E-Credit News The Business Credit Management Association, Wisconsin Credit Association 15755 W Rogers Dr #200 PO Box 510157 New Berlin WI 53151-0157 The Business Credit Management Association, October 2010 Wisconsin Credit Association 262.827.2880

In This Issue

BCMA/WCA Member Updates & News

This month’s topics…

1. Credit App Processing: Inordinate Tension & Challenges 2. Are You In The Cloud Yet! A Webinar: "THE USE AND ABUSE OF DSO AS A 3. The Power of One: How a One-Man MEASURE OF CREDIT DEPARTMENT PERFORMANCE" Credit Department produces Monday October 25 9:00 AM – 10:00 AM CST Extraordinary Results This Webinar program examines and discusses: 4. The Perils of Credit Sales to Public  Why DSO is so popular as a tool for measuring Accounts: State, County & Municipal credit department performance  What factors affect DSO that are typically beyond Followed by the control of the credit and collection team Industry Group Meetings  Why DSO should not be used as the primary tool to evaluate an individual collector or an entire department’s performance

(Partners)  Alternative measures to DSO for evaluating the effectiveness of collection efforts By clicking on First National Merchant Solution's logo, you will be leaving this web site. Products and services accessed through  The strengths and weaknesses of these alternative this link are not provided or guaranteed by your Business Credit measurement tools Management Association (BCMA). First National Merchant Solutions may have a privacy policy that is different from your BCMA Affiliate. Please review First National Merchant Solutions  The proper or correct use of the DSO calculation. privacy policy. Download Registration BCMA Members MEMBER NEWS! *NACM Credit Services, Inc. Congratulations to Becky Feffer-Wolf from Continental Plastic Corp. Becky married Carl on July 17 in Lake Geneva WI. They *Pennsylvania Association of Credit Management honeymooned in Cancun, Mexico. We wish them a lifetime of happiness together! *Wisconsin Credit Association Congratulations to Renee Wagner, Schenck AccuRate, Inc. on her recent marriage to Ben Guerra Congratulations Renee!

Congratulations to Jill Westrich, CCP, CPC, CCE from Schneider National Inc on her recent promotion to Credit Manager. Well Done, Jill

2009-10 Board of Directors NEW ASSOCIATION MEMBERS Marie Tomlin- Boerner Executive Committee: Quality State Oil Co Inc Chairperson Brenda Bomber Penny Keen CCP, CPC WS Packaging Group Inc President Darryl Rowinski CCP, CPC NEW ASSOCIATION REPRESENTATIVES Counselor Adriana Sertich CCP, CPC Paul Knabe Director Emeritus Graybar Electric Company Inc Wayne Crosby, CCP, CPC Jim Colburn Directors: WISN-TV/A Hearst-Argyle Station Abe WalkingBear Sanchez Rita Simioni Davy J. Tyburski Kennicott Brothers Lyle Wallis Todd Rykal Rob Lawson Phillips Plastics Corporation Steve Kailas, Esq. Shawna McCleary Seth Dizard, Esq. Northern Factory Sales Stu Sturzl, CCP, CPC JoAnne Aerts CBA, CCP, CPC Lynn White Barry Elms Wausau Financial Systems Lisa Bird Crescent Electric Supply Co, Madison Contact Us Steven Bastin PNC Phone: 262/827-2880 John Larson, CCE, CPC, CCP Web: www.wcacredit.org Neenah Foundry Company Darryl Rowinski CCP, CPC X222 President & COO, NEW GROUP MEMBERS BUILDING/CONSTRUCTION MATERIAL INDUSTRY Chrys Gregoire X221 Administrative Support CREDIT GROUP Marie Tomlin- Boerner Dianna Rowinski X225 Quality State Oil Co Inc Groups (including ICE) Education CONSTRUCTION INDUSTRY CREDIT GROUP Linda Chernault X232 John Geurts Employment Services Central Corp Gail Venne, X223 INTERNATIONAL CREDIT EXECUTIVES GROUP Group Administrator Steven Bastin Lisa Schroeter X224 PNC Credit Reporting/Group Services/ Data Transmission John Duimstra Attorney Liaison Zero Zone Inc Lee Pearce, CCP, CPC X231 FOOD SERVICE SUPPLY HOSPITALITY INDUSTRY Recovery CREDIT GROUP Tim Hogren Sandi Chojnacki, CCP, CPC X228 Performance Food Group TPC Recovery

