Business Credit Journal - NACM Commercial Services

7931 NE Halsey, Suite 200, Portland, Oregon 97213

Phone 503.257.0802 • Fax 503.257.0247 • www.nacmoregon.org

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Business Credit Journal

...continue on page 17

Preference Defense: New Challenges FacingCreditors—Part 2by Dorman Wood, CCE, CEW

Continued from October issue.

“On December 1, 2006, the Federal Rules of Civil Procedures wereamended to address court procedures for disclosing electronicinformation during the discovery phase of litigation. The new courtrules begin to apply to a company when litigation is “reasonablyanticipated.” At that point, a company must put a “litigation hold” onits electronic and other records that may be discoverable in litigation.Companies that take this step will be protected against courtsanctions, so long as they take reasonable steps to protect and preserveinformation.”2

The Federal Rules of Civil Procedures are considered to apply tobankruptcy proceedings and therefore, apply to discovery (alsoreferred to as production) of documents in a preference suit. Motionsfor discovery or production filed by counsel for both plaintiff anddefendant are generally far-reaching and include, but are not limitedto all documents or records pertaining to the business relationshipbetween the parties. Such documents or records can include emails -internal and external; accounts receivable records - aging reports, cashapplication and check copies; lock box records; invoice copies;collection notes - hard copy or electronic; contracts or distribution orpurchase agreements; purchase orders; shipping records; notes fromtelephone calls; other forms of correspondence, and policies andprocedures to name a few. Documents or records described may havebeen stored electronically - on servers, disc drives - internal orexternal, laptops, PDA, or in hard copy form.

Creditors who may not have a written policy or procedure in placegoverning the retention and or destruction of corporate documentsare encouraged to develop and implement one. Those who havealready have such a policy and procedure in place should review itand revise as needed to conform to recent court decisions. Remember,preference suits may be filed any time within two years following thebankruptcy petition date. The time to start gathering documents toaid in a preference defense is not when a notice of such preferenceaction is received.

In This IssueCoverPreference Defense: New Chal-lenges Facing Creditors—Part 2

p. 2Chair's Message

p. 2President’s Message

p. 3Experience at GraduateSchool, by Steve Taff, CCE

p. 5Past Chairs

p. 6Legal Corner

p. 7National Summary of Domes-tic Trade Receivable Results

p. 8Education

p. 9NOF Scholarship Recipients

p. 10Upcoming Events

p. 11New Experian Product

p. 13International Corner

p. 14Industry Group of the Month

p. 15Credit Manager's Index

p. 16CFDD Chapters

p. 17Contacts



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Chairman of the Board Pat Jones

The NACM Oregon Board and staffhave adopted the following StrategicGoals and Directives for 2008:

1) Develop strategy for retention andgrowth in membership

2) Grow and enhance our creditreporting database

3) Optimize value of our building4) Grow collection claims5) Grow Distressed Business Services

We need your help to achieve our goals in 2008.Does your firm contribute their account aging data toour database? If not, you should. For one thing,contributors pay less for some credit reports. Ourstaff is creative and will be excited to help you find aneasy way to contribute.

Have you sent any accounts to our professionalcollection staff lately? If not, you should. We will do agreat job collecting for you and the fees earned helpNACM Oregon fund the other things we do(education, certification, lobbying) for our members.

Please be receptive to our staff when they contactyou to get your support for our core services. Givethem a chance to earn your business and help us builda stronger NACM Oregon in 2008. Thank you, andhave a great Thanksgiving holiday!

Pat JonesConsolidated [email protected]

President Rod Wheeland, CCE, CAE

NACM Oregon celebrated its onehundred and eleventh birthday thisyear. There are many individualswho’ve played a role in its success asan Association over these many years.In this issue we’ve included a pictureof the individuals attending the recentPast Chairman’s Dinner. Each of these individualshas contributed to the success of NACM Oregon. Werecognize them for their service on the Board –average tenure of more than seven years – theirprofessionalism and high standards, and theircommitment to NACM Oregon. Should you crosspaths with any of these individuals, I hope you willtell them “Thanks!”

The NACM/CFDD Holiday Breakfast will be heldat Embassy Suites Airport on Thursday, December13. Margie Boulé will entertain the participants withstories gathered in her career as an Oregoniancolumnist and a broadcaster. Please plan to join us.

We always appreciate your comments about NACMOregon programs, products, and services. In the nextsixty days we will survey the membership, and themember responses will help us plan programs andservices for the coming year. When you receive theemail, please take a few minutes and complete thesurvey.

Thank you for your continuing support.

Rod Wheeland, CCE, [email protected]



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My Experience at NACM Graduate School of Credit andFinancial ManagementSteve Taff, CCE

“He who doth notanswer to therudder, shall answerto the rock.”

I begin my story by going back a few years. In2000, my company went through an ownershipchange. As a part of the change process, managementemployees were offered a course in “resiliencytraining,” designed to help employees make it throughthe transition easier. One of the things our instructorrecommended was to undertake something new,something outside our comfort zones, something thatwould enhance our professional careers. I chose topursue a CCE designation through NACM. I learnedabout the Roadmap method, anddiscovered that I had sufficientexperience and education to just takethe CCE exam. I bought a copy ofthe Charles Gahala book- “CreditManagement Principles and Practices”and nearly memorized it. With noother preparation, I took the test andpassed! Even a blind squirrel finds anut on occasion. I was amazed to learn that, at thattime, there were fewer than 1000 CCE designees inexistence.

