鈥溌槎勾� Talks鈥� hosts top professionals from different sectors of the lumber and building material industry to share their expertise, with a heavy emphasis on practical, tactical strategies to help you serve your markets and grow your business.
This episode of 麻豆传媒 Talks Credit is all about Credit Insurance. Thea is joined by Joe Ketzner, Regional Vice President, and Bobby Williams, Vice President of Business Information Sales, from听, a global credit insurance company.
This episode includes information about what credit insurance is, how it works, and implementation mistakes to avoid.
Watch this conversation and more great content from 麻豆传媒 journal via our YouTube channel
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Please send all podcast inquiries to听thea@creditoverlord.com.
Reach out to Joe at听 鈥撎�
or Bobby at听 鈥撎�
A big thank you to the sponsor of this episode听,听a manufacturer of premium engineered wood products (EWP) in North America.
Prefer to read about it instead? Take a peek at the transcript below.
(Editor鈥檚 note: Transcript is AI-generated and may include some errors.)听
Thea Dudley听 00:00
This episode of 麻豆传媒 talks credit is sponsored by PWT, and at PWT, you get more than an engineered wood supplier. You get a true partner who鈥檚 ready to support your success, coast to coast, and that鈥檚 something they鈥檙e willing to shake on.
听
Thea Dudley听 00:31
Well, my friends, welcome back to another episode of 麻豆传媒 talks credit with Thea Dudley, we are going to break down one of the least talked about areas of the credit process. And first, I鈥檓 just going to go on record as saying I hate this topic, mostly because it鈥檚 hard to understand and I鈥檝e been burnt to a crisp by it. I鈥檝e got a couple guests with me today, and we鈥檙e going to talk about one of my least favorite topics, because it鈥檚, it鈥檚 I鈥檓 still a little scarred and bitter. So I have Bobby Williams with Coface business services and Joe ketzner with CO fast trade credit insurance. Credit insurance is our topic of the day. And for those of you that have not had the pleasure of talking about credit insurance, you鈥檙e in for a treat. Welcome guys.
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Bobby Williams听 01:26
thanks for having us.
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Joe Ketzner听 01:29
Thank you. Thea, appreciate it.
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Thea Dudley听 01:30
Bobby, I think I got your title wrong. Business credit information, not services. I struggle with titles. It鈥檚 like you work there and you do something, we鈥檙e good.
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Bobby Williams听 01:42
You got the name of our company, right. That鈥檚 right.
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Thea Dudley听 01:47
Okay. Well, my experience with trade, with trade credit insurance, the first one was when we were selling internationally. And I think the biggest challenge is usually the person signing the contract and doing the negotiations is usually, you know, a lot of times your CFO, which in our case, it was, and they don鈥檛 share with the credit team what all is in there. It鈥檚 just, we got credit insurance. We鈥檙e so golden, so we鈥檙e shipping, thinking life is great, and then you find out something goes wrong, and it鈥檚 like, okay, Joe, I鈥檓 gonna make this claim. And it鈥檚, let鈥檚 say, 100,000 and you鈥檙e like, well, there are some steps you have to go through. And that鈥檚 when, you know, I flipped my hair and lost it, and a lot of bad words came out of my mouth. And everybody in the company, I鈥檓 sure, heard it. It was, I was, I was just so ticked because I didn鈥檛 know any of this, and unfortunately I took it out on the our poor rep. So thank God it wasn鈥檛 you, but it was, it was very frustrating. And I think that鈥檚 one of the things that credit insurance can be a great tool, but it鈥檚 often misunderstood, and those of us who have had experiences with it, they鈥檙e not always great,
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Joe Ketzner听 03:04
