credit today perspectives #4 · increasing customer requests for extended payment terms increasing...
TRANSCRIPT
PanelistChristopherRios
VP–FinanceSolutionsDun&Bradstreet
PanelistDanHowarth
SolutionsConsultantBilltrust
CreditTodayPerspectives#4:LatePayments,Bankruptcies&BadDebts…OhMy!
PanelistDavidCulotta,CFASeniorManager
Atradius
ModeratorDavidSchmidt
EditorCreditToday
June2,2020
Whatchangeshavetherebeeninregardtohowfastcompaniesarepayingtheirbills,as
wellashowaretheypayingthem?
Poll#1:WhathasbeentheeffectofCovid-19onyourcompany’sDSO?
Improved-it'slowerthanitwas2/29/20
4%
Stayedaboutthesame27%
Increased,butlessthan5days
21%
Increasedbetween5and10days
18%
Increasedmorethan10days30%
79Responses
Paperbillsasapercentagearedecreasing
61.5% 57.5% 54.3% 48.2% 42.4% 40.3% 37.2%
2013 2014 2015 2016 2017 2018 2019
BillratiosPaperbills
eBills
Copyright2020Billtrust.Allrightsreserved.
Copyright2020Billtrust.Allrightsreserved.
2019CPAVolume
Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
InvoicesDelivered
100+A/Pnetworks
Copyright2020Billtrust.Allrightsreserved.
ConservingcashandstabilizingliquidityduringtheCovid-19crisis■ The State-specific stay-at-home orders and broad company shutdowns resulting from the spread of
Covid-19 have sent many companies into cash conservation mode.
■ Drawing down available borrowing capacity on credit facilities
■ Delaying capital expenditures
■ Restricting share repurchases and dividends
■ Halting business travel
■ Furloughing employees
■ Negotiating rent concessions
■ Applying for funds under the CARES Act
■ Extending payment terms with suppliers
■ Multiple approaches to payment term extensions depending on end markets served, existing state of operations, importance of the supplier to the supply chain, available liquidity, etc.
Overthenext12to24months,howwillthebankruptcylandscapeevolve,andwhatshouldcreditorganizations
dotominimizelosses,bothnearandlongterm?
THECORONAVIRUSCONTINUESTODISRUPTTHECOMMERCIALMARKETFORCINGBUSINESSESTORE-EVALUATECURRENTPROCESSES
Source:D&BAnalytics,April03,2020 COMMERCIAL IN CONFIDENCE
177M TOTAL NUMBER OF ACTIVE BUSINESSES
38M IN IMPACTED
GEOGRAPHIES
11M BUSINESSES IN
IMPACTED INDUSTRIES
Source: Dun & Bradstreet Business Intelligence Reports
ANTICIPATED DECLINES
TransportationMostWidely
Affected40%
Q12020–ManufacturingandProcessing
19%
Q12020–RetailandWholesale
37%Q12020–CorporateServices
17%In E-commerce, Respiratory
Materials, Medical Equipment, and Supermarkets
For Retail, Wholesale, And Manufacturing
POSITIVE RESULTS
+20-30%
COMMERCIAL IN CONFIDENCE
WHILEMANYINDUSTRIESDECLINE,INDUSTRIESINGROWTHMODEREQUIREADIFFERENTAPPROACH
TheImpactonSmallBusinessIsLikelytoBeSubstantial
Source:SmallBusinessPulseSurvey:census.gov
Downgrades,debt,anddefaults:therisinginsolvencytrend
9
11
12
17
17
19
21
25
31
40
48
65
69
70
0 20 40 60 80
Germany
Japan
Switzerland
Denmark
Sweden
Belgium
Austria
Italy
France
Australia
UnitedKingdom
Netherlands
UnitedStates
Spain
Source:Atradius
Insolvencygrowthforecasts2020 ,%y-o-y
Withbaddebtlosseslikelytorise(maybesubstantiallyforsomefirms),whatportfoliomonitoringand
collectionbestpracticesshouldyoubefollowing?
Poll#2:Whichofthefollowingdoyouexpecttobeyourgreatestchallenge
throughtheendoftheyear?Balancingthecreditandcollectionsworkload
15%
Handlingtheincreaseincustomer
delinquencies32%
Minimizingbaddebtlosses
22%
Workingwithsalestoremain
profitable31%
85Responses
PastDues&BadDebt:FinancialStatementImplications
The Trends
■ Increasing customer requests for extended payment terms
■ Increasing insolvency and payment default risks leading to bad debt provisioning
■ Supply chain complications and product availability concerns
Best Practices to Protect Your Balance Sheet & Cash Flows
■ Call or video conference your customers! Understand the current impact of Covid-19 on their business operations, their liquidity, and their customer base.
