HEARTLAND

HEADLINERPUBLISHED BY NACM HEARTLAND UNIT, INC.

Managing Risk Without the Financials

SPRING 2016

The best case scenario for credit managers evaluating credit applications is to have a complete picture of the company who has applied for credit. This typically means the company has provided access to the financials. Yet, in today’s environment, there are a number of valid reasons you don’t have access to financials.

So what do you do?

First, realize that extending credit is an art. We can put hard and fast rules in place to help guide the process, but some of the most successful credit managers also allow “the gut” to play a role in the decision process. We can go by what experience has taught us, but there are also other ways to gather the information necessary to mitigate risk.

Customer visits If possible, a visit to the client’s facilities can tell you a lot about a company. Is it clean? Is it well organized? Simply looking around the facilities can tell you how a business is run and whether it is worth a gamble.

Evaluate health of industryAll industries go through a cycle – some times are better than others. For example, look at the oil and gas industry. It doesn’t take more than reading the newspaper to realize this is an industry in flux. That doesn’t mean all the companies that do business in this space are doing poorly. Take a look at where they are positioned. Are they established? Who are their

biggest customers? You may be able find this information in public records, but it is more likely you’ll have to engage in a conversation with the client to get answers.

Engage in meaningful conversationTake a step away from scripted questions and demonstrate interest in how the company has gotten to where it is, as well as what its growth strategy might be. Questions such as “How have you been successful selling in this turbulent time” can show whether there is a plan in place or the company is shooting from the hip.

Identify red flagsIf a company doesn’t want to share their financials with you, you have to respect their decision but you don’t have to walk away from a potentially profitable partnership. Yet, be aware there are “red flags” such as:

• Asking for an amount of credit significantly more than expected.

• Hesitation to provide industry references.• Difficulty arranging time to discuss

questions from application.

Even without financials, you have other avenues to explore during the due diligence phase of the credit application. Just remember, not all decisions have to be made with data … a little sleuthing, a little experience and listening to your gut can set you and your new client down a successful path for years to come.

How to Determine the Proper Risk and Exposure Without Financials

PRESENTED BY:

Ed Bell, PhD, CICP, ICCE Sr. Manager, Credit Administration, Grainger

Friday, May 13 | 11:30 am –1:30 pmDes Moines Golf and Country Club1600 Jordan Creek Parkway, West Des Moines

We have the unique opportunity to preview what will most certainly be a popular 2016 Credit Congress breakout session. Dr. Ed Bell will explore the options and tools that are available to help you determine the appropriate credit limit — if you don’t have access to financials. Ed will cover the:

• credit review process including what information is needed,

• sources of the information and • steps to complete the review.

COST $35 members | $45 non-members

RSVP to Maggie Bessenbacher at Maggie@nacmheartland.com or 888.222.1447.

MAY

5.2–8.19 Accounting Online Course

5.2–7/.29 Business Law Online Course

5.2–7/.29 Credit Law Online Course

5.4 Risk Mitigation Tools

5.9–8.7 International Credit & Risk Management Online Course

5.9 Article 9 of the Uniform Commercial Code:

A Beginner’s Guide to Secured Transactions

5.10 Export Compliance & Regulations Webinar 4

5.12 Protecting a Global A/R Portfolio with Trade Credit Insurance

5.13 Lunch & Learn: How to Determine th Proper Risk &

Exposure Without Financials

5.16 Learning to EXCEL with NACM: Part 2

5.26 Heartland Construction Meeting – Johnston, IA

5.26 Commercial LCs

5.30 Paperwork Deadline for the Certification Exams on July 25th

JUNE

6.11–6.15 Business Credit Principles

6.11–6.15 Financial Statement Analysis 2: Credit and Risk Assessment

6.12–6.15 120th Annual Credit Congress & Expo

6.12 Certification Exam Date – June 12, 2016 - Credit Congress

6.20–6.30 The Graduate School of Credit and Financial Management®

6.23 Heartland Construction Meeting - Johnston, IA

6.23 Heartland Board Meeting

6.23 Iowa Cubs Game/Family Night

JULY

7.4 Happy Independence Day!!!

7.20 Credit Resources - What to look for in credit reports

and examining other resources available

7.21 Trade Credit Financing

7.25 Certification Exam Date: July 25, 2016

7.27–28 Heartland Construction Meetings

Calendar of Events

HEARTLAND AG CONFERENCE SUMMARY

On March 3, more than 60 NACM Heartland members gathered on the DMACC campus in Ankeny, Iowa, to a summit regarding current and future ag trends.