and that鈥檚 fair. I mean, it鈥檚 a very fair comment, especially when you look at how trade credit insurance is presented to the market. So a lot of times when we鈥檙e going in to talk with a business, we鈥檙e talking with a the C suite to look at this as a financial toll, and it鈥檚 overlooked going further down into the bowels of the business of how this is actually going to be utilized. Because I could tell all of my team, we鈥檙e walking into a business to tell them the way that they鈥檙e doing business, is it right? And we might have a solution, and it鈥檚 going to cost them money that nobody budgeted for. So it becomes a dance between the C suite making the financial decision and the credit teams that are actually going to be utilizing it. I鈥檝e always been a big proponent of making sure that the whole team is on there. You can talk to the person that it鈥檚 going to be writing the check for the product, but if the team that鈥檚 actually going to be implementing the trade credit insurance isn鈥檛 on board and understands they鈥檙e not going to be a client for more than a year. They鈥檙e out the next year. So I feel what you鈥檙e saying, and I鈥檝e run into it, and it鈥檚 something that we鈥檙e trying over and over to overcome, because it is a huge roadblock for the success of the product
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Thea Dudley听 04:20
well, and once you go through it, once you know the questions to ask, but you know, I do think it鈥檚 one of the most misunderstood tools. And I got a little bit further involved with it, with one of the companies I worked for. Every time we would acquire somebody, especially in the upper northeast, it was, we have the don鈥檛 worry about it. We have credit insurance so we can sell whatever we want. Like, that鈥檚 not what that means. So I need you to calm down. There are rules. It鈥檚 kind of it鈥檚 a little bit like outsourcing your credit department, but not and one of the things I do like about it is you can. Actually kind of cap what your bad debt is going to be for the year, like, here鈥檚 what my policy costs, and then kind of back into it from there. So I鈥檓 gonna, I鈥檓 gonna, you know, hit you guys with some questions, because there鈥檚 it, there鈥檚 it鈥檚 just such a gray area of of the business. And I know there鈥檚 a lot of credit people out there that really don鈥檛 understand it, because I didn鈥檛, and I鈥檓 sure there鈥檚 still a lot of it I don鈥檛 understand, because my experience has been, no, you can鈥檛 do that. What do you mean? I have to pay money. What do you mean? I have to jump through these hoops. It was all like a surprise. It was like a gift that kept giving in a but I didn鈥檛 want the gift. I couldn鈥檛 give it back. So, so one of the things I want to ask you is, you know, it鈥檚, how does it work? I know it鈥檚 like a prenup, but how? How exactly, if you had to explain it, you know, just like elevator speech, it to me, how does it really work?
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Joe Ketzner听 05:57
So I think the best way to look at it in that standpoint is breaking it down to the simplest form is it鈥檚 going to be a relationship of information between the insurance side and your business. Any decisions that are made from the insurance company is comes back to you as a business decision. So the easiest way is, you ask for coverage? I say yes, that鈥檚 easy enough, right now. You have to make a business decision, because I look at risk differently than our customers look at risk. So I could say somebody鈥檚 good for a million dollars. Does that mean you want to sell them a million dollars? What does that mean to the rest of your customer base? What does that mean to your product? Do you only have a certain amount of product to sell, so just us saying yes or the other regards, if we say no, you come and ask me for coverage, and I鈥檓 saying I鈥檓 not insuring this account, and I鈥檓 giving you reasons why it is a high risk customer. On our side, you could decide I鈥檓 going to do business with them anyway, because my margins are X. I get two shipments out of this. I鈥檝e already covered any loss that I鈥檓 going to have in the future, and it鈥檚 just gravy for us. So understanding that the partnership is truly a partnership in that we鈥檙e looking at risk a little bit differently than our customers are, but understanding to your point, the gray area of where that means from a credit management standpoint of knowing when to say yes or when to say no after our decisions.
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Thea Dudley听 07:25
So I call you up as a credit manager, and I say, Look, we are looking at credit insurance for our receivables. Where do we start? Do I do I get to do i insure? The whole thing is, every account covered. Can I pick and choose. You know how what does that look like?