Fast forward to 2005. I have attended severalNACM Credit Congress sessions since 2000, and havetaken varied courses offered there. I was looking for anew challenge, when a friend, Nancy Reed, CCE,recommended the NACM Graduate School aspossibility.

I looked at the NACM website about what theschool offered in the way of courses, and I becamemore interested—especially with the courseworkregarding creative accounting practices, and how to bemore effective in analyzing company financialstatements.

So in late 2005, I applied, and was accepted for theclass of 2006-07. The program is held during thesecond two weeks in June, for two consecutive yearson the campus of Dartmouth College at Hanover,New Hampshire.

The curriculum for the first year course includedfinancial reporting and analysis (strong emphasis oncash flows), corporate strategy, time management,treasury, business ethics, and compliance issues. In thesecond year we studied advanced negotiations, legal

environment in credit, financialwarnings (my favorite), successfulpresentation skills, risk management,and international credit. I found thecoursework comparable to that of thosein my MBA experience. Most of theinstructors came from the faculty ofmajor business colleges. Dr. CharlesMulford (Georgia Tech) was our

instructor for both years, and became a class favoritefor his ability to teach us how to uncover creativeaccounting practices used by some companies. Welearned to “feel the cash flow” as he taught us. He isoften quoted in the Wall Street Journal aboutaccounting irregularities.

The living accommodations were rather Spartan, aswe were housed in the student dormitories. They dohave wireless internet on the Dartmouth campus.Because of the three hour time difference, it was easyto keep up on emails, and I actually was able to dosome collection work after classes in the afternoon.The food was very good—most meals being served atthe historic Hanover Inn, adjacent to the Dartmouthcampus. Lunch meals were at the campus cafeteria.




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Once for dinner we did go out toMurphy’s, a popular localrestaurant. Athletic facilities aremade available for those wantingto exercise, although I enjoyedjust walking around the woodedareas surrounding the campus inthe early mornings.

Since there is a weekend betweenthe two weeks, there is theopportunity to see some of thelocal countryside. New England isvery green and beautiful in thesummer. There are lots of oldhomes, churches, and other placesof historic significance to visit.There are maple sugar farms, golfcourses, and a Ben & Jerry’s icecream factory to tour. Vermont isonly a mile west of the campus,and I attended a country fair thereon one of the Saturdays.

At the end of the first year wewere divided up into groups offrom three to five persons to workon a case study to be completedprior to the next session. Mygroup was given the assignmentof deciding on a credit limit forMartha Stewart Omnimedia(MSO) company. We started outwith five in our group—four of usfrom the West Coast and one fromTokyo, Japan. Two of our groupdecided not to continue, so thethree of us finished up our papernear the first of April. Koko even

traveled from Japan to meet with usin Portland once for a face to facemeeting, but most of our meetingswere over the phone. (For yourinformation, 4 p.m. Pacific CoastTime is 8 a.m. Tokyo time, only oneday later.)

It was interesting to follow acompany closely for nearly a year. Iwon’t divulge our final creditdecision, but the attached drawingwill demonstrate what has happenedwith Martha and her company overthe past 5 years.

The case study provided ourgroup the opportunity to use manyof the things we learned in our firstyear studies, most notably businessstrategy, ethics (a big issue withMSO) and financial analysis.

Perhaps the best part of theprogram is getting to know a lot ofgreat credit professionals from otherparts of the USA and othercountries, and the relationshipsestablished that will last in the yearsto come. Our class began with 23students and wound up with 18graduates after the second year. Forthose who did not have CCEdesignations, the exam was offeredtoward the end of the second week

of the second year. All 17 of thosetaking the exam in my classpassed. In my opinion, it would bedifficult to not pass the CCE if onesimply attended all the classes andpaid attention. The necessary toolswere offered to be successful on theCCE test.

I had applied for, and received, ascholarship from NACM OregonFoundation, which was matchedby NACM national the first year.This made the graduate school areal bargain. Like Nancy Reed, Iwould encourage anyone wantinga challenge and lots of fun toattend this course.

Final comments: On one of mymorning exercise walks I climbedto the highest point on theDartmouth campus- a woodedknoll with an old observationtower nearby. In a clearing I founda large bolder adorned with an oldbrass plaque. It was presented toDartmouth College in 1950 fromthe class of 1923, and it read:

“He who doth not answer to therudder, shall answer to the rock.”

This short statement remindedme of our studies in businessethics, and in my particular groupcase study. This will be one of thebig “takeaways” from myDartmouth experience, and I hopeit will define my personal life, aswell as my professional career.

Graduate School,continued from page 3

� � � �



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NACM Oregon extends apersonal thanks to the dedi-cated individuals who havevolunteered their time andservice to the NACM OregonBoard of Directors.

Each director usually servesat least two terms, six years,and meetings are held ten totwelve times a year. Eachdirector also serves on at leastone committee, which may meetone to three times a year.Directors are not remuneratedfor their time, so this involve-ment takes a commitment anddedication to the profession andto NACM Oregon. This Asso-ciation has prospered over thelast one hundred and elevenyears as a result of the servicethese individuals make.

