Trade Credit Link-Letter

August 2002, Issue 1, Volume 1

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Editor: David Schmidt

The Trade Credit Link-Letter is published monthly by A2 Resources, a consulting firm providing innovative solutions for credit excellence. Learn more about us and about our services at www.a2resources.com.

We welcome your comments and suggestions regarding this newsletter. Please email them to us at info@a2resources.com.

To subscribe, please fill out the FeedBack Form at http://www.a2resources.com/newsletter.html.

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Contents

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Tracking Small Businesses (Credit Reports)

Cranking Up Collections (Collection Management)

Am I Covered? (Credit Insurance)

The New Playing Field (Technology & Credit Management)

When You Can’t Get Financials (Credit Analysis)

Markets Bet on a Bankruptcy Bill (Legislation)

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Tracking Small Businesses

a. Small business credit reports are getting increased attention from the credit bureaus.

Equifax, known for its consumer credit reporting, has over the last several years been expanding its commercial offerings, though not primarily in the USA. Now they have come out with detailed credit reports on 10 million small businesses based on data from their own archives, which includes consumer and utility records as well as accounts receivable information from 40 corporations, and records from the Small Business Financial Exchange (SBFE), a consortium of 30 financial institutions that share credit information. For more information, go to http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/07-30-2002/0001774133&EDATE.

b. Meanwhile, Dun & Bradstreet and Fair, Isaac & Company have teamed up to create a suite of small business credit and risk management solutions for the U.S. and European markets. Details of that alliance can be found at http://investor.dnb.com/ireye/ir_site.zhtml?ticker=DNB&script=410&layout=9&item_id=313817.

c. We also need to mention that Experian (www.experian.com) is continuing to develop small business credit reporting tools built upon their extensive consumer and commercial databases.

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Cranking Up Collections

In this economy, it is vital your collection staff be pumping on all cylinders. That requires an understanding of the dynamics that underlie an effective collection function:

1. Effectively deploying your resources,

2. Expanding the time available for contacting accounts,

3. Providing collector’s with easy access to information, and

4. Implementing a strategic prioritization process.

You can read the entire article at http://www.a2resources.com/crankingup.html.

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Am I Covered?

Credit Insurance, widely used in Europe, has over the last several years been gaining market share in the USA. The catalyst behind this growth is industry consolidations that have boosted underwriting capacity. But, now a troubled economy is causing trade creditors to consider insuring the integrity of their receivables, both domestic and export. For an overview of the credit insurance marketplace check out “Credit Insurance: A Corporate Security Blanket” (http://www.collectionsworld.com/05sr02.htm).

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The New Playing Field

Ever since the first computer generated aged accounts receivable trial balance was printed, credit and collections management has been transitioning from manual to automated processes. As a consequence, there has been a lot of change over the last four decades, but we can now see the light at the end of the tunnel. Some are predicting that within the next three to five years a fully integrated, end-to-end, automated quote-to-cash cycle will become a practical reality. To understand better how technology is transforming the credit profession, you should check out, “The Dirty Dozen: Twelve Ways Credit and Collections Will Be Transformed By a Technology-Driven World”

(http://www.nacm.org/bcmag/bcarchives/2002/jan/features1.html).

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When You Can’t Get Financials

Getting financial statements from private companies has always been problematic. On more occasions than not, you simply cannot get them. But, when a customer or potential new account does not cooperate by turning over this information, you can still probe for more information. Expert financial and credit analyst Cindy Moorhead recommends, “Seven Questions to Ask if No Financial Statements Are Received from Your Customer” (http://www.moorheadmgmt.com/articles/clm/5nofinancial.htm).

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Markets Bet on a Bankruptcy Bill

Though Congress failed to vote on a long awaited bankruptcy reform bill before adjourning for the summer, the financial markets are already beginning to factor in the effects of reform on credit card issuer profits. The bill recently emerged from a joint Senate and House conference committee after months of hard negotiations. The controversies have been mostly on the consumer side: homestead protection, credit card marketing policies and a provision to prevent anti-abortion protestors from declaring bankruptcy to escape court ordered fines top the list. On the commercial side, the bill is expected to provide added protections for creditors in the form of less aggressive preference claims, expanded reclamation rights, and new fast-track mechanisms to accelerate the Chapter 11 bankruptcy reorganization process. To read more about the expected effect of the bill on the financial markets, click on http://biz.yahoo.com/djus/020729/200207291516000647_2.html.

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