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Our Subscribers Say...
I think Credit Today is fantastic. You cover many practical topics in the credit field that I use regularly. Just one recent example—a conversation on the ListServ about preferential payments—gave me tips that I used in an actual case. The specific information I picked up from this one discussion saved me $10,000, enough to cover my membership for many years!
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Manager of Credit & Collections, ASSA Abloy Americas Division, New Haven, CT
Credit Today's Resource Directory and their online e-mail forum (ListServ) provide information on almost any credit-related topic you can think of. It is a great way to exchange information with other credit professionals. As the saying goes, "You don't know what you don't know."
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Credit Manager, Big Lots Stores, Inc., Wholesale Division
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David Dungan, Director of Credit
Justin Brands, Inc. (A Berkshire Hathaway company)
Fort Worth, Texas
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Corporate Credit Manager-World Wide
Thales Navigation, Inc.
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Corporate Credit Mgr
Fulton Paper Company
"I love Credit Today and read every issue cover to cover. For me, the greatest perk of a subscription is ListServ. I believe Credit Today's ListServ members may be the most knowledgeable Credit brain trust in existence today. I have saved and categorized hundreds of contributions on a wide variety of topics which I refer to often. It's an easy and cost effective way to network and learn."
Doug M. Thomas
Kimberly-Clark Customer Financial Services |
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Financial Analysis Today
Sound credit management requires you to be proactive and there's no better tool for that purpose than the art and science of financial analysis. So here's your library of tools and resources relating to financial analysis in the credit field. Find plain English views and advice from the leading experts - both inside and outside the field.
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Instant Decision Making With an Economic Parity Model
Ever wish you could sit in on sales calls and make terms and pricing decisions right then and there? Well, this credit manager can, sort of. An internally developed computer program on the salesman's laptop precisely calculates the consequences of any accommodation the customer asks for and instructs the salesman how to respond. In this article you'll learn: - How and why this firm developed a financial model to be used in negotiations with customers
- The key variables that go into it
- The powerful impact that empowering sales with a portable financial model has for this company and its profitability
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Can Forensic Accounting Stop the Surge in Fraudulent Financial Statements?
The stepped-up focus on business accounting fraud recently announced by the SEC, after years of concentration on cases resulting from the financial crisis, has been welcomed by the trade credit community. But seasoned credit managers we've spoken with are viewing it with as much skepticism as relief. Is there really any way, they wonder, of reining in aggressive and outright fraudulent accounting? In this article we cover... - What the SEC is now doing to spot & combat fraud and what that means for credit execs. Will their efforts work?
- Five top accounting issues that indicate high risk
- Five top governance issues to watch out for
- Why experience credit exec is more concerned about current info than audited info
- One of the biggest (and most common) flaws in reasoning that most people make when analyzing financial info
- A "forensic tip sheet" you can use
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Rising Inventories = Potential Red Flag
As a credit analyst, one of the most important indicators you can track is the ratio of inventory to sales. It's used by money manager and retailing expert David Berman. Berman originally cut his teeth as a CPA, where he learned that inventory accounting was a way managers could manipulate earnings. Berman points out that companies can let inventories rise over time and thus avoid the markdowns and hits to profits that they should be taking. . . .
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Beyond Credit Data to See More, Sell More
By Jim Swift
Businesses have long relied on conventional credit data to evaluate the credit worthiness of potential customers. In fact, many companies have leveraged traditional credit data to analyze the financial solvency of prospects -- using the data to predict whether a prospect was in a financial position to purchase additional products and services. . . .
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Customers Withholding Financial Statements? Here Are Questions to Ask to Develop a Complete Picture Anyway
By David Schmidt
Customers, especially private firms, often refuse to provide financial statements with their credit application. This can raise concerns if their credit report indicates slow payments. However, it's important not to jump to conclusions and assume the worst. Sometimes credit bureau payment histories don't tell the whole story, and it is necessary to determine if these are isolated or temporary situations or indicative of a more long term cash crisis. With that in mind, we've developed a series of questions you can ask that will both get them talking and help you gather critical information about your customer's financial health, even if you never see a financial statement! . . .