Each year the Board elects aChair to provide leadership tothe Board and the Association.This commitment involves aspecial dedication and manymore hours of meetings, delib-eration, and service to NACMOregon. We offer our gratefulappreciation for the contribu-tion these individuals make.

Thank You ForYour Service

On The Board

The Past Chairs meet once a year, "share notes" about their experiences,and get an update on NACM Oregon. The picture above, taken at a Septem-ber 2007 dinner, shows past Chairs from left to right and the years theyserved as Chair:

Rick Weisman, CCE, Graybar Electric Co. (2004-05); Steve Porter, CCE, IQCredit Union (2001-02); Joe Fustolo (1985-86); Lynne Lyons (1983-84);Mike Bena, CCE, Columbia Machine, Inc. (2001-02); Dale Walker (1990-91); Tom Hammond (1986-87); Ken Knox (1967-68) and National NACMChair (1973-74); Terry Clifford (1977-78); Hal Wineland, CCE, PendletonWoolen Mills (1992-93); Cheryl Wahlberg, CCE, Food Services of America(2006-07); Rod Wheeland, CCE, CAE, President, NACM Oregon (1991-92);Barry Caplan, Sussman Shank, LLP (1997-98); Yvonne Prinslow, CCE,Hampton Lumber (2003-04); Jeffrey O'Banion, CCE, CICP, NorthwestNatural Gas (1989-90); Ken Johnson (1971-72); Ken Hume (1961-62); andDave Erickson, CCE, Allports Forwarding, Inc. (2005-06).



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Legal Cornerby Brenda Terreault

Terms and Conditions LanguageNo one enters into an agreement

with the idea that the contractrelationship will fail. But, frombusiness disputes to bankruptcyfilings, contract relationships dosometimes fail. Planning ahead forthat possibility can only help thecreditor.

While a verbal contract/application may be acceptable inmany instances, a well-writtencontract/application is stronglyrecommended, and often legallyrequired, to limit disputes overterms. A well-written contract/application will include terms andconditions that can protect thecreditor if the customer/debtorfails to pay or disputes thecontract.

Applicant/DebtorAcknowledgements

The credit application shouldhave a written representation inwhich the applicant/debtoracknowledges that he understandsthat the information provided inthe application is complete andaccurate and will be relied upon inevaluations an extension of creditterms. In some application, theapplicant/debtor signs or initialsthis written representationseparately.

Right to InvestigateAlways obtain the right to fully

investigate the applicant’sbackground, including having theright to pull credit report on thecompany.

Applications ask the debtor to listtwo or three trade references, andrequest the right to call the listedcompanies. But frankly, who is goingto list a negative trade reference?Without further information or theability to obtain further information,a creditor can make a bad decision.

Currently, creditors can obtaincredit reports on commercialdebtors, but statutes changefrequently and case law oftenabrogates creditor rights. A creditorneed the ability to obtain updatedinformation regarding the debtor asthe creditor deems necessary. Soobtaining the right to fully in-vestigate the debtor’s credit andfinance history will protect acreditor should the law change andrequire the commercial debtor’spermission.

Application Constitute AgreementCreditors often use the credit

application as the contract. Toprotect the creditor, the applicationshould have language that providesthat the terms and conditions listedon the application will, uponextension of credit by the creditor,constitute an agreement of sale andthat the applicant agrees to be

bound. Byadding suchlanguage, thedebtor/applicant isput onnotice thatthe terms and conditions willapply during the contractualrelationship.

Amending TermsAdditionally, creditors may also

want to include language that theterms and conditions of theapplication/contract can beamended only in a writtenamendment, signed by the parties.Terms that differ from the originalterms and conditions must beexpressly approved in writingsigned by the creditor. This isimportant as a debtor mayattempt to change the terms byadding language in a purchaseorder and include the provisionthat should the creditor fill theorder, the creditor is agreeing tothe new terms.

Late FeesWhen an account remainspartially unpaid after becomingdue, a creditor will want to collectinterest. The interest rate beingcharged should be set out in thecontract. Unless the contract statesa specific amount, the creditor canbe held to either the statutoryamount for the state whose laws




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Legal Corner,continued from page 6

apply, or be barred from collectinginterest. Most contracts allow formonthly interest of 1.5%, whichwould amount to 18% a year.Contracts will provide theinformation on a monthly basis ascreditors expect net termsgenerally around 30 days. InOregon, the statutory rate is 9% ayear. In Washington State, it is12%.

Collection and Legal CostsAll collection costs, attorney fees,

and legal expenses shouldspecifically be included in theterms and conditions of theapplication/contract, andgenerally be “reasonable.”Otherwise, the creditor will not beallowed to collect them from thedebtor. Still, regardless of whetherthese are provided for in thecontract, some state courts willnot allow recovery of suchexpenses and fees. In Oregon,given the credit application isproperly worded, such costs arerecoverable.

State Laws and JurisdictionContracts should include

information as to which state’slaws will apply for any litigationthat may arise out of the contract.This generally will be the law ofthe state where the creditor islocated, but the parties can agree

to the laws of any state to which thecontract has some connection.