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Joe Ketzner听 07:45
For better or for worse? There is a billion different options that you can have with it, and that that becomes a little bit of the problem. And it becomes when you want to make sure you鈥檙e dealing with someone that understands the product, understands the business, and also understands your business. They don鈥檛 have to be an expert, per se, but they have to understand some nuances. Is there seasonality? Is there International, like with the one company you were speaking about, understanding that can help frame it, but everything that you just said, Do I have to insure everything? Can I be selective in who I鈥檓 insuring? We can segment policies to fit the needs of people. What we can鈥檛 do is we can鈥檛 take a hot potato. You can鈥檛 say this is the one that鈥檚 about to explode the next three months. Do you want to insure?
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Thea Dudley听 08:27
Yeah, can you take my my junk accounts? Because we don鈥檛 want to take the risk, but we鈥檙e going to ask you to insure them. So I I understand that you鈥檙e like, Look, don鈥檛 don鈥檛 send me your dogs. I don鈥檛 want them. You don鈥檛 want them. I don鈥檛 want them there. I鈥檓 not going to be able to qualify them. But you know, the some of the experience in looking at a whole AR where they鈥檙e like, look, we have our whole AR covered. The the process for them was so different where, you know, the whole, I鈥檓 just going to sell them whatever I want, because we have insurance and so it鈥檒l cover. It鈥檚 like, no, no, this customer is approved. This customer is not. You sold them at your own risk. This customer is only approved to 50,000 Why is he at 150,000 What were you thinking? They鈥檙e not going to cover that. So those are the kind of things that I think, those those nuances escape people, because all they hear is, you know, we have insurance. It鈥檚 just like, well, we have lien rights like that doesn鈥檛 mean it鈥檚 bonanza. Go nuts
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Joe Ketzner听 09:25
Exactly, exactly. And it gets back into the communication, both from the C suite as well as from the credit team, is, what are the goals? What are you trying to achieve in trade credit insurance? There鈥檚 really four cornerstones of trade credit insurance on why people buy, they鈥檙e looking for a sales expansion tool, which can mean a number of things, that every business, it could be a new brand, new customer they鈥檝e never dealt with before. So now they鈥檙e able to look at us to help evaluate that risk and provide coverage. It could be an organic growth to what you said before. You might have been selling them 50,000 but. If you had $100,000 in coverage, you could sell them 100,000 looking at that sort of growth, or going international, at brand new region or brand new product, we see it a lot. I believe you mentioned earlier, with acquisitions, these are companies you don鈥檛 know if you鈥檙e able to wrap that with an insurance product that is a sales expansion tool that we鈥檙e able to do. The other three are looking at it straight from a loss ratio standpoint. We call it sleep insurance. There鈥檚 a line that every business has that says, I can take a loss of we鈥檒l say $10,000 it doesn鈥檛 ruin the day. It鈥檚 business. It happens. I鈥檓 not worried about it. And I always talk to the credit team, and I say, when does that move up? At what point do you have to go into the CFOs office? At what point does the CFO have to go to the CEO鈥檚 office? And how many accounts are above that line? What鈥檚 that line that you have in the sand? And then you can start to talk about it from the loss perspective of this is a meaningful loss issue, and credit changes daily. So what might be good today won鈥檛 be good tomorrow. So by having this and putting a flat line across, it really helps credit management sales and the C suite look at this as being a win for them. The third is looking for bank financing, if a company is pledging their receivables, so it adds a baseline of credit, we just wrap those receivables with credit insurance that just guaranteed your collateral to the bank, and you should be able to get a higher advance rate for working capital if that鈥檚 needed. That might not be something that鈥檚 on the credit teams radar, but that鈥檚 something that鈥檚 on the C suites radar, if that makes a benefit for them. And the last one, which they all roll into, is just credit management, enhancement. Thea, you鈥檝e been doing this for a long time. Information is king. How much information can you have to make a decision? How new is that information? And what if the information isn鈥檛 correct? What happens? So by pulling the insurance,
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Thea Dudley听 12:03
bad things happen. That鈥檚 what happens.
