A few thoughts from
Jon Flora, President & CEO
I had a great high school history teacher. He would sit up on a bookcase and, with arms waving, lecture from on high about our Founding Fathers, the Westward expansion, and great truths such as innocent until proven guilty. His enthusiastic lectures instilled in me a lifelong passion for American history that has carried over to my professional life.
Case in point: We’re seeing repeats of what happened before the Great Recession, DotCom Bust, and previous economic downturns.
Leading up to the 2007 financial crisis, our economy was chugging along quite nicely. Business was good; everyone’s customers were paying on time. Many of our NACM customers got comfortable and quit pulling credit reports. They also sat on their A/R longer. Best practices were set aside until… (insert Armageddon music).
When the economy took a fast and nasty fall, our customers started pulling reports again in a big way. And, then they hurriedly increased their use of our Collections Department. While we were able to help a lot, we couldn’t overcome the fact that many debtor companies just couldn’t pay their bills. Too much time had passed with too much leeway provided.
This pattern has pretty much led every downturn and, now, we’re seeing signs that it’s happening again. I have spoken with a few of my counterparts across the nation and they’re seeing similar signs. Members and customers are pulling fewer reports and sitting on debt longer than normal. Best practices are again being set aside because business is good and companies want to save a little money by cutting back in these areas.
As British Prime Minister Winston Churchill said at the outset of World War II, “Those that fail to learn from history are doomed to repeat it.”
This is not a message of doom. It is, however, a timely reminder to ensure that your company is continually following best practices regarding credit risk. If you consistently follow proven methods, like always pulling credit reports and turning accounts over to our Collections Department before too much time has passed, you will usually stay ahead of the game. When the next downturn comes – even if it’s small – you will weather the storm better than those who choose a more relaxed path.
We are watching forecasts and see some questions on the horizon. Stay disciplined and take full advantage of the credit tools available. Let us help you avoid the repeat of history.
In other topics, please check out our Surcharging story in the October edition of the NACM BCS eNews. As promised, we are sharing a report on our first month’s experience with Surcharging.
Also, check out our events calendar for upcoming educational offerings. Some of them require planning on your part and we don’t want you to miss them.
I hope your autumn is off to a good start and your favorite football team has at least won a game!