1. Speaking Credit

The role of English as the universal language of business is ending. With the expansion of global trade, markets are developing where any knowledge of English, much less fluency, is rare. That's not just in the remote villages of the Congo Republic or Kazakhstan. Only 6 percent of the world's population uses English as a first language. Another 26 percent claims some level of proficiency. That leaves 68 percent in the dark when it comes to reading, much less speaking, our language.

Doing business on credit in large swaths of Southeast Asia, Central Asia, South American and other regions where markets opportunities are booming will require language skills few companies have today. Moreover, just speaking the language in your customers' country may not be enough.

"An effective multilingual credit professional must have a good understanding of the local credit and collection policy in their specialty country," says Riki-Lee Ritz, a bilingual account executive in the international department at ABC-Amega. In addition to performing standard credit and collections responsibilities, Ritz notes that a multilingual specialist should be able to:

3. Some Unique Indicators to Spot a Customer in Trouble

Changes in order patterns or payments should tip you off if a customer is approaching bankruptcy, right? Wrong, says Terry Nielson, credit manager for Meissner Manufacturing Company, Inc. dba Unicel. "By the time orders and payments change, it usually is already too late," he notes.

So, Neilson is alert for more subtle signs of impending failure, like disgruntled employees or the departure of key managers or executives. When he notices these he'll often pay a visit to the customer's facilities, where he'll look for other signs, like poor maintenance and maybe depleted inventories.

Then there's that classic signal of imminent business demise: the vacant receptionist's desk.

In anticipation of increasing financial problems, Nielson has increased customer financial analyses in many cases from biannual to annual. But he concedes that many problems can slip by an analysis.

So, his basic strategy when he suspects a business failure may be impending is to increase contacts any way he can. "You've got to find reasons to call," he says. "It's essential that you stay in touch, keeping your finger on the pulse."

What steps does Nielson take when he suspects a bankruptcy filing may be in the offing? He begins with a thorough review of the account, including all available trade information and bank references. He makes certain there's a signed credit application on file showing that the customer has agreed to the stated credit terms.

He also tracks the customer's ordering and payment pattern closely. "In this business, 12 days past due is considered normal," he says. "We're careful not to allow anything beyond that, and we may tighten further.

"A lot of this has to do with the customer's normal volume. If they've been buying $50,000 a month and they go to $70,000, that's a red flag, especially if they're not responding to our inquiries. It's all a matter of what we feel comfortable with.

This is also a time when he carefully searches through all available information sources—the Internet, interchange sources and the news media.

"This can be tricky," he says. "Sometimes a customer like this will make required disclosures where they hope you won't see them. A couple of years ago, we had a customer announce an asset transfer in a little weekly paper a couple of towns away. They didn't think we'd see it, but we did."

Most successful bustouts are not really owned by the person appearing on the credit report as the owner of the business. According to Mohammed, a bustout operator interviewed by Credit Today, it is quite typical for Middle Eastern men to allow their name to be used for a bustout after several years in the U.S., just prior to their
planned return to the Middle East.

Front men are usually paid handsomely, sometimes being offered a percentage, rather than a flat fee, as was offered to Mohammed.

Most front men, he says, use their real names 95 percent of the time. "Everything is 100 percent legal. The name is 100 percent what's on their passport, or visa, or driver's license, or Social Security card." Those using fake names are typically not leaving the country, he says. They just move on to a different state after each fraud. A fake name or ID is very easy to obtain, he explains.

Making a Name for Oneself
Once it was in the newspaper that Mohammed was being charged in his case in the early nineteen-nineties, a fellow countryman from Houston called to ask if he could sell Mohammed his name for another bustout. Mohammed explained to the caller that he had called the wrong guy. He wasn't even the 'real' operator of the
business.

In fact, while Credit Today was on the phone interviewing Mohammed, someone came by his store, he said, and told him that his brother was leaving the country and wanted to do some kind of a scheme. Anytime you are leaving the country, and not planning on returning, explains Mohammed, the attitude is "Why don't you leave with $50,000 or $100,000 instead of $10,000?"

5. Risk Intelligence

There are some kinds of risks that all of us meet on pretty much equal terms, like prevailing interest rates and natural disasters. David Apgar, in Risk Intelligence (Harvard Business School Press) calls these "random risks." Then there's another kind of risk—one involving, say, customer relationships and technologies—that you can take advantage of if you're ready for it. Apgar calls these "learnable risks", and the problem here is that your competitors are trying to take advantage of them too. So whoever is best prepared when encountering these learnable risks is apt to be the winner.

That's the gist of Risk Intelligence, and in 200 pages of clear, incisive writing, Apgar, who is a managing director of the Corporate Executive Board, details a strategy for maximizing learned risk capabilities. These include changing your approach to risk, separating learnable from random risks, conducting risk strategy audits,
building networks that can adapt to risk and systematically raising your risk intelligence.

What struck us was how familiar most of this would be to experienced credit managers. Apgar's focus tends to be the chief executive. But many of the strategies, like building networks and what he calls "pipelines" are what you do routinely in rounding up the best possible information on customers and credit applicants from your industry groups and other information sources.

Still, Risk Intelligence is a wonderful read. One of Apgar's models is Wilber McLean, a Virginian who was working a farm in May, 1861 on the banks of a stream soon to be world famous, Bull Run. When the smoke cleared, McLean moved 200 miles south, far from the war, to a sleepy hamlet named Appomattox Court House. Four years later, Generals Grant and Lee signed their surrender agreement in his living room. Souvenir hunters stole every stick of furniture and even the kids' toys. We're not sure what that has to do with random and learned risk, but it's a heck of story.

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