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Joe Ketzner听 12:05
exactly. By pulling the insurance in, it helps to supercharge your credit team, because now you do have that ability saying, my gut is telling me here, insurance is telling me here. Where can I be in between. That makes sense, because I鈥檒l say it to everybody, credit is impossible. You鈥檙e either on too long or you鈥檙e not on enough. You鈥檙e never right. So you鈥檙e always in a balancing act to try to do it, and credit insurance helps to even out the seesaw effect of that.
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Thea Dudley听 12:36
I like to equate it to standing up in a hammock. You鈥檙e always moving your feet to try to figure stuff out. Now I think taking you鈥檝e done a really good job at helping to demystify this. I want to keep breaking that down a little more. So let鈥檚 say I鈥檝e worked with my CFO as the leader of my credit team. Maybe I鈥檓 a team of one, but this is what we鈥檝e decided to do. Then I have, I have my receipt, let鈥檚 say I have all my receivables insured, and we鈥檙e working together as a, you know, little little bit little bit of an outsourced credit department, little a little bit in sourced. I have an account. Go, go. We鈥檙e going to call it going rogue, not paying. What happens now I come to you, and I say, Joe, I need to make this guy鈥檚 he鈥檚 gone. He鈥檚 a deadbeat. I can鈥檛 find him. I鈥檇 like to file this claim now. So give me my money, and you
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Joe Ketzner听 13:30
say, I say, let me see, there鈥檚, there鈥檚 three things that we鈥檙e needing on the front side, well, there鈥檚, there鈥檚 four that we鈥檙e needing at COVID Fauci, and the fourth is pretty easy to do. Well, actually, all of them are easy to do. I need invoice, purchase order, proof of delivery, with the fourth being a summary agent of what that account is. Once you file that with us, there鈥檚 two forms of coverage. There鈥檚 protracted default, which is what you鈥檙e asking. Now, the guy just disappeared. You don鈥檛 know if he鈥檚 solvent or not, but he鈥檚 not paying you, and you鈥檙e done waiting. So if you鈥檙e done waiting, you pull the trigger. You file it with us. As that happens, our team wants to collect once the event is solidified, begins to work at it from a collection agency standpoint, for 60 days, we鈥檙e trying to collect it, phone calls, nasty grams, skip tracing, looking for them. We don鈥檛 find the individual to collect your money from. As a collection agency, I cut you a check, minus any risk share that鈥檚 associated with the policy, then I continue to try to collect it. But now our relationship within that loss change before it was 100% on you. Now it鈥檚 a 9010 based off of our risk share back on me. So this is not my money. I鈥檓 trying to collect. So I鈥檓 gonna go and continue to try to work. It could be six months, could be a year. Could never happen, but either way. Day you got your money on the 61st day, it鈥檚 a little bit more clean cut on a bankruptcy. They file for bankruptcy. Schedule F handed over to us. We pay you in 30 days.
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Thea Dudley听 15:11
I like that, especially with the increased bankruptcy. So I want to, I want to back up for a minute. So the experience I had was, you didn鈥檛 know, yeah, what? What I didn鈥檛 know was what killed me, and I think that was, you know, being able to pull the mystery back on that. It鈥檚 like, look, everybody鈥檚 in business. Nothing鈥檚 free. There鈥檚 always a cost to something. So it鈥檚 like, look where it鈥檚 just, like, the insurance on your car, we鈥檙e going to insure this, but there鈥檚 a deductible on your policy. I I didn鈥檛 know that. So that right away, you know, that was an opportunity for me to rant. Then there was, hey, you have to wait until we try to collect it for 60 days. And like, well, I didn鈥檛 know that. So there was another rant. And then when it, you know, that finally paid out. Well, well, now I have this bad taste in my mouth because I didn鈥檛 know those. I didn鈥檛 understand those two pieces, which was bad on our company. You know, shame on us. That was definitely not on the insurance company. But I think having your credit, whoever鈥檚 doing your credit, leading that team involved in those conversations, when you first start walking through, hey, this is what we鈥檙e going to do. We鈥檙e going to go the insurance route. Let鈥檚 make sure we understand the process going in and when we have to collect. Because had I known that, I I wouldn鈥檛 have, like, lost it all over some poor guy that鈥檚 probably still putting band aids on his butt today.