Some takeaways included:

• Don Foley noted that today’s bankers are younger and less educated and experienced than they have been in the past. This creates its own set of challenges. However, he noted that an early 2016 survey noted they were largely positive about the coming year, but guarded about the future. Concerns that were identified included rising costs, declining cash flows and the ability to communicate honest projections.

• Chad Hart covered managing risks and government payments. The biggest challenge he sees is the uncertainty in the coming years. While U.S. remains the largest producer of corn, China is the largest planter of corn, which may impact the export market. The supply of crude oil is greater than demand – for now. And, the soybean market is challenging. All of this creates concerns about cash flow and liquidity as well as how best to protect working capital. He suggests diversifying income by either adding or minimizing non-farm income. It will also be important to maintain cash reserves and credit lines while looking to revise production costs, scale of operations and fixed costs.

• Rod Kubat provided some tips for securing your loans and collections. First, make sure you have a written notice of security interest. The agreement should include a list of buyers as well as the penalty for selling to someone else.

Editor’s note: Thanks to Valerie Moore and Nealey Powers who took the great notes that made this article possible.

2016 LUNCH AND LEARN

BARR Credit Services Innovative Ag ServicesLeaf River Ag ServiceMunson Lakes Nutrition

Editor’s note: This article was written after an interview with Ed Bell of Grainger, who will be presenting a session at Credit Congress titled, “Managing Risk Without the Financials.” He will be presenting the same topic at a NACM Heartland Lunch and Learn on Friday, May 13 at the Des Moines Golf and Country Club in West Des Moines, Iowa.

Osakis Creamery AssociationPro CooperativeStateline CooperativeSunrise Ag Coop

WELCOME NEW MEMBERS

N A C MH E A R T L A N DNational Association of Credit Management

THURSDAY JUNE 23

RSVP to Maggie@nacmheartland.com or 888.222.1447

We’ll watch the I-Cubs take on the Nashville Sound from the comfort of a suite at Principal Park.

Snacks are provided, and there will be a cash bar.

ONE OF NACM HEARTLANDS’S MOST POPULAR FAMILY EVENTS IS COMING UP!

Adults: $20 Children under 13: $10

Principal Park | 6 pm

TAKE ME OUT TO THE

HEARTLAND HEADLINER • WWW.NACMHEARTLAND.COM HEARTLAND HEADLINER • WWW.NACMHEARTLAND.COM

Education Opportunities Abound

CREDIT MANAGER’S TOOLBOX:

UTA Releases Mobile Deposit SolutionNACM Heartland partner, United TranzActions (UTA), has announced the upcoming release of their new Mobile Deposit solution.

Accept check payments while on the go, anytime, anywhere, with UTA’s mobile application. Whether you have an iOS or Android device, UTA’s user-friendly Mobile Deposit enables your company to take full advantage of all of the benefits that UTA’s check processing solution has to offer including, Check Guarantee / Verification, Remote Deposit Capture (with Guarantee), and ACH processing (with Guarantee) from the convenience of a mobile device. Features include: • Capture payments outside of your

traditional Point of Sale environment• Take images of checks with the camera

on your own Apple or Android device• Obtain a guarantee authorization from

UTA in seconds• Deposit approved checks remotely into

your existing bank account• Have access to your guaranteed funds

within two business days• Access comprehensive reporting• Accept personal or business checks

from virtually any customer, anywhere To learn more about UTA Mobile Deposit, please visit go.unitedtranzactions.com/mobiledeposit.

One of the single best values of your NACM membership is the number of educational opportunities you have access to. In addition to the lunch and learns and events planned by NACM Heartland, you may take advantage of a variety of sessions offered by NACM National.

Live WebinarsNACM webinars are an interactive platform that simulates online educational presentations. Using a chat function, you may share your comments and questions to enhance the quality and diversity of the conversation. It feels as though you are in the room with the speaker and sharing the educational experience without leaving the office. Topics of upcoming sessions include: Article 9 of the Uniform Commercial Code: A Beginner’s Guide to Secured Transactions, Protecting a Global A/R Portfolio with Trade Credit Insurance, Commercial LCs and Credit Resources - What to look for in credit reports and examining other resources available.

On-demand WebinarsNACM offers digital audio replays of our past webinars. The webinar prices are $249 for 60-minute webinars and $299 for 90 minutes. Visit nacm.org to order access the link to the webinar and the handouts provided by the presenter. Within one business day after submitting your order, you will receive an e-mail the information necessary to access the replay.

