In the News
January 11, 2018
Invoicing Taking Toll on SMEs
Paperwork can be the bane of your existence, but there is a reason behind that. TV shows and movies often depict police officers and other figures groaning when it is time to fill out paperwork. But paperwork or documentation is important, especially to a business. Having accurate information is just as vital, and a lack of it can cause problems for your business or customer.
In the United Kingdom (U.K.), this has become an issue, according to eProcurement provider Wax Digital and Sapio Research. Of the 200 finance professionals surveyed, more than four-fifths said invoice process management was impacting the effectiveness of their work environment. Roughly two-thirds reported that processing supplier invoices was the most-hated part of their job. This is due to missing and inaccurate information, such as financial values and inconsistent line items. More than a third of respondents said invoice issues could hurt the relationship they have with the supplier. Automated or e-invoicing could alleviate the problems, according to nearly every survey respondent.
Another common issue in the U.K. relating to invoices is late payment. Business finance company MarketInvoice reviewed 80,000 invoices from over 90 countries and found 62% of invoices from small- and medium-sized enterprises (SMEs) in the U.K. were paid late. The outstanding balance is equal to more than $28 billion. “Late payment is the silent killer of modern business and it’s getting worse,” said Anil Stocker, MarketInvoice co-founder and CEO, in the report.
Northern Ireland was the worst offender with 93% of invoices paid late. Invoices in the U.K. are paid on average 18 days past due. The rest of Europe only takes nine extra days on average for payment. Germany takes the longest to make payments, with an average of 28 days late. France is at 26 days, while the U.S. and South Africa are each at 20 days. Ireland has the largest outstanding invoice face value at roughly $46,000. Finland was second and the U.S. was third, both slightly under $40,000.
Despite invoicing issues and late payments, SMEs in the U.K. are optimistic about what 2018 will bring. Half of business owners expect revenues to increase in the next year, according to a release last week from lender Aldermore. Three-fourths of the more than 1,000 respondents to the Aldermore Future Attitudes survey report they will have access to the funding needed to expand business during the next year.
Another factor that will likely impact SMEs in the U.K. is Brexit. Data from Bibby Financial Services said 37% of SMEs doing business overseas will be negatively affected by the U.K.’s decision to leave the European Union. On the other end of the spectrum, only one in 10 respondents believes Brexit will benefit their business in the next three years. More than a third already reported being negatively impacted by Brexit.
– Michael Miller, associate editor
There's Still Time to Register for the FSA1 Certificate Course
Feb. 4-9, 2018. Program Instructor: Toni Drake, CCE, president of TRM Financial Services, Inc.
Financial Statement Analysis (FSAI) analyzes financial statements issued by companies using fundamental ratio analysis techniques and analysis of the statement of cash flows. These evaluations can be used to determine the operating efficiency, profitability and financial risk of a firm. This is invaluable knowledge and training for any credit or financial professional.
FSA1 is a requirement of both the CBA and CCRA designations.
- Held at our national headquarters in Columbia, Maryland.
- Relaxed learning environment.
- Outstanding, experienced instructor.
- Complete a Certification Program requirement in one week.
Learn more and register here!
When Are Construction Projects Considered Complete?
For construction credit managers, figuring out if and when to file a mechanic’s lien sometimes requires they review every aspect of a job account, from identifying any issues with their company’s product or service to spotting problems with invoices.
After those considerations have been made, trade creditors then have to determine what statutory deadlines exist in their state for filing the lien. Some states provide a fairly clear-cut deadline, while in others, including California, the deadline date can be more ambiguous.
Claimants for private construction jobs in California, including the original contractor, subcontractor or supplier, must file a mechanic’s lien within 90 days of completion of the project if the owner has not recorded a notice of completion or cessation.The owner can record this notice of completion on or within 15 days after the completion date of a work of improvement.
But whether or not the owner does file such a notice, just what is this completion date? It’s a question that in some situations doesn’t have a solid answer, according Connie Baker, CBA, director of operations for NACM’s Secured Transaction Services (STS).
According to California’s Civil Code, Title 2, Private Works of Improvement, Section 8180-8190, completion of a work of improvement occurs when one of the following happens:
- Actual completion of the improvement work
- Occupation or use by the owner accompanied by cessation of labor
- Cessation of labor for 60 consecutive days
- Recordation of a cessation notice after cessation of labor for 30 days
The notice of completion is not always available at the county recording site for the project, said Chris Ring, of STS. Credit managers can search the job site to find the notice, but that’s not always practical, he said. Likewise, a request for a copy of the notice from the property owner or general contractor could go unanswered because the California statute does not outline damages if they don’t furnish a copy.
