Survey: How Credit Leaders Are Dealing With Today's Tough Economic Climate; Insights & Action Items You Can Use
Credit Today's latest Benchmarking Survey drew a host of useful insights from trade credit leaders across a variety of industries. Read on for some great observations along with action plans being implemented in response to today's economic conditions. For the full survey results, Click here. Automotive
"We are in the auto industry; selling to OEM companies, co-manufacturers and warehouse distributors. Things are bad with companies filing Chapter 7, 11, or 15. The problem is to keep sales up and roll the dice on when, not if someone will file."
- Elli Minert, Credit Manager, Delphi Diesel Systems, Troy, MI. Construction
"We are a refrigeration manufacturing company and we do a lot of construction related projects. These types of projects have many sorts of issues and delays as there are GC's and subcontractors involved. Payments need to funnel [through] and there are a lot of challenges in getting these invoices paid according to your company's terms. We have been trying to implement pre-lien notices. It presents challenges and some negativity on the dealer end of it. They question our motives and many don't understand the intent behind doing it."
- Julie Smith, Credit Manager, Victory Refrigeration "We are an HVAC Distributor, and the Credit Team and the Sales Team have been working together with willing customers to change market strategy to get our customers out of new construction and get into Retrofit and Service Work, which turns cash flow quicker, and returns higher profits. We are also analyzing the two types of customers that pay slow: Ones that are willing to change their behavior and become stronger business partners with our company and Ones that will not change, don't want to change, and are not going to change, and thus, our Credit Team is lowering our credit limits to an appropriate risk level."
- James B. Albert, Senior Credit Manager, Gensco, Inc., Tacoma, WA. "The credit department is implementing strategies on slow paying customers including early hold, lowering credit limits, having discussions with the customers, and increasing payment amounts and frequencies - just being more proactive when accounts fall within the 60-day past-due buckets."
- Deb Ford, Credit Manager, Nesco, Canton, MA - Deb also noted that NESCO is challenged by general contractors that are slow paying the electrical subcontractors that are NESCO's customers. "The home building industry in Texas is slowing. Along with this, our business is off 20 - 30%. A/R payments are slowing also. We are a very conservative company when it comes to the extension of credit and have had to become even more with the current market conditions."
- Lisa Childress, Corporate Credit Manager, Bison Building Materials, Houston, TX. "We are a building products supplier in the Houston market. Some of the greatest risks, besides significantly slower payments, are bankruptcy filings and foreclosures. I am filing more liens and working more closely with financial sources and title companies. "Many of the builders, both large and small, are not able to sell their houses as easily as they did before, due in part to the sub-prime mortgage company problems with variable rate structures, causing fewer loans to be available to high-risk buyers. Banks appear to be scrutinizing builder loan applications more carefully. We don't anticipate much improvement for the next six months. Optimistically, we hope sales improve by the fall of 2008. "We are preparing to take whatever steps are necessary to protect our legal rights, whether it's through filing liens, judgments or Small Claims Court suits. We are offering joint check arrangements to high-risk builders to ensure that their funding sources jointly pay the builder and us. We have also offered Letters of Credit."
- Brenda Keener, Credit Manager, Gulf & Basco L.P., Houston, TX. "We manufacture steel framing products which are supplied to the construction market and because of the market conditions our credit risk is higher. In additon because of the increasing steel prices, our product prices have increased, which takes a toll on customer credit lines. It becomes a difficult balance."
- Jane Geisler, Director of Corporate Credit, MarinoWare Industries, Inc., South Plainfield, NJ. Consumer Goods
"My company sells to apparel retailers. Our greatest credit risks are the privately-held small and medium-sized retail stores and chains with limited financial resources and limited financial information. Economic issues in our industry are often geographically concentrated. To battle some of these challenges, we are making collection calls earlier and focusing our collection efforts in geographic areas where we have already identified specific accounts that are having cash-flow issues."
- Tim Carney, Hurley, Costa Mesa, CA. "We are in the jewelry manufacturing industry and have been really struggling for the last seven years. Current gold prices are at $980/oz, plus platinum at $2200/oz, are straining an already stressed industry. Consumers are not going to purchase jewelry items with gas over $3.00 a gallon, oil at $125 a barrel and mortgage worries. Our credit team has to be more flexible in terms and more tightly watch customer trends. It is a going to be a rough year."
- Eddie Keough, Credit Administrator, Hoover & Strong, Richmond, VA "We have reduced tolerance towards extending new credit on customers who are showing a slower payment trend. Also, we have tightened the process on new account approvals. Fasten your seat belts, it's going to be a bumpy ride."
- Harris Semegram, Director of Credit, Prestige Brands Holdings, Inc., Irvington, NY "In the gift industry, with most products being made with oil-based parts, it will be a major challenge to keep costs down."
- Larry Lederman, Credit Manager, Gallery Marketing Group, Niles, IL "We sell our giftware products internationally. We are not anticipating problems with our export customers. We see a small increase in the risk of our domestic customers. We have seen some slowness in smaller accounts. We are working with these accounts and anticipate only a small increase in business failures among our accounts. We are being more vigilant on credit limits and past due accounts."
- Bill Edgar, Credit Manufacturer, Zippo Manufacturing Company, Bradford, PA. Manufacturing
"We've already seen a slowness in business and expect it to continue until at least the 4th Quarter. We sell mostly domestically, but have a few international clients. We are a custom manufacturer, so we tend to get a large portion of our costs up front. We'll have to keep a closer eye on our potential leasing customers, and more people want to lease when money is tight."
- Randy Clark, Assistant Division Manager/Credit, Young Electric Sign Company, Las Vegas, NV. "Tool Manufacturing Industry geared towards the professional user- with the downturn of the housing market, and promotions from larger competitors, business is harder and harder to obtain, and some customers who are placing larger orders are not necessarily credit worthy. "We are working closely with our sales force to examine deals for questionable customers and trying to make sound business decisions so that we can move forward on some orders that in better economic times we may not have."
- Amy Daniels, Credit Manager, Metabo Corp., West Chester, PA "We sell to the commercial printing industry which continues to shrink due to growth in electronic media. Also, our customers are heavily asset laden with their investments in equipment (printing presses) and the banks are definitely tightening in terms of providing working capital needs to our customer base."
- Jon Hanson, CCE, BRW Paper Co., Inc., Carrollton, TX Technology
"We are flying in the face of recession talk and rolling out significant credit line increases across our entire customer base - take that, credit crunch! The high tech business is still subject to fraud, so we are looking to add fraud prevention/validation tools to our credit decisioning mix."
- Tony Warfield, Director of Credit Services, D&H Distributing, Harrisbury, PA. "We are generally concerned with the credit crunch and how it will affect highly leveraged and/or growing companies. Without continuing credit support, we believe many companies will find themselves increasingly falling into the 'cash crunch' cycle, thus requiring them to lean more on vendors for working capital support. "We are looking at our larger customers, and specifically updating banking references, along with reviews of those customers who have been recently acquired by private equity firms."
- Gordon Miller, General Credit Manager, ISP Technologies, Wayne, NJ Transportation
Trucking has seen the slowdown before other industries. When it turns up again, we will again see it first. Housing and automotive are in a ditch now and will be for the next 12-15 months. The manufacturing sector is flat to average for Q1 historically. "How long will it be when the credit crunch will affect the ability of our marginal customers to obtain credit and at a rate they can afford? If they can't get sufficient credit for working capital, they will turn to their general unsecured creditors to make up the shortfall.
- Douglas Swafford, Credit & Collections Manager, U.S. Xpress, Chattanooga, TN.
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