Credit Learning CenterThe Credit Learning Center brings targeted, quality education to your desktop from the name and brand you’ve trusted for more than a century - NACM. Carefully selected, expert instructors present 50-minute audio/visual presentations on a wide array of topics. You choose what learning module you want to take, and when, and view it on your computer at your convenience. You may also work toward completion of a course or specialty certificate. Modules are created and added periodically throughout the year.

Professional CertificationsThe certification program, sponsored by the National Association of Credit Management, has helped define and establish professional standards in this demanding and rapidly changing field, and fosters recognition of those individuals who possess special expertise. There are six levels of certification that can be obtained in a variety of ways including online or in person classes.

The Graduate School of Credit and Financial Management® (GSCFM®)The GSCFM, conducted on the campus of Dartmouth College, is a two-week per year (for two years) intensive program exposing participants to a wide range of ideas, practices and resources, and leads to the mastery of new concepts and the development of a new, clear vision.The program delivers high quality, application based credit, financial and management instruction in a setting designed for executive education. The professional relationships that develop throughout this program are a critical component to the program’s long-standing success.

Learn more about any of these opportunities at

nacm.org/education

Credit Congress Is Almost Here!

Things are getting exciting for the 2016 Credit Congress in Las Vegas June 12–15! There is still time to register. Visit credit congress.nacm.org to register online.

Some things to keep in mind if you are planning on attending this year’s event:

• Our annual NACM Heartland member and vendor reception will be held Sunday, June 12 from 6-8 p.m. in the Octavian Ballroom 7 in Caesar’s Palace. If you will be joining us, RSVP to Maggie at 888.222.1447 or Maggie@nacmheartland.com no later than close of business on June 1.

• There are a number of great educational opportunities. For example, you can pick up tips on how to extend credit when you don’t have access to financials presented by Ed Bell from Grainger. (He’ll be giving us a preview at an upcoming lunch and learn. Preregistration numbers indicate these are two other hot topics.

Key Ratio Analysis: Calculating the Numbers Correctly! Presented by David Osburn, Osburn & Associates, LLC will teach you how to utilize a “five-step” key ratio analysis plan to correctly interpret the financial condition of the business client. The key ratios cover liquidity, activity, leverage, operating performance and cash flow analysis. It will further review the Z-score and sustainable growth models and help you apply the concepts through case analysis.

Becoming a Lie Spy – Clues if Someone’s Being Honest presented by Karen Purves, innovative impact, will help you understand human behavior and identify when people behave in a trustworthy manner. There’s a science to decoding unconscious behaviors and you can hone your observational skills to help you, and others, act with integrity. This innovative and engaging program shares numerous, practical, insider tips to identify cues and gain insight on human behavior. You’ll leave better able to gather information and trust your judgment about someone’s behavior to reduce deception. Karen shares specific steps to get to the truth, preventing costly mistakes, increasing positive outcomes and allowing you to make better decisions!

These are just three of the many great sessions offered. Make sure to check out the detailed schedule online for more information.

• Interested in certification opportunities? Two certificate session courses are being presented at the 2016 NACM Credit Congress, Business Credit Principles and Financial Statement Analysis 2: Credit and Risk Assessment. They are held from Saturday morning through Wednesday afternoon of the conference and are separate from our educational breakout sessions. Participants must attend all five segments of the course and must successfully complete the exam offered on the last day (Wednesday afternoon, June 15) to pass each course, respectively. A certificate course fee of $349 and the purchase of the course textbooks are required in addition to the Full Delegate registration fee.

How to Leverage Technology for AR Automation

Tune in May 5, 2016 at 10 a.m. or 2 p.m. EST to learn “How to Leverage Technology for AR Automation” presented by United TranzActions and DadeSystems.

In today’s business world, payment processing has increased in complexity. The need to grow revenues while meeting the payment processing requirements of your customers require acceptance of payments from multiple channels (online, lockbox, COD, mail and mobile). Companies are not only looking for ways to automate their cash collection process, but increase cash flow and reduce operational costs.

During this complimentary one-hour webinar, Tim Cratty will describe how Jackson Family Wines has improved their payments operations by using DadePay AR Automation from UTA and DadeSystems. DadePay AR provides a complete end-to-end AR Automation Solution for Jackson Family Wines by capturing payments in the field using mobile devices that complement their traditional lockbox operation.

This webinar explains how the DadePay AR Solution can improve your operations by matching payments to open receivables and processing them straight through to your ERP system. Don’t miss this one-hour session to learn how you can increase efficiency and improve your cash flow with DadePay AR Automation. To register for this free webinar, visit https://attendee.gotowebinar.com/register/7254509924228335873.

COMPLIMENTARY WEBINAR