Contracts also should outline thejurisdiction for any litigation thatmay arise. If the debtor is located ina distant state, and the contract doesnot specify the state jurisdiction, thecreditor may be required to file suitin the debtor’s state. Listing ajurisdiction does not mean that thecreditor cannot file suit in thedebtor’s state. The creditor canwaive that contract provision andfile suit in a court in the state wherethe debtor has a presence.

ConclusionOverall, any contract can beinterpreted to either party’s benefit.A creditor may not be able toeliminate all contract disputes, butby adding a few terms into acontract, the number of disputesmay be limited. Industry specificterms and conditions were notcovered in this article. For those, werecommend talking to an attorneywho regularly represents you orwho works with others in yourindustry.

National Summaryof Domestic TradeReceivable Results

We have received the results ofthe National Summary of DomesticTrade Receivables for the thirdquarter. As you know, the CreditResearch Foundation has beenproducing this valuable quarterlyreport for more than 50 years.

DSO increased slightly from theprior quarter to 42.30 from 41.15. Ayear ago the measure was 41.37.Best Possible DSO was 31.89, ascompared to 31.60 last quarter and31.70 a year ago. Average DaysDelinquency decreased to 6.10 from6.80, as compared to 6.50 a year ago.The percent reported over 90 dayspast due increased to 0.90 from 0.80,as compared to 0.98 a year ago.Medians for 22 different industriesare included in this summary.

This report included indicators forcertain industries, and copies areavailable. Please contact yourCustomer Service or MemberServices Representative.

Now that you've done the NSDTR,if you really want to see how you'redoing, you'll want to participate inCRF's comprehensive benchmarkingsurvey. You can do that athttp://www.crfonline.org/surveys/benchmarking/benchmarking.asp

Brenda Terreault is theCollection ServicesManager for NACMOregon and an Oregonattorney. Her email [email protected].



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Good Morning Credit!

The Good Morning Credit! series is an excellent way to learnfundamental credit and collection management techniques, totrain new staff, or to have a good review. The program startsat 7:30 a.m., so you or your staff can head back to the officeby 9. Join us for these informative sessions packed withpractical tools for immediate use.

Second Tuesday of each month (except August), 7:30 - 9 a.m.NACM Oregon, 7931 NE Halsey, Suite 201, Portland

$35 (Members); $45 (Nonmembers)

.15 CEU per class

November 13—International Credit MethodsDecember 11—Bankruptcy Basics for Creditors

Half-day Seminars

Human Resources for Credit ManagersPresenter: Patricia Altenhofen, Cascade EmployersAssociation

November 14, 2007

8:30 a.m. - 12 p.m.NACM Oregon Boardroom

Learn about effective interviewing, hiring, disciplining anddischarge, and the laws and regulations that govern humanresource management.

Getting Exceptional Collection ResultsPresenters: Cheryl Wahlberg, CCE, and Isaac Miller, FoodServices of America

November 14, 2007

8:30 a.m. - 4 p.m.NACM Oregon Classroom

An overview of collecting accounts as a basic function ofcredit management, with emphasis on effective telephonecollection techniques.

Education

Measuring and Reporting Performance of the CreditDepartmentPresenter: Ron Hill, Xerox Corp.

Learn how to measure the credit department's effectiveness inreducing bad debt, increasing sales, and cashflow.

Date: December 6, 2007

Time: 8:30 a.m. to 12 p.m.

Location: NACM Oregon Classroom7931 NE Halsey, Suite 201

All-day Seminars

Security: Beyond Open CreditPresenter: Brenda Terreault, Attorney, NACM OregonCollection Manager

November 6, 2007

8:30 a.m. - 4 p.m.NACM Oregon Classroom

Credit managers will learn about Article 9 of the UniformCommercial Code, how to develop a system of security interestsin accordance with applicable laws, and when to seek legal help.

Oregon/Washington Lien Law (2-days)Presenter: Jason Alexander, Partner, Sussman Shank, LLP

An overview of Oregon and Washington construction lien laws,from lien law legislation to filing a lien and how the foreclosureprocess operates.

Date: November 7 & 8, 2007

Time: 8:30 a.m. to 4 p.m.

Location: NACM Oregon Classroom7931 NE Halsey, Suite 201

Credit: 1.2 CEU

Cost: $265 for NACM members$375 for nonmembers

Half-Day Seminars, Continued



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NACM-OregonFoundation Scholarship

NACM Seminars - $1,000

Certification Fees—to establish files and for continuingcertifications and recertifications.$2,000

College Courses approved and required forAccreditation and Certification. Includes online coursesoffered through NACM National EducationDepartment—proof of completion required—$2,000

Certified International Credit Professional Fee—FCIB on-line course $350

Meeting Room Rental

NACM Oregon has meeting rooms available foryour organization’s use.

The larger room,approximately 700 squarefeet, will comfortablyaccommodate 24 peopleclassroom-style or 35people theater-style. Thisroom has whiteboards ontwo walls, and all contemporary technology isavailable.

Meeting Room Rental Fee: $190 per day/$70 per hour (two-hour minimum). NACMOregon Members and Building Tenantsreceive a 50% discount on these fees.

NACM Oregon also has a Boardroom thatcomfortably accommodates ten people. This roomincludes a whiteboard and appropriate technology.

Boardroom Rental Fee:$150 per day/$50 per hour (two-hourminimum). NACM Oregon Members andBuilding Tenants receive a 50% discount onthese fees.

