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  • Creditors, Suppliers and Security Breaches

    Once upon a time, all the suppliers had to worry about what was the credit of their customers and the legal effectiveness of the security liens that they took on inventories. Now, debtors and creditors alike, for that matter, live under the constant threat of security breaches which can have consequences of a material order of magnitude. As a lawyer advising payments companies, I thought it would be interesting to discuss security breaches ...

     
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  • Black Holes and Old Invoices

    My article titled Black holes and Credit Management published in To Your Credit’s fall 2007 edition began with this paragraph:

    “Credit management is an integral and highly visible part of the cash-to-cash business cycle, in which cash invested by shareholders is used to produce and deliver goods and services that are sold for even more cash.

     
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  • ELECTRONIC FUNDS Transfers and Fraud

    Electronic Funds Transfers (“EFTs”) are widely accepted as a method for organizations to transfer funds on a timely basis to suppliers, employees and other organizations. However, EFTs can pose an internal control weakness for many organizations. Employees can circumvent the built-in internal controls, if any, and defraud the organization of significant amounts of cash at one time or over a period of time. EFTs typically allow employees to withdraw organizational funds by way of an Online Banking Agreement (“OBA”) in which an employee may ...

     
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  • Receivable Insurance Tips

    It is critical that you understand your obligations under the credit insurance policy you have signed and that you are complying with them.

     
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  • Collecting from your large customers: Is it 'Collections' or 'Corrections'?

    A few years ago I was at a major railroad company for imparting training sessions on the topic of Collection Skills and Receivable Management. On the first day of training a, I realized that the collections staff was made up of people who had a significant number of years of collections experience. The group was an enthusiastic batch; however most of the proven collections techniques were being met with...

     
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  • Predictive Indicators - Learn how to read the signs and improve your bottom line

    Managing your company’s exposure to risk has become a challenging task. There is more pressure to speed up the credit review process and more responsibility resting on your shoulders to be accountable for your decisions and improve company profitability.

     
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  • Identity Theft - Practical tips for credit professionals

    Every year, identity theft results in millions of dollars of reported losses for Canadians. This has serious implications for credit professionals when it comes to the collection, protection, usage and disposal of the information they gather on their customers. Whether your company accepts payment by credit card, by wire transfer, via e-commerce or by the ageless paper-based cheque method, you need to ensure that your department plays its part in having the necessary checks and balances in place.

     
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  • CRA Trust Overrides Contractual Right To Set Off

    In a recent decision involving the Canada Revenue Agency (CRA), and the Caisse populaire du bon Conseil (Caisse), the Supreme Court of Canada, (SCC) considered whether a lender’s contractual rights in respect of its customer’s term deposit account could be overridden by a deemed statutory trust in favor of the Crown.

    The issue was whether the Caisse, by virtue of its contractual arrangement with its customer, Camvrac Enterprises Inc, held an iron clad security interest over the proceeds of its deposit account that could not be overruled.

     
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  • Factoring Agreement: Security or Sale of Assets?

    Lenders and other members of the factoring community should be aware of the potential impact of a recent ruling on a priority fight over the accounts receivable of a bankrupt company.  One of the issues that the court had to consider was the application of a factoring agreement.

     
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  • Demand Promissory Notes and the (New) Ontario Limitations Act

    Hare v. Hare (218 O.A.C. 164), a December 2006 decision of the Ontario Court of Appeal, has important ramifications for the use of demand promissory notes in tax planning. Legal and tax planners should be aware that standard drafting language used in promissory notes may bring about unintended consequences.

     
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  • Info from Visa

    What is expected of a credit manager when a customer claims that he was a victim of identity theft, and the debt is not his?

     
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  • PPSA & Legislative Q's
     
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  • Financial Ratios and Related Tools

    A ratio by itself is an incomplete figure that could be misleading if analyzed in isolation. To perform an analysis, inter-related ratios should be examined and calculated over a period of time to see the trends, and then compared to ratios of industry or peers.

     
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  • Financial statement simple analysis

    In today's environment the obtaining of Financial Statements from a customer is becoming virtually impossible. A good credit professional needs to sell his customer on the benefits of supplying at least a common size balance sheet and income statement in order to justify a credit limit sufficient to meet both yours and the customer's needs.