■ Gain an understanding of your customer’s payment trends during the current environment. Is the customer slow paying multiple suppliers or just you?
■ Tighten your credit controls in the current environment. Regularly review your aging and quickly contact customers falling outside of normal payment behaviors.
■ Identify financially at risk customers and increase the frequency of your credit reviews. Adjust credit limits and risk appetite
accordingly. Be aware of the potential for preferential claims in the event of a bankruptcy.
NOWMORETHANEVER,IT’SCRITICALTOUNDERSTANDCORPORATELINKAGE • Businessesintheimpacted
regionshavelinkagethroughouttheworld
• Closeto180Kbusinessesinimpactedregionsarebranchesorsubsidiariesofcompaniesheadquarteredelsewhere.
• ThecountrieswithhighestfamilytiestotheimpactedregionsnotablyincludeFrance,Malaysia,Canada,NorwayandMexico–whatisthistryingtosay?
Global Headquarters Distribution of Businesses in Impacted Region: Top Countries and Regions
COMMERCIAL IN CONFIDENCE
ITALY37%
BRAZIL21%
USA11%
SPAIN10%
INDIA7%RUSSIAN
FEDERATION3%
ENGLAND3%
FRANCE3%
CANADA2%
BELGIUM2%
TURKEY1%
Other1%
Develop a risk-based assessment process for both onboarding and
ongoing monitoring
Monitor your full portfolio of
customers and majority ownership
relationships
Monitor your full portfolio of
suppliers and your customers’ Tier 1
suppliers
Prioritize Collection Strategies
THESETIMESWARRANTAFULLREASSESSMENTOFPOLICIES&PROCESSES
COMMERCIAL IN CONFIDENCE
Review your credit approval processes to include evaluation of risk sectors: geography, line of business (SIC/NAICS) and predictive indicators
• Failure • Delinquency • Voluntary Cessation
Prescreen new business prospects
Identify parental ownership and material relationship to cross reference levels of risk
Re-evaluate your risk thresholds
BESTPRACTICESCRISISPLAYBOOK
COMMERCIAL IN CONFIDENCE
Develop diverse collection strategies: • High Touch vs. Low Touch • Prioritize by risk segments (geography,
industry, risk indicators, size and age) • Consider alternative payment options
(i.e. credit card, partial payments, payment plans)
Monitor your supply base to determine your potential supply chain interruption
Monitor your key customers’ critical suppliers
Review credit limits related to risk segments and aggregated exposure
Questionsweareunabletoanswerduringthewebinarwillbeansweredoff-lineanddistributedtoallattendees,aswillcopiesofthisslidedeck.
Weappreciateyourattendingthisevent.CreditTodayplanstocontinuethesediscussionswithotherleadingcreditindustryexperts.ThenextPerspectiveswebinaristentativelysetforJune29th.
FormoreinformationaboutCreditTodaypleasegotocredittoday.net.YouwillfindseveralarticlesaboutdealingwithCovid-19inourpubliclistingsaswellaslinkstoourearlierwebinarsinAprilandMay.
Questions?Ifyouwishtocontactanybodyonourpanel,youmaydosoviaemail:
• ChristopherRios– [email protected]
• DavidCulotta– [email protected]
• DanHowarth– [email protected]
• DaveSchmidt– [email protected]
Biographies
Christopherbringsover20yearsoffinancial
operationsexperiencetotheFinanceSolutions
teamatDun&Bradstreet.Hehasexperienceacrossvariousindustries
includingmanufacturing,services,andsecurity
withafocusonorganizational
developmentandresourcing;strategic
planningandtechnologymanagementtobuildaglobalsharedservicesmodelforfinance
operations.
Inhisrole,DavidisresponsibleforprovidingstrategicdirectionfortheU.S.underwritingplatformandformonitoringthe
developmentoftheU.S.portfolioandadaptingtheriskmanagementapproachasnecessary.DavidearnedhisMBAat
LoyolaUniversityMarylandandisaCFA
charterholder.
DanhasbeenwithBilltrustsinceJanuary2019whereheworks
withclientsonsolutionstoimprovetheirorder-
to-cashprocessspecificallyfocusingoncreditandcollections.PriortoBilltrust,DanworkedatalargethirdpartylogisticscompanyasapractitionerinCredit,Collections,
Billing&Payment,andPricingfor9years.DanreceivedhisMBAfrom
XavierUniversity.
DavehasbeenacontributingeditorwithCreditTodayforabout15years.HestartedhiscareerwithD&Bandthenmanagedcredit
departmentsforseveralmid-marketfirms.In1994DavefoundedA2Resources,aconsultancywithafocusonCredit,
CollectionsandReceivablesautomation.
He’stheauthorof“PowerCollecting:
AutomationforEffectiveAssetManagement”(J.Wiley&Sons,1998)