The Banfield Plaza, an NACM Oregon property, iscentrally located at the I-205/I-84 junction inPortland. NACM Oregon offices are on the secondfloor. For more information please contact LisaRogstad, Building Manager, at 971.230.1160 oremail [email protected].

CONGRATULATIONS

Congratulations to the following recipients ofthe NACM-Oregon Foundation scholarships tothe Oregon/Washington Lien Law Seminar:

Mara Braaten, Pacific Power ProductsRobyn Christensen, Cummins Northwest, LLCNadine Sabado, Cummins Northwest, LLC



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Upcoming Events

NACM ONACM ONACM ONACM ONACM OREGONREGONREGONREGONREGON

FFFFFOUNDATIONOUNDATIONOUNDATIONOUNDATIONOUNDATION’’’’’SSSSS

A SA SA SA SA SWINGINWINGINWINGINWINGINWINGIN' 40'' 40'' 40'' 40'' 40'SSSSS G G G G GALAALAALAALAALA

HHHHHOLLYWOODOLLYWOODOLLYWOODOLLYWOODOLLYWOOD-S-S-S-S-STYLETYLETYLETYLETYLE

MARK YOUR CALENDAR FOR SATURDAY, APRIL 5, 2008,FOR A SWINGIN' 40'S GALA. PLANS ARE UNDERWAY FOR

A TRUE HOLLYWOOD-STYLE EXPERIENCE.

WE ENCOURAGE ALL MEMBERS TO SUPPORT THIS

FUND-RAISING EVENT BY DONATING AN ITEM.

PROCEEDS BENEFIT THE NACM-OREGON

FOUNDATION THAT GRANTS SCHOLARSHIPS TO CREDIT

PROFESSIONAL FOR CONTINUING EDUCATION,PROFESSIONAL DESIGNATIONS, AND CONFERENCE

EXPENSES.

Holiday BreakfastJoin us Thursday, December 13, 2007, to

celebrate the season.

Our special guest, MargieBoulé, will present inspirationaland uplifting stories sure to fillyou with appreciation for thistime of year. This program alsopromises to touch your funny bone and bring a smileto your face, so don't be left out.

CFDD Portland will be having their annualBaskets of Cheer for the holiday breakfast. This is afund-raiser for the scholarship fund to supportPortland Chapter members with educationopportunities throughout the year.

You may register with Claudia Sarinana,[email protected] or 971.230.1184.

Watch for more information!



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Commercial Fraud InsightSM

Verify your customers's identity while protecting yourbottom line

Knowing your customer has never been more crucial.Commercial Fraud InsightSM can help you mitigate fraudand comply with customer Identification Program mandates

Quickly verify business informationIn today’s risky business environment, it’s more

important than ever to verify the identity of yourcustomers. Whether it’s mitigating fraud losses orcomplying with federal "know your customer" mandates,verifying the accuracy and truthfulness of the informationyour customers are presenting to you is not an option; it's anecessity.

But manual verification can be costly and slow, In today’sfast-paced marketplace, you need a solution that providesreliable information and reduces approval time in order tostay competitive. Verifying business information is morecomplex than verifying the identity of an individual. Withthe possibility of multiple trade names, locations, andguarantors, the cost of manual verification can quickly addup. This is especially true for small-business transactions,where lower dollar amounts may not justify in-depth duediligence and information on the business may be scarce.

Mitigate fraud losses and reduce search costsThat’s why Experian® created Commercial Fraud

Insight, the most comprehensive and powerful commercialfraud and authentication solution available. Through asingle inquiry, Commercial Fraud Insight quickly analyzesdata on:

Business name or “doing business as” (DBA) nameUp to two business addressesBusiness Tax ID Phone numberUp to two sets of consumer (personal guarantor)information

Commercial Fraud Insight draws on the depth andbreadth of multiple Experian databases, including the

National BusinessDatabase of more than16 million U.S.businesses and Experian’s vast consumer database ofmore than 215 million consumers.

Within seconds, Commercial Fraud Insight:

Validates application information for accuracyVerifies the application information fortruthfulnessProvides a consistent, comprehensive evaluationof all the commercial application information to detectpossible fraudDelivers both high-level alerts and detailedinformation from multiple sources in a simple, cost-effective reportAllows clients to further automate and streamlinetheir application process while mitigating costlycommercial fraud

The strength of Commercial Fraud Insight lies in thewealth of information in Experian’s databases it uses toidentify indicators of fraud.

Address verification confirms the business address andverifies address deliverability based on U.S. PostalService standardsVerifies business name and business address dataIdentifies high-risk addresses and phone numbersVerifies Business Tax ID utilizing Experian's TaxIdentifier,SM Experian's proprietary repository of more than13 million unique Tax IDsVerifies consumer’s (personal guarantor’s) name andaddress dataValidates and verifies consumer’s (Personal guarantor’s)Social Security numberPhone verification identifies phone number anomaliesand confirms that the phone number is associated withthe business or consumerHistorical matching of previously submittedapplication data identifies when a business or



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individual is making additional attempts to obtain services by changingapplication informationChecks inquiry information against the Office of Foreign Assets Control(OFAC) watch list

Commercial Fraud, continued from page 11 Let NACM OregonGet a Handle On

Those Small Claims

Would you rather spend timemaking on new deals or preparingfor appearance in small claimscourt on old deals?