     
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  • Role of the Credit and Collections Department in Business

    Companies expect their credit department to be sales oriented. Put simply, this means the credit department should be looking for reasons to justify establishing open account terms and/or releasing orders pending, rather than looking for excuses to hold orders or to reject applicants for open account terms. Having this simple idea in mind can make

     
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  • CREDIT’S UNTOUCHABLE CODE

    There is one principle of credit management which is inviolable. In fact it’s as close to being sacrosanct as Canada’s right of sovereignty over the Northwest Passage. To break with this code would be to dismantle the basic principles of credit management and the outcome would be similar to the situation which I am certain that we have all experienced in the past, when the little boy visits the grocery store with his mother and is transfixed by the beautifully structured pyramid of apples.

     
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  • BIA compared to the CCAA

    The Companies' Creditors Arrangement Act (CCAA) is a federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs. Under the CCAA, corporations ask the Court for protection while they prepare ...

     
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  • Free Fraud Detection Resources

    One of the simplest ways to detect potential fraud is to confirm certain information provided on a credit application using easy, free resources on the Internet. As a commercial collection agency, we regularly get claims where this has not been done and we discover that the information provided was either misleading or outright fraud. In either case, it is...

     
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  • PIPEDA and Collections

    Often, collection activity requires interacting with personal information about a consumer, in order to research, contact or collect from that consumer. Whether you are in an internal receivables department, third party collection agency, or you are a legal agent...

     
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  • Credit application Terms

    Here is a list of items that are commonly included in B2B credit applications.

     
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  • Understanding Accounts Receivable Metrics: DSO, CPI, CEI

    Finance professionals calculate DSO by dividing Total Accounts Receivable (A/R) by Total Credit Sales multiplied by the number of days in the measurement period.

    For companies using Collection Productivity Index (CPI), it is the amount of cash collected per collector as a % of the opening A/R for each fiscal quarter. As quarterly sales are not linear month to month, (heavily weighted in a particular month) you will find this to be...

     
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  • International Credit

    Foreign trade differs from domestic trade with respect to the instruments and documents employed. Most domestic sales involve an open-account credit where the customer is billed and has so many days to pay. In international trade, the seller is seldom able to obtain as accurate or as thorough credit information on the potential buyer as with a domestic sale.

     
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  • What to do when a customer files for Bankruptcy

    Find out exactly what the situation is. Most people when they think of bankruptcy only think of the final stage, where the customer is no longer in business. In reality there are a few different types and various levels of severity.

     
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  • Cross Border and International Collections
    You've serviced your client, you've invoiced the job, and you've not been paid. What can you do?
     
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  • Standard Ratios

    Liquity Ratios

    • current Ratio
    • Acid Test

    Debit - Equity Ratios

    • Current Debt to Tangible Net Worth
    • Total Debt to Tangible Net Worth
    • Working Capital
    • Net Worth
     
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  • Credit Rules (Axioms)

    If short-term credit suppliers are paid by asset conversions, then the primary interest should be centered on the balance sheet and their focus of attention should be liquidity.

     
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  • Credit and Collections as a Revenue Generator
    Next time you are spending quality time with a client, at a board meeting, or getting an update from the CFO you may want to inquire about practices of their company’s credit and collections department. The credit and collections department is constantly interacting with the company's customer base. This provides them with opportunities to augment sales, identify customer needs and problems, and / or be proactive in collecting those slow paying accounts. A properly operated credit and collections department can enhance profits and earnings per share.
     
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  • If a customer must pay back a debt over time, what are the 6 critical elements in negotiating payment plan?
     
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  • Risk Assessment

    Risk assessment is a step in a risk management procedure. Risk assessment is the determination of quantitative or qualitative value of risk related to a concrete situation and a recognized threat (also called hazard). Quantitative risk assessment requires calculations of two components of risk (R):, the magnitude of the potential loss (L), and the probability (p) that the loss will occur.

     
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  • Credit and Collections Department Should Be Generating Revenue

    Next time you are spending quality time with a client, at a board meeting, or getting an update from the CFO you may want to inquire about practices of their company's credit and collections department. The credit and collections department is constantly interacting with the company's customer base. This provides them with opportunities to augment sales, identify customer...

     
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  • Credit Risk Management

    Credit risk is defined as the likelihood of loss resulting from a customer's failure to pay for the goods delivered. It is the responsibility a Credit Manager to verify that all customer files are complete and contain all the necessary information to protect the accounts receivable.

     
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  • Collection and Dispute Management

    The objectives of the Collection team are to:

    • Facilitate a seamless processing of Sales orders within a specific risk guideline defined by the Credit and Collection department
    • Liaise with the Sales department and the credit department to anticipate any future discrepancy between the Sales plan and the maximum risk exposure
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  • Letters of Credit

    A letter of credit is a document that a financial institution or similar party issues to a seller of goods or services which provides that the issuer will pay the seller for goods or services the seller delivers to a third-party buyer. The seller then seeks reimbursement from...