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Joe Ketzner听 16:42
Yeah, 100% it is absolutely a partnership, and it鈥檚 something that I like to talk to a lot when I鈥檓 dealing with the credit side is, what do you do today? What鈥檚 this process look like if someone defaults on you today? At what point are you pulling certain triggers? When are you taking it out of internal collections and sending it to third party. Because if I understand that, and you understand what my requirements are within the policy, if they match up, we鈥檙e good to go. If they don鈥檛 match up, is when you have a situation, like you said, which is, hey, I did ABC, and now you鈥檙e coming in with 123, like, why? Where do you go? And understanding what the actual process is. So 100% that this is, this is a living, breathing product that requires partnerships between both sides well. So
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Thea Dudley听 17:32
what are the biggest mistakes that you see when credit managers make, and I鈥檝e already, like, stepped into a couple of them, it鈥檚 like no problem sharing where I stepped in a pile of something. What are the common things you see that turn people off from using credit insurance or where they mess up and then they鈥檙e upset with you, and it鈥檚 really maybe something they could have avoided. Like, I don鈥檛 know your CFO, communicating better with you?
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Joe Ketzner听 18:01
Yes, there鈥檚, there鈥檚 two questions in what you just said. The first one is in terms of what can trip up a client for a claim standpoint, and there鈥檚 really only two things that that are big trip ups. The first one is having coverage on the wrong entity, so you鈥檙e invoicing one person, but you have coverage on a different person. Just because the names are the same doesn鈥檛 mean it鈥檚 the same entity. So if you don鈥檛 have coverage on the right person, that鈥檚 going to be very problematic when you鈥檙e trying to get indemnified. The second is holding on to the debt too long. Because, as I said, there is a a filing period within everyone鈥檚 policy where basically we鈥檙e saying, from invoice date, you have six months to work yourself. It鈥檚 a pretty fair amount of time to try to work something. And if, if you鈥檙e having success, most every carrier is going to allow you to continue to try to collect on that and give you an extension to it. But it is very important to say here鈥檚 my triggers of when something gets past due. When do I have to make sure that I鈥檓 informing the insurance company of a collection claim event? So those are the two big ones that we see people get tripped up on, and the ones that we continue to try to reiterate with them.
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Thea Dudley听 19:19
Well, those are the same ones that are just kind of credit 101, things like, don鈥檛 hang on to this debt too long, because there鈥檚 no money in it if you do so, I like that. There鈥檚 some consistency there. Let鈥檚 take a look at how AI is going to impact, or has impacted credit insurance. I mean, Joe, Bobby, maybe one of you, both of you, take it and run
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Bobby Williams听 19:43
Go ahead, Joe. If you want to start with the trade credit insurance, Ican talk a bit about the business information side of it.
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Joe Ketzner听 19:49
I mean, we鈥檝e seen, like every industry, we鈥檝e seen, leaps and bounds from using AI and using simple APIs integration within. Companies commercial or credit, as well as their sales businesses to help utilize tech to make credit better. Where it鈥檚 going to be in six months is as much of a mystery as where it was going to be six months ago. So from looking at it from a big picture standpoint, using Blockchain, using AI information, using algorithms that is pulling data. The end of the day, the insurance is just like the information that Bobby and his team are putting out there. We鈥檙e only as good as the information we get. So the more that we have people that are embracing utilizing the technology, the better it gets across the board. So is there anything specific on the horizon? I鈥檇 say everything we鈥檝e looked at stuff from inner individualized invoice coverage the same way when you鈥檙e buying a trip beyond you know, Southwest Airlines and you want to insure your trip for 30 bucks, we鈥檝e been looking the industry has been looking at doing similar things, from an invoice to invoice stamp.