And after getting the judgmentyou spend additional precioustime still trying to get paid.

Let NACM Oregon’s SmallClaims Division handle thosesmall claims for you.Service includes:

Analyzing the account forlegal issues

Analyzing the debtor’s creditfor possible income and assets

Compiling necessary evidence

Appearing with you and foryou in court

For more infomration contactMarmie Carpenter at971.230.1200 [email protected]

Mitigate fraud on the front endStreamline the application process

ACQUIRE

Reduce fraud lossesMinimize charge-backsStandardize new account evaluation criteria

ASSESS

Improve customer serviceIncrease competitive advantageShorten the revenue cycleReduce administrative costs

MAXIMIZE

Ensure policy compliance across your entire organizationLeverage as a tool for regulatory compliance

MANAGE

To find out more about Commercial Fraud Insight,contact your Member Services Representative at503.257.0802



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International Cornerby Alice Knight

There is an old saying that “a sale is a gift until you getpaid.” This is true for both domestic and internationalcredit. A primary goal in business is to get paid for yourproduct or service.

There are many different ways to mitigate the risk ofnonpayment. You can do extensive credit analysis on thecustomer. You can do in depth Country Risk analysis. Youcan use varying levels of security or payment methods.All of these activities have a cost. The cost can be actualdollars spent for reports, people costs for the time spent,and the potential cost of loss of market share.

You can expend significant margin if your creditreports and analysis are too expensive. Time spent onlengthy analysis is time not available for other duties. Youcan loose a customer if it takes 30 days to approve theircredit. You can not generate much market share if yourequire cash in advance and your competition is offeringopen account.

One of the challenges for credit professionals is tobalance risk – cost – reward. You can have a zero baddebt rate if you require cash in advance but, then again,you might have zero sales!

One tool that has been used in Europe for a long timeis credit insurance. At one time credit insurance in theU.S. was primarily used by large multinationals. Today itis a potentially useful tool for companies of any size.

Credit insurance comes in all shapes and sizes. It can betailored to individual needs, experience levels, and costs. Ingeneral, credit insurance protects against nonpayment.For international receivables companies usually alsoinclude protection against political risk.

Credit insurance can be for specific customers or for ageneral range of customers (spread of risk). Someinsurance companies prefer to do the investigation andanalysis and set the specific limit themselves. They haveextensive files for customer and country analysis andusually set a limit within a very short time frame. Somecompanies allow the insured “discretionary limits” based

on their level of expertise and credit policies. For foreignsales there is often a country limit as well as customerlimit for exposure.

Having the insurance company evaluate and set specificlimits can save the cost of customer credit and/orcounty reports. It can also save valuable personnel time.

Premiums vary widely based on the level of coverageand the spread of risk. Individual policies are generallymore expensive than a policy covering a range ofaccounts. For example, a policy covering all accounts witha requested limit of $100,000 or more, the good as wellas the risky accounts, would be spread of risk. You payfor the good accounts to help cover the risk of thequestionable accounts.

The premium can also be affected by a co-pay ordeductible (often 10%) a minimum amount before a claimis submitted, multi–year provisions or rebates for noclaims submitted.

Many lending institutions will not include foreignreceivables in a lending base unless they are creditinsured.

Credit insurance protects against nonpayment but itdoes not protect against slow pay. If cashflow is a primeconsideration you will want to balance the cost ofsecured timely payment such as letter of credit ordocuments against payment against the cost of creditinsurance but potential slow pay.

Credit insurance can be a valuable tool if understoodand used wisely. It is not a magic solution for all creditrisk. It is one of many tools to use in meeting the needsof your specific company.

Alice Knight is Vice President of Finance &Administration for Paper Products Marketing (USA) Inc.,Ms. Knight has more than 35 years of experience inInternational Finance and is an active member of FCIBand NACM. She has served as Co-Chair, Panel Memberand Presenter at Annual Global Conferences, as Presidentof FCIB Forest Products Group, and participated in FCIBConferences in Mexico, Puerto Rico, Munich, and Brussels.She is currently a member of FCIB Board of Directorsand the FCIB Hotline Committee.



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Industry groups give you the unique opportunity to talk with other credit professionals in your industry and base your creditdecisions on current and accurate information. You can share your payment experience of common customers, and exchangetechnical and education information concerning your industry. You will be better informed and better protected.

Who is eligible for the Paper Industry Group?Any company that manufactures or distributes paper, paper products, and printing supplies or services to the printingindustry.

Who are the companies that participate in the Paper Industry Group?Col Tab, Inc. Columbia Corrugated Box Co. Fuji Film Graphic Systems USAInk Systems, Inc. Merchants Paper Rapid Bind, Inc.Spicers Paper, Inc. West Coast Paper Co. Xpedx

Industry Group Highlight of the MonthPaper

SPICERS PAPERNANCY PECH

ADMINISTRATIVE ASSISTANT

“NACM Oregon industry groupsare a great resource, fun, andinformative. The Paper Group thatmeets monthly is very helpful toSpicers Paper, not only withexchanging credit information anddiscussing industry changes, but isalso a great learning tool. An

example of this is when check by fax first came out, NACMOregon informed us of this new tool at our industry group.NACM Oregon also helps us to be proactive and stay on topof certain situations.