     
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  • Hypothec

    Hypothec Definition: - Is a charge on property upon which an unpaid creditor may enforce payment of the debt.  It is the right of a creditor to take a...

     
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  • Floor Plans

    Go to any large auto dealer and there are hundreds of cars on the lot. You may wonder how much the dealer had to spend to provide you with almost limitless choices. What you don't realize is that, like most new car dealers, a floor plan was used to the cars. Simply, it is a way for...

     
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  • Construction Credit

    Construction credit is a unique and specialized form of mercantile credit. Although the field follows many of the same principles, practices and procedures as mercantile credit, there are a number of factors that make the practice unique. In order to be successful, the credit professional must...

     
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  • Leasing and Rentals

    Merchantile Credit Managers are well trained to deal with how to manage the credit and collections of the transactions of selling of a product or services from one business to another.  However, the Leasing or Rentaling of a facility or a piece of equipment deserves special  consideration.

     
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  • The Quickening of Innovation in Asset Based Financing

    Some would call it evolution: others, revolution. Semantic flourishes aside, financial technologies are increasingly in the foreground as drivers of product differentiation and proliferation in the asset-based financing industry.

     
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  • Acceleration Clauses in the Event of Default – Are they enforceable?

    All leases have an acceleration clause when there is a default, however there is not a consistent approach as to what the damages will be. Some leases require the defaulted lessee to pay the balance of payments due without discount while others utilize a net present value formula applying a discount rate close to, but generally below, the interest rate implied in the lease. A few still use “the rule of 78’s” (but few under 50 know what that means). The recent case, Hav-A-Kar Leasing Ltd. v. Vekselshtein 2012 ONCA 826 (“Hav-A-Kar”) discussed this matter but may have not quite got it right.

     
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  • If A Customer Must Pay Back A Debt Over Time, What Are The 6 Critical Elements In Negotiating Payment Plan?
    Please enjoy this complimentary video from our Best Practices Series
     
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  • If A Customer Must Pay Back A Debt Over Time, What Are The 6 Critical Elements In Negotiating Payment Plan?
    Please enjoy this complimentary video from our Best Practices Series.
     
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  • An Accounts Receivable Integration Framework
    This webinar discusses how to build a strategy and action plan for A/R transformation. You will learn how PrimeSource centralized credit & collections for more than 40,000 customers across 35 locations.
     
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  • Five Most Common Business Credit Mistakes
    How often has your accounts receivable department attempted to collect a payment, only to discover that a client has gone bankrupt, or cannot be compelled to pay an invoice? Each unpaid account is significant revenue lost. But there are ways to minimize this loss.
     
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  • The warning signs that preceded Carillion's fall

    Not since the financial crisis has the collapse of a business had such a political impact, but the warning signs had been flashing at Carillion for all to see, says Jane Fuller.

     
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  • Direct payments and construction insolvency
    Main contractor Carillion’s entry into liquidation has resulted in many employers seeking to establish relationships with subcontractors, under which they will be paid directly in order to stay on site and finish the relevant project. On the face of it, this seems like an attractive solution, and may leave some employers wondering why they didn’t procure their projects by construction management in the first place. However, establishing direct relations is not without risks, and requires safeguards for employers and subcontractors alike. Those are set out in the last section of this article, but it is important to understand the pitfalls, particularly of direct payment, first.
     
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  • Remington Outdoor Company Plan of Reorganization Confirmed by the Court
    MADISON, N.C.--(BUSINESS WIRE)--Remington Outdoor Company (“Remington” or “the Company”), one of the world’s leading designers and manufacturers of firearms, ammunition, and related products, today announced the United States Bankruptcy Court for the District of Delaware confirmed the Company’s Plan of Reorganization (“the Plan”). Remington expects to emerge from bankruptcy before the end of May.
     
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  • These Best Credit Practices in Brazil Will Keep You from Falling Downhill
    I’m often asked by many overseas creditors about where to start when establishing a business relationship with a customer in Brazil. My answer is that it often depends on whether you are going to grant credit, and if so, how much.
     
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  • Do You Have a Credit Policy for Your Organization?

    If your business lets your customers receive goods or services now in return for a promise to pay later, then your business grants credit. And you are not alone. Most businesses grant a credit to their customers, especially if their customers are other businesses (B2B—business-to-business). In fact, this is the most common type of credit offered in the business world and most of the credit offered in this way is unsecured.

