports

PRS Country Reports help you manage the risk from global market uncertainty by digging beyond the headlines to give you a comprehensive, fact-based view of the economic and political risk of doing business in a particular country. Each report provides 18-month and five-year forecasts for turmoil, investment, transfer and export risk in 100 countries, plus in-depth coverage of relevant political and country risk events, country conditions and independently back-tested methodology sourced by the IMF.

Political Risk Newsletter

The “best in class” monthly Political Risk Newsletter, written by the PRS Group and available to members through FCIB, provides concise, easy-to-digest briefs on up to 10 countries, with additional recaps updating prior month’s reports. Each month’s Political and Economic Forecasts Table covers 100 countries, with 18-month and five-year forecasts for KPIs, such as turmoil, financial transfer and export market risk. You’ll also find rating changes, providing an excellent method of tracking ratings and risk, for the countries you’re exporting to.

FCIB and NACM members receive a 10% discount on PRS Country Reports and the Political Risk Newsletter.

Staying on Top of Accounts Payable Invoice Inquiries

Assessing customer payments is a pretty consistent task within the accounts payable (AP) department. Is a customer up to date on payments? If they’re behind, how many days are payments past due? Some professionals might say answering these questions isn’t a huge concern from the customer’s perspective, but supplier self-service solution InvoiceInfo’s 3rd Annual Accounts Payable Customer Service Survey offered up some surprising information. Released on June 15, the survey found the most common question vendors had for AP was, “Has my invoice been paid?” followed by, “When will my invoice be paid?”

InvoiceInfo, based in Atlanta, Georgia, incorporated responses from more than 150 businesses in the U.S. and analyzed AP customer service processes and challenges. After reporting thousands of vendor inquiries funneling into businesses’ AP departments each month, more than a quarter of respondents (31%) said AP customer service handles businesses’ questions via email—a 12% increase over the 2016 survey results. The second-most popular question-answering method among AP staff was rotating who answers customers’ questions (23%). This method drastically shifted from 2016, when 46% of respondents said they took turns answering inquiries.

Voicemail boxes, live chat, managerial voicemail/email oversight and vendor self-service portals were the least-used options, the study noted. Respondents were split between the use of policies or several-level agreements detailing how long they take to respond to inquiries. Nearly half of participating businesses reported they respond to an inquiry within one day after it is received, while 29% said they respond within two days. Only 5% said they respond within one to four hours, and 9% respond within three days.

So, is there a solution to invoice payment notifications? According to The Edge, a news publication in Malaysia and Singapore, “the connectivity between business processes and financial services” is the link that will help customers know if and when invoices are paid.

“It is important [for a company] to make sure it has full visibility of all of its liabilities and obligations, and make sure it is making payments and receiving them on time,” Kerry Agiasotis, managing director and executive vice president of Sage Asia Pacific, said in the article. “Once those things become connected, the business owner will no longer have to check his bank accounts to see if the invoice has been paid.”

The InvoiceInfo survey stated that a quarter of respondents have adopted a vendor self-service portal to track payment status, up 17.5% from 2017. Furthermore, 83% of those who use a portal are companies with revenue greater than $1 billion. The top reasons for using a portal were to reduce phone calls and emails, allow AP staff to handle more productive tasks and provide 24/7 customer service.

Billing and invoicing software has replaced former payment methods, such as paper checks, in some companies over the past two years. An example is Inspyrus Total Pay, which was released by invoice automation company Inspyrus in May and allows vendors to process and pay invoices in one portal rather than separately via invoice management and supplier payment.

“We know that a supplier needs to get paid on a certain date,” Inspyrus Founder and CEO Nilay Banker told PYMNTS. “The customer doesn’t need to worry about it at all. All the customer has to deal with is making funds available. The solution is going to optimize payment methods. As far as the customer is concerned, everything is paid electronically.” Once complete, customers will know if and when their invoices were paid.

—Andrew Michaels, editorial associate

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Proving Intent on Credit Applications in the Age of the Internet

The transition from paper and snail mail to technology and the internet has restructured most industries; the credit industry is no exception. While many professionals are becoming more comfortable with this transition, legalities are becoming more specific and tangible, meaning credit professionals need to not only be scrupulous but also savvy when drafting online credit applications. With many credit managers working with customers who are far from their offices, understanding the pitfalls associated with electronic credit applications is imperative.