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Thea Dudley听 21:09
Okay, that鈥檚 that is just why that鈥檚 actually kind of crazy, because now I would send my sketchy folks over there and be like, I will pay the 20 or 30 bucks to ensure that this idiot figures out how to write a check.
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Joe Ketzner听 21:22
Yep, yep. So that鈥檚 to what you said, is the bigger problem is,because then it becomes an information gap to try to figure out how we can make that economically work for the clients as well as for the insured. But all of that stuff is being looked on, and it鈥檒l be interesting over the next, I鈥檇 say five years is going to be the big jump for for AI and trade credit insurance.
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Thea Dudley听 21:44
Well, so Bobby, I want to ask you this, as we鈥檙e talking about business information, if, if I have, if I鈥檓 sitting down and saying, hey,I want to get credit insurance for my receivables, how does does the business credit piece flow into that, or does it here? I鈥檓 sending my applications over there to get approved first, and you get, how does that piece work?
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Bobby Williams听 22:11
Yeah, no, that鈥檚 a great, great question, actually, yeah, you can鈥檛 have insurance without the right underwriting, and you can鈥檛 have the right underwriting for insurance without great credit information, right? So the way it works is, you know, not everybody that you want insured is going to get insured. And it鈥檚 just like,
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Thea Dudley听 22:35
you take my whole you take my good people, and you take these losers over here too. That鈥檚 right, that鈥檚 right, that鈥檚 that was my, that鈥檚 my Christmas wish list. You鈥檙e probably like, no, nobody wants you keep you up.
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Bobby Williams听 22:47
yeah, so, so, and I guess in some respect, we would, but it gets it gets it gets priced accordingly, right? So that鈥檚 kind of how that works. But the information is absolutely critical. And to your question, you know, business information, I would say I think of AI is kind of like this beast that is just data hungry. I think we鈥檙e, I think we鈥檙e just seeing the beginning of it, right, there鈥檚 some, there鈥檚 going to be some challenges with it, because inherently, AI is not transparent. You know, it鈥檚 not like calling up a credit reference on an application. When you鈥檙e using AI to drive your credit information. You鈥檙e not really, necessarily totally understanding where that information is sourced from. So you could run into, I see some challenges right down the road, some challenges with that, you know, the ethical sourcing of data, and maybe because of that, especially because we鈥檙e also an insurance company, primarily an insurance company, the regulatory implications of that, right? The use of AI for for underwriting, it鈥檚 going to be very interesting moving forward. I don鈥檛 think we鈥檝e I don鈥檛 think we鈥檝e seen the end of it. That issue with transparency is going to be, continue to be an issue. I believe,
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Thea Dudley听 24:09
how does the fraud protection come into all of this? Because that鈥檚 the other really big topic right now in credit is anything tech and fraud, and everybody鈥檚 talking about tariffs, but I almost have to wonder, is it just something everybody鈥檚 using it鈥檚 like, oh, tariffs. Because I have to tell you, I went into Total Wine, and every imported wine just went up in price. I鈥檓 like, I know you guys have had this in the back for a while, so you this just didn鈥檛 roll up on the boat yesterday. So is, is that I kind of feel like that鈥檚 almost getting used a little bit. But what does it look like, and the on the fraud horizon within that, that platform,
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Joe Ketzner听 24:52