     
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  • Waiting too long to collect

    My colleagues think that my role is the worst possible in the company. This is mostly because my job involves calling customers for money. But I have a secret for you: I like making those calls. Rest assured, I’m not an extortionist who likes to torment poor souls. I just love what I do, especially knowing that I contribute to my organization’s success.

     
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  • Do Not Miss the Warning Signs of Insolvency!
     
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Q and A (2)
  • What is the best course of action to follow when dealing with accounts payable staff does not result in payment of an overdue account?
    https://creditedu.org/knowledgecentre/index.php/site/qa/2

    Dealing with A/P staff is part of the initial stage of collecting on a delinquent account.  Rightly, they deserve every due respect.  However, if a solution is not forthcoming, then one should resort to the principle of escalation.  This entails finding out who the A/P personnel answers to and whether that person (general manager, controller, director of finance, accountant, etc…) has the genuine decision making power or the authority to provide information as to the company’s ability to pay.

  • What can creditors do to protect themselves when a customer remits a cheque, for less than the full amount owing, and marks it "Paid in Full" or words to that effect? Also, what can a creditor do to protect themselves in this situation when their company uses a "lock box" or "shared service" center and the A/R personnel may not even see the cheque prior to it being negotiated? Is the law that governs these scenarios Federal or Provincial?
    https://creditedu.org/knowledgecentre/index.php/site/qa/3

    Courts are very familiar with this tactic and will generally not give effect to it. A cheque marked “paid in full” may very well be evidence of an agreement to reduce the debt owing, but it is easily rebuttable by clear evidence that the creditor accepted the payment only as partial payment. This is based at least partially on the concept of consideration. Put simply, this concept involves the idea that you do not get something for nothing. What the debtor is attempting to do in this situation is to receive a discount on its debt without providing any real benefit to the creditor in return. The courts will not allow a debtor to unilaterally alter its agreement with its creditor - which is what it is attempting to do with the notation on the cheque.

    One possible method of dealing with such attempts would be regularly forwarding statements thanking the debtors for any payments received and indicating the account balance to date. If the debtor then challenges the statement arguing that payment had been made in full by way of the cheque in question, all the creditor would have to do would be to respond by saying it was received in partial payment. Unless the debtor is able to produce some sort of an agreement with the creditor showing the creditor’s agreement to accept the reduced amount in full satisfaction for the amount owing, it is extremely unlikely that the courts find in favour of the debtor.

    Of course, if the creditor notices the notation before it deposits the cheque, it can also send a specific letter to the debtor thanking it for the payment and saying that the payment has been applied against the amount owing, that the creditor did not agree to accept the payment in full satisfaction of the amount owing and that the balance remains owing by the debtor.

    The law governing these scenarios is the common law of contract, which is a matter within the jurisdiction of the provinces. As such, the law as interpreted in one province may not necessarily be applied in another. However, frequently the courts in one province will consider and often follow the decisions of courts in other provinces.

Wiki (7)
  • Surplus income
    https://creditedu.org/knowledgecentre/index.php/site/wiki/72
    Payment required, if any, to be made by a bankrupt to the estate for distribution to creditors. The amount of the payment is fixed by the trustee, having regard to the standards established by the Superintendent and to the personal and family situation of the bankrupt.
  • Priority
    https://creditedu.org/knowledgecentre/index.php/site/wiki/56
    The order in which creditors are ranked for payment of claims provable under the Act.
  • Security
    https://creditedu.org/knowledgecentre/index.php/site/wiki/66
    Property or asset given or pledged to guarantee the fulfillment of an obligation, e.g., for the payment of a loan.
  • Preference
    https://creditedu.org/knowledgecentre/index.php/site/wiki/54
    The payment of money or the granting of security by a debtor that benefits one or more creditors to the detriment of the other creditors.
  • Mortgage
    https://creditedu.org/knowledgecentre/index.php/site/wiki/43
    A conveyance of title to property that is given as security for the payment of a debt. NOTE: In the province of Quebec, it is a real right on property securing the performance of an obligation, without relinquishment of its owner.
  • Hypothec
    https://creditedu.org/knowledgecentre/index.php/site/wiki/32
    A right on property given to a creditor as performance for an obligation. It confers on the creditor the right to follow the property (even if it undergoes successive changes of ownership), to take possession of it, to take it in payment, or to sell it.
  • Insolvent person
    https://creditedu.org/knowledgecentre/index.php/site/wiki/34
    A person who is not bankrupt and who resides, carries on business, or has property in Canada, whose liabilities to creditors provable as claims under the Act amount to $1000.00 or more, and: - who is unable to meet obligations as they become due; - who has ceased paying current obligations in the ordinary course of business as they become due, or; - the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all obligations, due and accruing due.