IndustraTech's Meltdown: Your Wake-Up Call

Picture this: IndustraTech Supplies Ltd., once the big dog in industrial supply, now drowning in a $40 million debt tsunami. Secured creditors are grabbing what they can, while the unsecured folks are left holding the bag with $11 million at risk. This isn't just some bedtime story, it's a freaking masterclass in what NOT to do!

Lesson 1: Know Your Place in the Food Chain

Are you secured or unsecured? It's not just a fancy label, it's the difference between getting paid and getting played. If you don't know where you stand with your clients, you're playing Russian roulette with your cash flow. Here's the deal: Get. That. Collateral. And if you can't, at least know where you rank among the creditors. Are you first in line or the sucker at the back? This isn't just info, it's your financial lifeline.

Lesson 2: Spread Your Bets, Don't Be a One-Trick Pony

IndustraTech's collapse is like a wrecking ball, smashing through every industry they touched. The lesson? Don't put all your eggs in one basket, or you'll end up with egg on your face. Diversify like your business depends on it - because it does! If all your clients are in the same industry, you're one market hiccup away from disaster. Spread that risk across different sectors. When one stumbles, the others keep you standing.

Lesson 3: Smell the Smoke Before the Fire Starts

Those unsecured creditors? They could've seen this train wreck coming miles away. Late payments, stretched terms, aging receivables - these aren't just annoying, they're freaking sirens blaring "DANGER AHEAD!" Don't wait for the ship to sink before you grab a life jacket. Keep your eyes peeled for those red flags. Check your clients' financial pulse regularly. It's not paranoia, it's survival.

Your Action Plan: Be the Credit Ninja

1. Risk Audit: Look at your top clients. If they go down, are you going down with them? Run those scenarios, know your weak spots.
2. Industry Intel: Don't just watch your clients, watch their world. Their problems today are your problems tomorrow.
3. Secure Your Ass(ets): Turn those unsecured claims into secured ones wherever you can. It's like upgrading from economy to first class when the plane's going down.

You know that managing credit means more than just running a tight receivables book—it means playing chess when others are playing checkers, foreseeing where the risk lies three or four moves ahead, and acting on it decisively. The IndustraTech’s scenario is not just a one-off case but a glimpse into what could be the new normal if macroeconomic challenges persist. The time to adapt and rethink your strategies is now.

How are AI, ML, Large Language Models (LLMs), Natural Language Processing (NLP) and other emerging technologies impacting your work? What successes or challenges have you encountered?

B2B credit professionals face a range of business problems related to managing credit risk, optimizing cash flow, and ensuring the financial health of their companies. Here are some of the key problems they aim to solve and how AI and ML can assist:

1. Credit Risk Assessment:

   - Problem: Assessing the creditworthiness of clients can be time-consuming and prone to errors. Traditional methods rely heavily on historical data and financial statements, which may not always provide a complete picture.

   - AI/ML Solution: AI and ML can analyze vast amounts of structured and unstructured data, including financial statements, transaction histories, and even news articles, to predict credit risk more accurately. Machine learning models can identify patterns and indicators of potential default that may not be obvious through traditional analysis.

2. Fraud Detection:

   - Problem: Detecting fraudulent activities is challenging, especially with sophisticated fraud schemes.

   - AI/ML Solution: Machine learning algorithms can detect anomalies and unusual patterns in transaction data, flagging potential fraud much earlier. AI systems can continuously learn from new fraud cases to improve detection accuracy over time.

3. Cash Flow Optimization:

   - Problem: Managing cash flow effectively is critical for business sustainability. Late payments and defaults can significantly impact a company’s liquidity.

   - AI/ML Solution: AI-driven predictive analytics can forecast payment behaviors, helping credit professionals anticipate delays or defaults. This allows businesses to take proactive measures, such as adjusting credit terms or pursuing early payment discounts.

4. Customer Segmentation and Personalization:

   - Problem: Different customers have varying credit needs and behaviors, and a one-size-fits-all approach can be inefficient.

   - AI/ML Solution: Machine learning can segment customers based on various factors like payment history, transaction volume, and industry. This enables credit professionals to tailor credit terms and collection strategies to individual customer profiles, improving satisfaction and reducing risk.

5. Decision Automation:

   - Problem: The process of credit approval can be slow and cumbersome, involving manual review and multiple approval layers.

   - AI/ML Solution: AI can automate routine decision-making tasks, such as initial credit approvals and setting credit limits, based on predefined rules and predictive models. This speeds up the process and reduces the workload on credit professionals.