Barbara Martin X227 NEW GROUP REPRESENTATIVES Recovery NATIONAL RADIATOR, AIR CONDITIONING & THERMAL PRODUCTS INDUSTRY CREDIT GROUP Jim Kelly (513) 492-7636 Director of Credit Services Shawna McCleary Ohio Regional Office Northern Factory Sales WESTERN WISCONSIN ELECTRICAL PRODUCT ALL EMAIL ADDRESSES ARE: [email protected]. SUPPLIERS CREDIT GROUP Lisa Bird Crescent Electric Supply Co, Madison GOT AN IDEA? Would you like to contribute to the BCMA PLEASE CONTACT CHRYS AT WCA, 262.827.2880 Newsletter? The most important part is your idea. X221 TO REPORT MEMBER NEWS We can handle the polishing. Just write to us at BCMAEditor@ CreditToday.net with your idea! 1. CREDIT APP PROCESSING: INORDINATE TENSION AND CHALLENGES

One of the most intriguing overall findings from Credit Today's benchmarking survey on the credit application process - completed by 343 credit execs - is that there is much tension related to the processing of new customer credit applications.

For instance:  Just getting customers to complete credit applications is problematic.  Credit applications are often submitted with incomplete information, and the information submitted is not necessarily up-to-date or valid.  Customers are reluctant to sign the credit application, credit agreement, and reference-checking authorizations.  Credit application processing and reference-checking are time consuming  Getting audited financial statements from applicants is difficult.  A lack of cooperation from the sales team increases the challenge of getting new customers to cooperate fully  There is a lot of pressure to ship initial orders before the credit application process can be completed.

And the list goes on.

The following three responses offer a good synopsis of the challenges many credit departments face with regard to credit application processing.

The Challenges "Large corporates don't want to fill out [credit applications]. Customers often leave sections blank. Sales Reps do not want to push a prospect to get the information. Follow up is almost always needed to get the tax exempt certificate and financials," laments Sandy Maxey, senior director, treasury operations, Cobra Electronics, Chicago, IL.

The challenge is "getting [credit applications] completed in their entirety--getting the original completed application back or a legible copy, getting banks to provide references. Sales are responsible for turning in a complete credit application. If it is not correct or is illegible, it will be sent back. If the bank will not provide a reference, we will inform the applicant and ask for a bank statement," explains Tim Carney, director of credit at Nike subsidiary Hurley International (Costa Mesa, CA).

"Customers do not want to provide financials or complete our credit application. They have a credit information sheet but it does not necessarily provide all the information we require. We insist on obtaining a signed credit application but are getting a lot of pressure to accept their orders and set up the customer. It's a challenge," says Valarie Murray, credit manager at Kanata, Ontario-based Zarlink Semiconductor Inc.

2. ARE YOU IN THE CLOUD YET?

Over the last year or so, you've probably heard the phrase "cloud computing" and thought, "oh, man, more corporate jargon" or perhaps you've ignored it, thinking it was just another corporate fad, destined to come and go after a burst of hoopla (think reengineering or MBO... we could go on). But cloud computing, we can assure you, is here to stay. It is already huge now, and it is only going to get bigger and increasingly influential. It is the future of computing.

We are going to take a quick look at what cloud computing is and why it is so important a trend.

First, what, exactly, is, cloud computing? Cloud computing enables you to use software located at a remote host location, rather than on your local PC. The same software (and document storage) is shared by however many users there might be for that software.

Sounds simple, and sounds like you might lose control, right? So, what is the big deal? Under the traditional software model, you might be one of, let us say, 10 million users, each of whom has his own copy of the software. If the developer spots a bug or wants to upgrade the software in some fashion (which happens continuously), they've got to send you and 10 million others that upgrade, and then you have to actually implement the upgrade.