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Vendor Study: How to be less surprised by a large customer's bankruptcy (or, demystifying the "cloaking effect")
By Camilo Gomez, PhD
The "cloaking effect" - Payment information has historically been a cornerstone of our methods for monitoring and evaluating the financial health of corporate customers. Historically, it has proven useful to review how we have been paid by a customer, and to review and compare how that customer has paid its bills to its other creditors. We know from experience that this basic credit analysis technique, used in combination with auxiliary information (such as a review of Suits, Tax Liens and other public records) provides an effective basis for making credit determinations. However, cases frequently emerge of companies that pay their bills on time… right up until the day they file for bankruptcy protection. Recently, some in the credit-information industry have called this the "cloaking effect," because these companies' payment profiles do not reflect their poor financial condition... their financial stress is somehow "cloaked." . . .
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Free Fraud Detection Resources
By Dean Kaplan
One of the simplest ways to detect potential fraud is to confirm certain information provided on a credit application using easy, free resources on the Internet. As a commercial collection agency, we regularly get claims where this has not been done and we discover that the information provided was either misleading or outright fraud. In either case, it is no surprise that the invoices were not collected by our clients. In less than five minutes you can use four free resources on the web to uncover indicators of the most common fraud factors. . . .
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Four Common Financial Mistakes Made By Small Businesses
"We all know from experience that smaller customers, as a class, are more prone to troubles because of financial problems than are the large corporations," observes a credit exec friend of ours. The reasons for these problems, he says, fall mainly into well-established patterns. These separate patterns are interrelated, resembling four upright dominoes. When the first domino falls, with rare exceptions the second, third, and fourth dominoes follow suit. Here are his observations: . . .
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The Perfect Business
By Rob Lawson
In most of my conversations with CreditRiskMonitor CEO Jerry Flum, we talk about markets and stocks. Jerry is an unabashed bear. He thinks the debt levels (measured as a percent of GDP, at all levels of government world-wide, as well as on individual levels) are at totally unsustainable levels. No living human has ever experienced what's going on now, so no one has any idea what's about to happen. (hint: "watch out below!"). . . .
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Legendary Investor's Advice for Credit Analysts
One of our favorite reads is the quarterly report of the Third Avenue Value Fund, run by famed value investor Marty Whitman. Whitman invests in the style of the late Ben Graham, Warren Buffett's mentor back in the 1950s. While Whitman's main angle is finding good investments, he is at heart a credit analyst. He likes good balance sheets and that forms the foundation of his analysis and much of the secret of his long-term success. . . .
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An Indicator to Consider: Arrogant Financial Contacts
We're all for credit scoring and automating as much as possible about the credit decision. But here's an example of how your instincts can really help identify problems and opportunities in the assessment of the character of your customer. "We just had three diverse businesses file," one experienced credit exec recently told us, "and the thing in common with all of them was an arrogant financial contact. . . .
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Measure and Manage Collection Efficiency Using DSO
By Loral Narayanan
Days Sales Outstanding (DSO) expresses the average number of days it takes a company to convert its accounts receivables into cash. It is one of the most widely used measures employed by credit professionals to analyze the success of their efforts. . . .
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RMA's 2010--11 Annual Statement Studies® Available
November 3, 2010
The 2010--11 edition of RMA's Annual Statement Studies is once again available in print and as eStatement Studies in an easy-to-use Web-based format. The latter allows users to download industry data into an Excel® spreadsheet, search using a query function and analyze data by region. . . .
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Understanding the Cash Flow Statement
By Loral Narayanan, May 26, 2010
The Cash Flow Statement -- also referred to as statement of cash flows or funds flow statement -- is one of the three financial statements commonly used to gauge a company's performance and overall health. The other two financial statements -- Balance Sheet and Income Statement -- have been addressed in previous articles. As the name implies, the Cash Flow Statement provides information about an organization's cash inflows and outflows over a specified time period. Simply put, it reveals how a company spends its money (cash outflows) and where that money comes from (cash inflows). . . .
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Bankruptcy Issues