They have a very professional staff that is excellent incommunication to their members, both by email and mailings.I highly recommend their services.”

WEST COAST PAPERCHERI LOYD

CREDIT MANAGER

The Importance of NACM Oregon Trade Groups"Every credit professional relies

on multiple sources of informationto open and maintain accounts soldon terms. By being a member of andattending a trade group you arebeing exposed to the newest mostreliable firsthand information

available. Your peers are playing the same game you are;protect your company’s assets and service the customer.

It’s true, rules must be followed, i.e. past and completedtransactions only; no conjecture of any kind is permitted.The payment information you are receiving in your tradegroup meeting is up to the minute and accurate.

The camaraderie is a bonus. Our profession gets littlerespect or empathy from the outside world. In the meeting,everyone knows, understands and respects what you aregoing through to collect the accounts in a positive mannerand maintain a great DSO.

I have attended trade groups for almost 20 years andbelieve they are a valuable tool in protecting my company’sbiggest asset: their receivables. It would be much moredifficult to do a good job without my monthly trade groupmeetings."



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The seasonally adjusted Credit Manager’s Index (CMI) fell 1.0% in October as half of the 10 components fell. While thedecrease was modest, it drove the CMI to its lowest level since February of 2003. Both the manufacturing and service sectorsdeclined and in both, the largest single drop by far was in the dollar amount beyond terms component. For the combinedindex this component fell sharply by 6.9%.

Euler Hermes ACI Chief Economist Daniel North summarized the results saying, “The data suggest that our respondents’customers are having difficulty coming up with enough cash to pay their bills on time. This condition could be a result eitherof their own customers’ inability to pay on time, or perhaps because they have built up too much inventory which hasn’t soldas quickly as planned. Whatever the origin of the problem, it probably reflects the weakness in the economy that is likely toturn worse over the next few quarters. So far, credit managers have been able to contain the triple threat of higher oil prices,the burst housing market bubble and the lingering effects of tightened monetary policy conditions. But the combination offalling indexes, and three of the 10 combined components dipping below the 50 level indicating contraction, suggests thatthe deterioration in the rest of the economy may be starting to catch up with them.”

Credit Manager's Index

Combined Manufacturing & Service Sectors (seasonally adjusted)

Oct Jan‘06 Nov Dec ‘07 Feb Mar Apr May Jun Jul Aug Sep Oct

56.3 59.5 60.9 61.6 59.6 58.1 62.8 61.5 61.9 60.2 59.1 59.0 54.7

56.2 56.5 60.5 60.9 52.5 55.9 56.7 56.2 58.6 56.0 55.6 55.3 53.3

58.3 62.6 59.5 64.8 66.2 58.4 61.5 61.9 61.0 60.2 60.1 60.0 60.0

63.2 64.0 63.7 65.3 63.6 62.4 59.3 62.2 63.6 63.0 61.6 60.1 58.7

58.5 60.6 61.2 63.2 60.5 58.7 60.1 60.5 61.3 59.9 59.1 58.6 56.7

54.8 51.7 50.1 51.6 52.7 51.9 52.4 52.7 52.6 53.4 51.1 51.8 52.0

53.1 50.7 47.8 50.2 50.3 48.4 54.0 51.5 52.0 49.8 50.7 49.0 49.6

49.7 49.9 47.9 51.0 52.1 51.0 51.2 50.7 51.9 51.9 52.2 50.2 49.4

52.2 50.2 48.1 50.1 50.5 53.5 50.1 53.0 52.0 48.9 51.4 55.3 48.4

50.5 51.3 49.2 51.7 52.0 49.3 49.3 53.3 53.0 48.8 52.2 49.9 51.5

59.1 56.3 59.7 57.0 55.9 55.7 56.8 57.4 57.5 57.3 57.2 57.7 60.4

53.2 51.7 50.5 51.9 52.3 51.6 52.3 53.1 53.2 51.7 52.4 52.3 51.9

54.5 54.1 54.1 54.2 53.3 51.7 55.4 57.4 58.4 54.8 54.4 53.4 N/A

Sales

New credit applications

Dollar collections

Amount of credit extended

Index of favorable factors

Rejection of credit applications

Accounts placed for collections

Disputes

Dollar amount beyond terms

Dollar amount of customer deductions

Filings for bankruptcies

Index of unfavorable factors

ISM Combined Sectors Index



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CFDD Chapters

Salem/AlbanyThis chapter of the NACM Credit& Financial Development Divisionmeets the second Tuesday of eachmonth.

Meeting Date: Tuesday,November 13, 2007

Location: Geppetto's Restaurant &Bar, 616 Lancaster Dr., NE, Salem

Luncheon: 10:30 - 11:30 a.m.

Topic: "Business WritingCommunication"

Presenter: Theresa Quillard,Accounts Receivable Supervisor,Air BP Aviation Services

Coordinator:Theresa [email protected]

Eugene/SpringfieldThis chapter of the NACM Credit& Financial Development Divisionmeets the second Wednesday ofeach month.

Meeting Date: Wednesday,November 14, 2007

Location: Downtown AthleticClub Conference Center999 Willamette St., Eugene

Networking/Lunch: 11:30 a.m.Presentation: 12 - 1 p.m.