That's 10 million times something must be delivered, installed, and supported and 10 million times something can go wrong, obviously a very labor-intensive and expensive process. But with cloud computing, the software is now operating remotely, in a central location, i.e., "in the cloud." The 10 million users are all accessing the same software. There is no need to download anything. And the developer of the software can fix a bug or upgrade the software just once on its central servers, and all 10 million customers instantly benefit from the change!

So, it is a quantum leap in efficiency over the traditional model of software on local PCs.

Second, users are no longer bound by a particular location. You can access your documents from any PC or smartphone! No longer will you be stuck because your document is on your office or home PC and you cannot access it or do not have the right software loaded to work on a document.

Third, you now can share your documents with whomever you want. Let us say you are decentralized and have staff in 12 offices around the country. Without your IT department even being involved, you can now securely share a spreadsheet or a word-processing document!

You can let others review it, add to it, make comments, approve it, whatever you want or need to do. Already, you can use Google Docs (a free program) for everything we just described.

Every time you use LinkedIn or Facebook or book travel arrangements online, you are working "in the cloud."

Yes, cloud computing is a beautiful thing. As we said, it is big now and is definitely the future of computing.

So how will this affect you as a credit exec?

It is noteworthy that large corporations are understandably reluctant to allow critical software to be out in space somewhere. Control and security are obviously very important issues in a corporate environment. And right now, most big companies are still struggling to implement and improve their ERP systems, which are not "in the cloud."

But that is beginning to change. Salesforce.com, one of the leading cloud computing companies, has traditionally been primarily a Customer Relationship Management (CRM) software tool that operates in the cloud. But now, with its Force.com software, it is taking their cloud-computing concept well beyond CRM and integrating with SAP, Oracle, and Microsoft for all kinds of applications.

And more and more vendors of credit and A/R-related software are delivering their software "in the cloud." It is simply more efficient. Small businesses can operate their entire business (accounting, CRM, etc.) in the cloud now, and that will gradually shift to larger businesses over time.

So, it is a trend whose time has come. One good way to familiarize yourself with cloud computing is play around with Google Docs at docs.Google.com.

Have fun learning and working "in the cloud." 3. THE POWER OF ONE: HOW A ONE-MAN CREDIT DEPARTMENT PRODUCES EXTRAORDINARY RESULTS There is a world map on the wall of Tom Cochrane's office. "That's my territory," he tells new sales reps at their meeting with him, part of their routine initial training. "What's yours?" He is making an important point. There are more than 70 sales reps in his gear manufacturing company, but there is only one credit manager. In fact, Cochrane is the entire department, an arrangement he is found to be an advantage. "I've got my thumb on the company's pulse," he notes. "If there were more people in this department, there might be other thumbs on it." That, he believes, would just create confusion. And there's no question that he's getting the work done.

Last year, despite the difficult economy, Philadelphia Gear's profit goals were met and bad debt write-offs were less than .01 percent. Close monitoring and control of the entire order-to-cash process are keys to his credit management strategy, and those initial one-hour meetings with new credit reps are a crucial part of it. During these "cordial" sessions, they review the company's terms and conditions sheet that spells out credit terms, when orders must be paid, arrangements for progress payments, and policies on returns and warranties. The object is to cover all of the key legal issues sales reps need to understand and be able to interpret to their customers and potential customers.”

Sales Reps Need Credit Coaching Cochrane finds that most new reps, even those with considerable previous sales experience, are seldom savvy about credit issues. "They are great going out, quoting the customer, and getting the order, "he says. "What they need to learn is how to interact on the financial side of the business. They have to be able to talk with customers intelligently and not put us in a position where we can get hurt. Some just don't grasp what can happen if terms and conditions are not followed properly, and I have to make sure they do."

He maintains communications with the reps over the phone, via their computer system (recently upgraded to EPICOROR-VAN TAGE) and via Blackberries that are issued to all of them. He emphasizes that he's available on his Blackberry, which they use frequently. "I may not always respond immediately, but I will respond, and I make that clear to them," he says. "We all benefit from this two-way communication channel. If there's a prospect they'd like me to run a D&B on, I'm happy to do that."

There are times, he adds, when you can't communicate with the Blackberry because you have to be able to talk to a person "to peel away the onion." There may be something he doesn't know and he needs to call and actually talk to the sales rep.