However, if you’re still in doubt, Baker advises construction creditors use their last furnishing date to file a lien. You’ll never be penalized for filing it too early, but filing it too late could lead to a loss of payment rights, she said.
If a work of improvement is subject to acceptance by a public entity, completion occurs on acceptance or cessation of labor on the work of improvement if it lasts for 60 consecutive days, according to California’s Civil Code, Title 2, Public Works of Improvement, Section 9200-9208. Also, for public jobs, a preliminary notice must be filed with the original contractor, surety or public agency within 20 days from first furnishing labor or material.
– Nicholas Stern, managing editor
Last Chance! Enroll Now for the January Course
Course starts this Monday, Jan. 15.
Are you ready to sell globally? FCIB’s International Credit & Risk Management online course (ICRM) is a comprehensive, 14-week course designed to educate entry-level professionals as well as senior-level executives about the complexities of global credit and risk management. The course offers vital, up-to-date knowledge in a collaborative, 24 hours/day-accessible learning environment. Peer-to-peer interaction will build, diversify and strengthen a reliable network of professionals, while helping you gain an all-encompassing view of credit and risk management.
Enroll now to better understand, manage and mitigate the credit risks associated with doing business internationally. Then, take the final exam to earn a CICP designation as a Certified International Credit Professional!
U.S. Trade Deficit Widest in Nearly Six Years
The U.S. trade deficit is at its widest in nearly six years. The Department of Commerce, along with the Census Bureau and Bureau of Economic Analysis, announced earlier this month the deficit was $50.5 billion in November, an increase of $1.6 billion from October.
One reason for the expanding deficit is due to November imports increasing by $6 billion from October. “While the level of exports also grew, it was not as fast as imports; the rate of increase was 2.3% for exports and 2.5% for imports. One of the factors that played a role in this surge is the threats to impose tariffs and other barriers,” said NACM Economist Chris Kuehl, Ph.D. These potential tariffs have already started to become a reality, which can be read about in this week’s eNews on the softwood lumber duties. The threats have caused importers to panic and rush product into the U.S. prior to such tariffs enactment, noted Kuehl.
The large gaps with China and Mexico “have not gone unnoticed in Washington, and wider deficits going forward could provoke a policy response from the United States,” said a report from Wells Fargo Securities. The deficit broken down is simply due to the U.S. spending more than it produces. The majority of the deficit is from household goods, such as automobiles and parts and consumer goods. “The deficit in international trade in goods is on pace to exceed $800 billion in 2017, which would be the largest deficit since 2008,” added Wells Fargo. And should a trade war ensue, that is when there will be negative financial and economic consequences.
The buying behavior of millennials has also impacted the deficit and imports, as has the demand for electronics and other devices, explained Kuehl. So far, the tariffs and barriers on products from China and other areas have been empty promises, but there are plans in place to limit solar panels, for example, and other appliances coming from China. There are also plans to reduce steel imports and other metals, noted Kuehl. “That has triggered an avalanche of exports to the U.S. as producers are trying to get product in the U.S. before the tariffs take hold. This defeats the purpose of the barriers—at least in the short term. The longer it takes to work out the plan, the more these imports will accelerate.”
The U.S. can reduce its trade deficit by raising its national savings and/or cutting its investment rate, explained Wells Fargo. The opposite is true if the U.S. were to lower its national savings and have a higher investment. The U.S. currently has a small surplus with South America and the Caribbean, and the gap is nearly balanced with OPEC countries, said Wells Fargo. The U.S. has an $88 billion deficit with its NAFTA partners and a $170 billion gap with European countries. Economists polled by Reuters predicted the overall shortfall would be $49.5 billion in November.
The deficit has been trending higher recently and will likely expand in part due to the recent tax reform, said Wells Fargo. Financial markets and the economy as a whole would suffer if the U.S. does find itself in a trade war with its partners. Despite this, Wells Fargo does not yet see the trade deficit as an economic problem.
– Michael Miller, associate editor
Nominate a Special Credit Professional
Do you know anyone working in the field of credit management whose professional life displays unquestioned integrity, outstanding and meritorious service in the field, and ongoing dedication to the highest standards of the profession? The National Association of Credit Management Honors and Awards have become an important mechanism by which we recognize our colleagues for their outstanding efforts and unwavering commitment.
Nomination period ends Feb. 16.
Click here to learn more and nominate your choice.
An Elevator Speech is Good for Trade Credit Business
Communication can make or break the relationship between a credit professional and customer, so it’s crucial for both parties to understand the reasons behind their decision-making processes and how their expertise was applied. From a trade creditor’s perspective, explaining his or her role in the bigger picture can be a daunting task, but it can also be one that allows business to thrive in the future.