6. Predictive Analytics for Delinquency:

   - Problem: Identifying accounts that are likely to become delinquent before they do is crucial for proactive credit management.

   - AI/ML Solution: Predictive analytics can analyze historical data and current economic indicators to predict which accounts are at risk of becoming delinquent. This allows credit professionals to intervene early and work with customers to find solutions.

7. Portfolio Management:

   - Problem: Managing a large portfolio of credit accounts requires constant monitoring and assessment to balance risk and growth.

   - AI/ML Solution: AI can provide real-time insights and analytics, helping credit professionals monitor their portfolios more effectively. Machine learning models can evaluate the overall health of the credit portfolio and suggest adjustments to mitigate risk.

8. Regulatory Compliance:

   - Problem: Ensuring compliance with various financial regulations and standards can be complex and resource-intensive.

   - AI/ML Solution: AI systems can help automate compliance checks and report generation, ensuring that all regulatory requirements are met while reducing the administrative burden on credit professionals.

Hi Everyone, 
Wondering if the community can advise of any experience they've had with Foodtastic Group (including Milestones, Freshii, Second Cup, Pita Pit, Quesada, etc), from a creditors standpoint. Maybe for privacy reasons, feel free to email me @ efisher@canterburycoffee.com.  
On an aside, I was hoping one day to build a "rolodex" of us creditors that we can reach out to on the regular for credit references. I think it would be more helpful than ever given the current market .
Thanks in advance!

Good morning, 

Our company is going through a process of master data cleanse and we are looking at the best ways to standardize a multi-provincial customer database.

In your experience, what is the best format for customer's legal names:

- Proper format versus all upper cases 
- Punctuation versus no punctuation within a name. For example, if the company is registered as : " John's Company Inc." - we will include the apostrophe, but not sure about the dot after "Inc." .  If we rule out all the ending dots in a name, would this have implications in Court in case of a default ( i.e could a Court dismiss our case claiming the defendant name not correct ?)
- For Quebec customers whose legal names include accents,  is it advisable to use all upper case so there is no need for accent ? Would a Court dismiss our case if the defendant name does not include the accent ?   

I appreciate any real life examples you may have, or at least pointing out to a reliable source to consult on the matter.

Thank you for your help !

Good afternoon,

It was difficult to outline the detailed question I have in the Q&A section of the Zoom meeting.
I was hoping George could review it here.

I was asking about getting authorization from the customer to charge their card repeatedly (month to month). Taking the card information over the phone was suggested by George, but this only gives you an opportunity to charge the card once. In 5 months when you are still charging that same card for the customers’ monthly invoices, they could challenge the charges. If you don’t have a signed document stating that you have permission to charge them every month you will receive a chargeback from your bank and have to pull all your back up and prove that the customer was provided products/services and hope the bank agrees with you.

Our company has a monthly pre-authorized form that the cardholder signs authorizing us to take a deposit to ensure the card works and to charge their card every month. We don’t get chargebacks anymore because we have written authorization. When we could use DocuSign, the cardholder completed their information and returned it back to us. We entered it into the vault and we redacted the card number (except the last four digits) off of the form that was returned in DocuSign. That signed form with the card redacted (except the last four digits) was kept as our record that the customer authorized us to charge their card every month. Somebody else brought up in the seminar, how do you verify that the card information you are receiving over the phone is not fraudulent and that it belongs to the person giving it to you. This form is how we protect ourselves and lower that risk.

Unfortunately, we were advised by our financial institution that we could no longer use DocuSign in the same way, so we have changed our form so that the customer only enters the last 4 digits of the card number on the form that they sign and submit. The remaining digits are obtained over the phone, we create the profile in our vault immediately and the form with the last four digits, is held as our backup that they authorized the monthly charges. Having the cardholders signature on our form reduces our risk of receiving fraudulent information.

Is there an easier way to do this where we can get the card information and their authorization to charge every month in one step while being PCI compliant? We are hoping for a system where the customer can enter their own card information into the vault so we don’t have to worry about storing it or receiving it before it is entered in the vault. However, we need to ensure that we are provided with monthly authorization approval as well and I don’t know if such a system exists. Before my time, when our company took card information over the phone and did not receive authorization to continue charging, we received chargebacks regularly and complaints from customers. With our form, we have proof they authorized it and this issue went away.

Thank you for your help!