4. THE PERILS OF CREDIT SALES TO PUBLIC ACCOUNTS: STATE, COUNTY AND MUNICIPAL

“Don’t worry. It’s a state account. They’re golden.” Not so long ago, that was the thinking. It isn’t anymore. From sea to shining sea, state governments are struggling—or, worse yet, not struggling—to pay their bills. At the cutting edge of impending state insolvency is California, which, at this writing, faced a $19 billion deficit and was unable to pass a budget.

What’s it like trying to extend credit to do business under these circumstances? We asked Credit Manager Dan Sproat of Jaco Oil. We picked Sproat, not just, because he manages credit for a company in the Golden State but because of the product, he sells. The margin on fuel is so thin that Jaco can lose its profit if a payment is two days beyond terms. How can they do business with accounts that may not be able to pay for months?

Sproat reviews his list of 50 public sector accounts daily. “If they’re two or three days past terms, we’re on the phone to them,” he says. “They’ll tell us, ‘We’re out of money. Until the budget is passed, we can’t pay.’”

“Then we have to make the decision,” he continues. “We’d love to serve them.” If the account can get a warrant (aka an IOU issued by the state treasury), and the amount isn’t too large, Jaco may decide to carry them. But some are large. The California Highway Patrol buys fuel in $20,000 truckloads. “The primary thing we look at is the balance that we’re going to have to carry,” he says.

“We’re not interested in being a bank if we’re not getting paid. They don’t pay finance charges or interest, so you’re just going to get paid what your invoice is worth and that’s it. We’re not interested in carrying a ton of money, warrant or no warrant, for a long time.”

Since many county and town governments and agencies get substantial amounts of their funding from the state, the problem is nearly as severe with them as well. Nor is it confined to public accounts. Many state employees have been told they’ll be furloughed or paid minimum wage. “We also service consumers so, not only are we fighting it on the commercial front, but many consumers can’t pay their bills either.”

To learn more about subscribing to Credit Today, check out their web site at www.credittoday.net

Benchmarking Extended Terms- Everything Approving Orders and What Credit Execs Are You will Need to Know Manage This Critical Doing to Address These Challenges Marketing and Credit Process Benchmarking Hold Orders- Reasons Why Benchmarking Extended Terms- Survey Some Companies DON'T Use An Automated Participants Weigh In on the Process With Approval Process to Release Orders on Hold Some Great Advice Benchmarking All Elements of Hold-Orders- Benchmarking The Processing of Hold How Many; How Long; How Fast They're Orders- The Primary Challenges Faced When Released (or Not); and the Processes Used Credit App Processing- Inordinate Tension by Credit Execs and Challenges

UPCOMING INDUSTRY CREDIT GROUP MEETINGS October 7, 2010 October 19 Food Suppliers Industry Credit Group Building & Construction Materials Credit Group Madison, WI Milwaukee WI October 8 October 20 SE Electrical Suppliers Credit Group Food Service Supply Hospitality Industry Credit Group Milwaukee, WI Milwaukee WI October 11 Minnesota Electrical Product Suppliers Group Brooklyn Park MN Fine Paper/Graphic Arts Industry Credit Group Plumbing & Heating Industry Credit Group Milwaukee, WI Waukesha WI October 14 October 21 Metals & Industrial Suppliers Credit Group Construction Industries Credit Group Brookfield, WI Appleton WI October 15 October 26 IL Fine Paper Industry Credit Group WI/IL HVAC Industry Credit Group Burr Ridge, IL Rockford IL October 18 Western Electrical Suppliers Credit Group IL Wholesale Floral Suppliers Credit Group Madison, WI Oak Brook IL EDUCATION EVENTS

OCTOBER

October 12-13, 2010 CREDIT PROFESSIONAL’S CONFERENCE & EXPO October 12-13 in Green Bay WI. Last Chance to sign Up

October 25, 2010 A Webinar: "THE USE AND ABUSE OF DSO AS A MEASURE OF CREDIT DEPARTMENT PERFORMANCE"

November

November 8, 2010 A Webinar: "WHEN AND HOW TO HOLD ORDERS"

November 15, 2010 Introduction to Dealing with Small Businesses

CHECK OUT OUR WEBSITE FOR MORE UPCOMING EVENTS.