from an insurance standpoint, when we鈥檙e looking at it from a fraud, we鈥檝e definitely seen an increase, and because of that, we鈥檝e.Increased our KYC process 鈥� know your customer 鈥� but understanding who the customer is, our customer as well as who their customers are, because it鈥檚, it鈥檚, it鈥檚 rare that you鈥檙e going to see a new entity pop up with no history that鈥檚 looking for very specific things. We see it, we flag it, because a lot of times, what we鈥檒l see is Company A is trying to get coverage on Company B but there鈥檚 ownership that鈥檚 similar, but it鈥檚 kind of hidden, and you鈥檙e like, I鈥檓 pretty sure you鈥檙e going to file a claim on yourself here in about 10 minutes. So we got to dig in deeper, and that鈥檚 stuff that was missed in the past because of information gaps and the Know Your Customer initiatives that have been put out. So all the major insurers are doing more and more, and we鈥檙e seeing it just in the US for used to be able to get a checking account just online, now you have to go into a bank and you have to show them your ID. It鈥檚 the same process. We鈥檙e just looking at that on the on the insurance side for trade credit insurance, but it鈥檚 definitely a problem, and I don鈥檛 think anyone has a perfect solution to it, but if you do count me in,
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Thea Dudley听 26:27
yeah, I鈥檒l be, I鈥檒l be calling you up, going, Hey, let鈥檚 talk about this. And so that鈥檚 where I guess the business information side of it ties in. So you鈥檝e got that, that credit insurance, and then Bobby, what鈥檚 going on on that side of the house, yeah, when we鈥檙e looking at that fraud piece,
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Bobby Williams听 26:43
yeah. So you know, you want to make sure you鈥檙e working with somebody that is looking at businesses from a global perspective, and that the data that鈥檚 being used is actually being sourced from multiple constituencies to validate whether or not this is a real entity or not, from a business to business perspective. So you know, as a credit professional, if you鈥檙e just relying on your own internal knowledge, your own internal credit information, you鈥檙e going to bemore susceptible to blind spots with fraud, right? So make sure, my recommendation is, make sure you鈥檙e working with somebody that is looking at the broader picture. Even if you鈥檙e a US company that only sells to domestic companies, you don鈥檛 know who your customers are dealing with too, right? And you want to, and some of those could be international, so you want to, you want to go deeper to make sure that you鈥檙e, you鈥檙e not stepping into something that potentially is fraudulent.
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Thea Dudley听 27:50
No, that鈥檚 a, that鈥檚 one of the things that we鈥檝e kind of beat that drum on, is, you know, look, look beyond just, hey, this is our historical information, because everybody pays you till they don鈥檛, yeah, he was the best guy ever. I鈥檓 like, Tilly wasn鈥檛. Yeah,
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Joe Ketzner听 28:07
the number, the number of stories of they were a best man in my wedding, and now they owe me money. Or, you know,
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Thea Dudley听 28:15
I think every father, every credit person, everybody you know, in that whole, I mean, you guys probably have some awesome stories about it, but there鈥檚 always that, oh my gosh, he鈥檚 my brother from another mother. I鈥檓 like, please don鈥檛 ever say that again, because it just it that just goes out the window when somebody has any kind of financial situation in their life. It鈥檚 like they want to be a good person, but you know, stuff happens,
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Joe Ketzner听 28:43
and the closer you are, the less likely you鈥檙e going to know it early on. They鈥檙e going to be hosing the people they don鈥檛 like first, and then you鈥檙e the last to know about it
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Thea Dudley听 28:55
thats a good point. It鈥檚, it鈥檚 you鈥檙e going to try to keep that you鈥檙e not or you have your blinders on. You鈥檙e like, I don鈥檛 want to see this in this customer, because I really like them, and they鈥檙e really nice. We鈥檝e had them a long time, and it鈥檚 like, I don鈥檛 want to have that hard conversation where it鈥檚, you know, you鈥檙e in the 90 day column and you鈥檙e still taking stuff out. Can we talk about this? It鈥檚 like, they just don鈥檛 want to have that. So I think there鈥檚, there鈥檚 we鈥檙e getting better as an industry. We鈥檙e not there yet, but we鈥檙e getting better,
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Joe Ketzner听 29:23
and some of that actually allows us to step in and be the bad guy. Because I look at credit black and white, yes and no, where they credit. Professionals have to look at it as it鈥檚 business. They鈥檙e making a business decision, and there鈥檚 relationships that are involved. And I tell everybody. I was like, let me be the bad guy. If I鈥檓 saying no, let me tell them no, because then you can back off and say, we can still go to the lake this weekend. But listen, Joe says you owe me money, so you better pay.