With increasing costs continuing to put pressure on borrowers disposable income its important to focus on a borrowers Debt to Income (DTI) ratio to ensure a borrower can afford the payments of a loan being offered. 
The DTI is a financial metric that is used to evaluate a borrower's ability to repay a loan. It is a measure of how much of a borrower's gross income is needed to cover their monthly debt payments. The ratio is calculated by dividing the borrower's total monthly debt payments by their gross monthly income.

For example, if a borrower has a monthly gross income of $5,000 and total monthly debt payments of $1,500, their DTI would be 30% (1,500/5,000 = 0.3). This means that 30% of the borrower's gross income is needed to cover their monthly debt payments. A lower DTI is considered more favorable, as it indicates that the borrower has a lower level of existing debt in relation to their income. Lenders usually have a maximum DTI ratio that they will accept for loan approvals. It varies from lender to lender and also depends on the type of loan. For example, a lender may require a DTI ratio of no more than 36% for a mortgage loan, but for a personal loan, it could be as high as 43%.

DTI ratio is important for lenders to evaluate the creditworthiness of a borrower, especially when it comes to long-term loans such as a mortgage or a car loan. A high DTI ratio indicates that a borrower has a high level of existing debt and may have trouble making their loan payments in addition to their other monthly obligations. This can be a red flag for lenders, who may decide to deny the loan or charge a higher interest rate to compensate for the increased risk of default.

To calculate the DTI ratio, lenders typically require borrowers to provide information about their income and debt. This includes:

•        Gross monthly income, which is the total amount of income earned by the borrower before taxes and other deductions.

•        Monthly debt payments, which includes all payments that the borrower is required to make on a regular basis, such as credit card payments, car loans, student loans, and rent or mortgage payments.

It is important to note that lenders may also consider other factors when evaluating a borrower's ability to repay a loan, such as their credit score, employment history, and assets. However, the DTI ratio is an important indicator of a borrower's overall financial health, and it is typically used in conjunction with other metrics to make a lending decision.

Moreover, borrowers can reduce their DTI ratio by either increasing their income or reducing their debt. Increasing income can be done by getting a raise, taking on a part-time job, or starting a side hustle. Reducing debt can be done by paying off outstanding credit card balances, consolidating loans, or negotiating a lower interest rate with creditors. By reducing their DTI ratio, borrowers can improve their chances of getting approved for a loan and qualify for a lower interest rate.

What a great time to be part of an association of credit professionals. We’ve seen unprecedented increases to interest rates by the Bank of Canada. Economists are telling us recessions looms. I have the feeling from the credit applications I am seeing that a lot of main stream lenders have put the breaks on originations.

I saw this at the beginning of my Career in 2008. But really, I think it’s been pretty rosy since then (Covid aside). Which means there must be a lot of Credit Managers who have started in the last 10 years or so that just haven’t seen this. Being part of the CIC gives us all access to so much expertise. Are we maximizing it?

Who’s seeing the End of Credit on the horizon? Where are you going for answers when trying to deal with situations that you may not have encountered before? And who is ready to step in and help those that do have questions?

Shane, CCP, Vancouver

#CIC23 #endofcredit #creditmentor

Hi friends,

Can anyone please give me some advice as to how to deal with a large amalgamated corporation with over 2 dozens predecessor companies? Several of the predecessor companies would like to apply for their own individual credit account with us but they are under one legal entity now under the amalgamated company. In case one of the predecessor companies defaulted on payment or went bankrupt, who do we go after to? Is it the individual company or the amalgamated company? Another issue is that they can't share one credit account as they have their individual accounting department.
Any information would be very much appreciated!
Thank you for your time!
Nancy Indita

Hi Credit Friends 
I am in a fairly new role and a part of our client portfolio are film/production companies. The clients set up a new entity for each new production leaving the credit ref bare or non existent. Bank checks are taking forever. I have added a PG to our credit app but its hit and miss on if it gets signed. Our line of business is services. I am having a hard time justifying the 100,000 credit limits they require. Any tips or thoughts on how to properly analyze or secure payment for these clients.
Thanks! 

Hi - i am not sure if anyone can give advise here. 
i got cerb but can't show them that i made enough to get the money and now i am so stressed that i owe it all back now.
i saw a post on facevbook from https://debt-experts.ca/cant-repay-cerb-breaking-news-25-03-2022/ that said if i have to go bankruptcy then i can get rid of this debt?  is this true?  anyone know if they are a good company?  thank you.