Topic: "The Use of Mediationand Arbitration in ResolvingBusiness Disputes"

Presenter: Serena Lee, VicePresident for Business Develop-ment, The American ArbitrationAssociation

Coordinator:Mary Ann GridelliFarwest Steel [email protected]

PortlandThis chapter of the NACM Credit& Financial Development Divisionmeets the second Thursday ofeach month.

Meeting Date: Thursday,November 8, 2007

Location: Red Lion ConventionCenter, 1021 NE Grand Ave., 6thFloor, Portland

Networking Time: 5:30 p.m.Dinner: 6 p.m.

Topic: "Fraud InvestigatingVia the Internet"

Presenter: Helena Snyder,Certified Fraud Examiner, PettusInvestigations, LLC

Coordinator:Diane Snyder, CCERodgers Instruments, [email protected]



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Preference Defense, from cover 2 www.paemploymentlawblog.com3 Court decision is pending, defendant asked to remainanonymous.

Dorman Wood, Co-Founder and President, of Dorman WoodAssociates, Inc., is a Certified Credit Executive and CertifiedExpert Witness with more than 35 years of professional creditand financial management experience including: credit andcollections; treasury, bankruptcy; revenue recognition; leasing;software compliancy; sales, product marketing; fulfillment andorder management.

He is an alumnus of the Graduate School of Credit andFinancial Management, Stanford University, St. Mary’s Collegeof California, and a FELLOW of the Credit ResearchFoundation.

Dorman currently serves on the Bankruptcy Litigation andUnsecurred Creditor’s Committees of the American BankruptcyInstitute.

He enjoys a national reputation in the professional creditcommunity as a proven asset manager, educator, seminarleader, published author, process improvement, and e-commercespecialist. Dorman has been certified as an expert witness innumerous court proceedings involving bankruptcy and accountsreceivable asset litigation.

He is a member of NACM Oregon and the Bankruptcy &Insolvency Group, which is sponsored by NACM Oregon.

Other examples of such creativity were apparentin a preference suit filed in the 8th Circuit (EasternDistrict of Missouri)3, in which plaintiff ’s attorneylisted the following reasons had not met theburden of proof for an ordinary course defense: 1)defendant’s use of a lock box for collection ofcustomer payments was notordinary; 2) defendant’s observance of customers’instructions for payment application [remittanceadvice] was not ordinary; 3) accuracy and validityof documents reprinted from defendant’s ERPsystem were unreliable due to a system conversion;4) due to system conversion, defendant couldreprint documents that were identical to theoriginals sent to plaintiff prior to the conversion,and 5) weekly phone calls by defendant to plaintiffto follow up on payment schedules was notordinary.

While credit executives, and perhaps somebankruptcy professionals may be left scratchingtheir heads over some of the above listed points,they are a few examples of what creditors may berequired to prepare for in defending a preferencesuit. Creditors may also use them as reminders ofareas of their business and credit departmentoperations that should be reviewed and revised ifnecessary with an eye toward preference defense.

While the intent in revising §547(c)(2) mayhave been to ease the ordinary course of businessdefense burden of proof for creditors, manybankruptcy professionals believe it still too earlyto how the courts will rule in the current cases inprogress, as well as those filed in the future. In reNational Gas Distributors, LLC, 2006 WL2135557 (Bankr. E.D.N.C.), not withstanding, itstill appears too early to label the “ordinarycourse” revisions as “creditor friendly.”

NACM Oregon LibraryNACM Oregon has a number

of outstanding books and videotapes in the Phylliss ClarkMemorial Library. Check outthe current Barry Elms' seriesvideo tapes.

Also available is the October 2007 Auto SupplierUpdate Newsletter.

These resources are available without charge tomembers through our library. We encourage you tomake use of this excellent collection of resources.

Feel free to come into the office and check out abook(s) or video tape(s). Several books can bepurchased from NACM National Bookstore.



N O V E M B E R 2 0 0 7


ChairmanPat Jones, Consolidated Supply [email protected]

Vice ChairBarbara Davis, CCE, Liberty NW Insurance Co., [email protected]

SecretaryDoug Jacobson, CCE, [email protected]

TreasurerDarrell L. Robinson, E C [email protected]

CounselorCheryl Wahlberg, CCE, Food Services of [email protected]

DirectorsTony Ceniga, Industrial Finishes & [email protected]

Steven Fancy, CCE/CICP, Pope & Talbot, [email protected]

Kellie Hainline, National Builders Hardware [email protected]

Sue Hein, Rapid Bind, [email protected]

Kimi Shelton, [email protected]

Raeann Smith, North Pacific [email protected]

Rick Weisman, CCE, Graybar Electric Co., [email protected]

PresidentRod Wheeland, CCE, CAE, NACM [email protected]

Board of Directors NACM OregonCustomer Service/Credit [email protected]

EducationClaudia [email protected]

Industry GroupsKathy [email protected]

Claudia [email protected]

Collection ServicesDenise [email protected]

Credentia Staffing ResourcesKaren [email protected]

BillingBarb [email protected]

Meeting Room RentalLisa [email protected]

Business Credit Journal - NACM Commercial Services

Documents

Transcript of Business Credit Journal - NACM Commercial Services