Having a witness verify a signature is simple in person but not as much when done online. In order to prove intent, credit managers need to craft applications and terms and conditions that remove any gray areas. Taking this necessary precaution prepares credit managers for possible push backs from customers.

“If everything is good and your customer has signed off and paid, then everything is good and everything is fine. But there may be a time in the future when you’re going to have a dispute you aren’t going to be able to resolve, and you’re going to have to sue your customer to collect your claim,” said Bruce Nathan, Esq., during an educational session at Credit Congress earlier this month. “If you can’t prove your customer signed or agreed to the underlying contract that gave rise to that debt—maybe in a purchase order with terms and conditions—the problem is if that contract cannot be proven in court ... then [the contract] is worthless to you and you’re not going to receive your claim.”

Proving intent on the part of the customer can be dicey through virtual signatures, but credit managers can prove intent using several methods. Nathan pointed toward terms and conditions, proving intent by requiring the signatory to read over terms and conditions before they are able to check a box or provide an e-signature. That way, if a customer pushes back, the manager can refer them to the terms and conditions and how the customer was electronically required to read them before signing.

Language is key. Muddy wording leads to confusion and more liability on the part of the credit manager. As an example, Nathan quotes HSBC Bank’s credit application, which states, “When I check this box, I acknowledge that this authorization shall be deemed your signature for all legal purposes, and it will have the same legal effect as if it were your handwritten signature.” In this statement, the purpose of an e-signature is clear and free of confusion.

Credit managers can get creative when proving intent, as long as terms and conditions are free of ambiguity. While pen and paper is still a concrete method of proving intent, the Uniform Electronic Transactions Act (UETA) deems electronic documents are no less enforceable than physical papers. Managers are required to adapt and understand the UETA, otherwise, they may face more legal trouble than it is worth.

“You’re getting pressure from your customers to [move online], you’re getting pressure internally to do that,” Nathan said. “And the key challenge is to make this move without creating risk: creating valid, enforceable and legally binding contracts through online channels without pen-and-paper signatures.”

—Christie Citranglo, editorial associate

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Suppliers Waiting Longer for Payment

The construction industry across the globe is no stranger to payment problems. According to United Kingdom-based business finance marketplace Funding Options, the payment delay crisis is worsening for small construction firms.

Suppliers are waiting 42 days for invoices to be paid on average, which is up from 40 days five years ago, said Funding Options. Construction giant Carillion came under fire during the first half of 2018 as the main target for payment issues in the industry. “Construction businesses are extending delays in paying suppliers which can threaten the whole supply chain’s financial stability, putting jobs at risk and threatening the [U.K.] government’s ambitious housebuilding targets,” said an article from LondonlovesBusiness on the topic.

Some smaller firms agreed to 120 days for payment from Carillion, but unfortunately, will likely never see payment or will only be paid pennies on the pound following the collapse in January.

Delays in payment have caused many construction firms to become insolvent, including more than 2,600 in 2016-2017, up 8% from the previous year, noted Funding Options. “A single late payment can be an issue even for larger and more successful firms, and worsening delays could create more insolvencies,” stated Funding Options CEO Conrad Ford. “Construction businesses have high overheads and labour costs, and many cannot afford to wait for payment for lengthy periods of time.”

In a recent webinar, How Not to Extend Supplier Payment Terms, from KPMG and supply chain solutions firm Taulia, it was stated there are many challenges to term extensions on both the buyer and supplier side.

There are several term extension traps buyers can fall into that can hurt their relationship with the supplier and even corrode the entire supply chain. Among them is the “Dear Supplier” letter. Often times, suppliers will contact the buyer after receiving the letter to extend terms but will contact the incorrect person—someone in accounts payable or a plant manager—rather than the people pushing the longer terms.

Other pitfalls include the “all stick, no carrot” method, a one size fits all approach and no mindset shift. If not careful, buyers can cause suppliers to push back and start litigation. With the “stick and carrot” approach, all the pain is pushed onto the supplier, who is now getting paid later. Buyers will often extend terms but give suppliers the flexibility to be paid sooner with an early pay program, i.e., the carrot.

To help determine term extensions, buyers must segment suppliers into different groups, according to the webinar. For example, troubled suppliers are those who will go out of business if terms are extended, or some suppliers can’t have terms extended due to a contract.

Ultimately, the purpose is to make it a “win-win for the buyer and supplier,” said Brian Murphy, director, procurement advisory, with KPMG and Taulia Vice President of Sales Kjel Christensen.

—Michael Miller, managing editor

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