The essence of a credit manager’s job can be relayed through clear communication in what is commonly known as an “elevator speech.” While some creditors may have longer periods of time to compile the precise wording to explain what they do, those who describe their duties and importance to someone in the time it takes to ride an elevator—say in a 30-second timeframe—can leave a lasting impression on the listener. In addition to strengthening the overall relationship, this impression also leaves the listener, or customer, with the knowledge of trade credit.
The elevator speech developed by NACM member Michael Cote, of Magnum LTL Inc. in Fargo, ND, is a prime example. Michael was the winner among more than 30 entries to NACM’s contest for best elevator speech, which earned him free registration to NACM’s 122nd annual Credit Congress & Expo in Phoenix, AZ, this June.
The winning entry, chosen by NACM’s editorial staff, is as follows:
– Andrew Michaels, editorial associate
Extending Credit is NOT the Time for Surprises
That's where knowing your customer—really knowing your customer—can help. The traditional credit report provides valuable data, but it doesn’t give you the whole picture. You need to look beyond the numbers for that.
FCIB Credit Reports assist in minimizing surprises by providing in-depth personal and operational information about your customer that’s vetted, validated and verified. FCIB seeks out the most up-to-date information available and identifies the best sources of information from agencies and local "on the ground" suppliers.
Get the whole picture with FCIB Credit Reports—Always freshly investigated and verified, with three delivery speeds.To learn more, click here.
Supply Low, Prices High for Softwood Lumber
Reasons behind high prices for softwood lumber in 2017 have analysts with the National Association of Home Builders (NAHB) predicting a similar fate for this year’s supply. The supply of softwood lumber, such as cedar, Douglas fir, pine and spruce, was affected in 2017 in part by tariffs and natural disasters.
According to NAHB tax policy analyst David Logan, softwood lumber prices remain steep going into 2018, as numbers rise to reflect U.S. import taxes on Canadian lumber shipments and areas in the region recuperating from weather-related tragedies. The 2017 price hikes of softwood lumber started with tariffs on Canadian imports, Logan said, in turn, affecting about a third of the U.S. supply.
Softwood lumber supply also dwindled due to wildfires that swept through British Columbia and the Pacific Northwest later in 2017 as well as hurricanes that hit the southern region, NAHB stated.
Canadian Forest Industries’ Wood Business reported on Jan. 3 that the tariffs included the 19.66% countervailing duty (CVD) and the 6.87% antidumping duties (ADD), effectively leading to a price increase from Canadian exporters. Following the U.S. Department of Commerce’s November ruling to have CVD and ADD duties of nearly 21% levied on Canadian lumber imports, the U.S. International Trade Commission (ITC) noted that Canadian lumber imports had a detrimental impact on the U.S. lumber industry.
While Canada has filed an appeal of this ruling, NAHB says they expect 2018 investments in softwood lumber to decrease by $1.1 billion for single-family structures and $147 million for multifamily structures. At the same time, NAHB reported that the average single-family home and multifamily home will increase by $1,360 in price and $478 in market value, respectively.
In NAHB’s December report, it was also predicted that the price paid by U.S. customers for softwood lumber would increase by nearly 7% in 2018.
Chris Ring, of NACM’s Secured Transaction Services, said impacts on creditors come down to their purchase order’s terms and conditions. Unlike the metal sector, which has become more adept in dealing with market fluctuations, Ring said those in softwood lumber don’t generally account for such occurrences.
“If it’s a one-time shipment, you’re not going to be worried about that,” Ring said. “If it’s a huge project—like a year and a half before that last furnishing and that market fluctuation comes through—there’s no way for that material supplier to pass those cost increases along to anybody else because they’re locked into a contract.”
Contract strategies to deal with fluctuations “usually aren’t developed,” Ring added. The agreed-upon price is generally already outlined in the contract, he said, so if the overall price increases, money is lost.
“It’s not the credit manager who is going to be able to solve this problem, unfortunately,” Ring said. “They’re the ones who have to deal with the problem once it occurs if there’s nothing they’ve done in their purchase order to protect themselves from price fluctuations.”
– Andrew Michaels, editorial associate
Don't Be Caught Unsecured
Become a secured creditor with NACM’s Secured Transaction Services (STS). We’ve got you covered with:
- Notice to owners
- Attorney network mechanic's lien filing service
- Foreclosure or bond suit actions with the attorney who filed your lien
- UCC equipment and inventory filing services
- Demand letters
- Tracking service and more
NACM’s Secured Transaction Services answers your most technical questions, takes pride in handling your projects and triple checks all work for accuracy. Managed by construction credit professionals, we know how important each job is to your company.
For more information, call Chris Ring at 410-302-0767 or visit www.nacmsts.com.