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Thea Dudley听 29:54
It鈥檚 like, Look, can you afford gas? Because you haven鈥檛 paid for your building materials. Maybe I鈥檓 gonna just. We鈥檙e going to be on a paddle boat or something. But that鈥檚 those are really good points credit requires you to have those hard conversations. And not everybody鈥檚 cut out for them. Not everybody鈥檚 comfortable. And even if you are comfortable with them, there鈥檚 a lot of times your your company, leadership or ownership will come into play, and they鈥檙e like, oh, you know, kind of dial it back. So I really do think there鈥檚 an amazing place for credit insurance in that, that trade credit arena, my experience is not withstanding. I but I understand, after having conversations with you guys that, you know, a lot of that was self inflicted wounds, and I was angry at the wrong person. We should have set it up better. And I, I like that. You鈥檙e able to learn from that. And go, Okay, let鈥檚 make this better. You know, what are the questions I need to ask going in? What are, you know? How does this work? What is the process look like? Give it to me, laid out, you know, show me in doll. It鈥檚 like, look, here鈥檚 what your deductible is, just like if I got an offender Bender, you know, I have a $500 deductible, and we鈥檒l pay everything past that kind of a situation. So knowing that makes it so much easier. It can actually use it as a way to kind of cap your bad debt, because here鈥檚 what the policy cost me, here鈥檚 what I could potentially lose. But if I balance the two against one another, I鈥檓 still coming out to the positive.
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Joe Ketzner听 31:26
Yep, I tell everybody, when I sit down with them, if this doesn鈥檛 make financial sense, I鈥檒l be the first one to tell you that this isn鈥檛 going to work out for us, because if you鈥檙e not seeing positive to your top and bottom line, then you鈥檙e not going to be happy with it. Some of the easier math that you can use is everyone鈥檚 going to have a bad debt reserve that鈥檚 sitting there. Let鈥檚 say it鈥檚 $100,000 well, that $100,000 is covering $100,000 you buy $100,000 worth of credit insurance. I鈥檓 now insuring $100 million of revenue. So the numbers just start to change when people start to look at it that way, or from a sales expansion standpoint, if I take on, if I don鈥檛 say no one time a month to a new customer, what does that actually equate to for business? And that鈥檚 where the product actually becomes entrenched in businesses, both from, like I said, the top and the bottom line from the credit and sales teams to look at this as a way that they can run towards the goals of the business.
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Thea Dudley听 32:28
Now, see to me, that makes total sense. I and I think you just heard, like several CFOs perk up on on hearing that, I think what kind of trips people up is nobody thinks anybody they鈥檙e ever going to get hit. It鈥檚, well, we have 100,000 reserved for bad debt, but we haven鈥檛 really written anything off in the last, you know, five years. It鈥檚 like, I get that you鈥檙e, it鈥檚 like gambling. You鈥檙e, you鈥檙e playing the odds. Maybe you won鈥檛, maybe you will, with the with how things are right now, they鈥檙e the only consistency is that there鈥檚 no consistency. I mean, the credit Managers Index comes out in one month, it鈥檚 up, you know, for DSO. The next month it鈥檚 down. It that same month it was down for collections, but up for collections the next. And so the the data is all just contradicting itself. And there, there鈥檚 no, like, consistent, nice line like you鈥檝e seen in past years. So that鈥檚 always something that you know, kind of look at all of your options instead of just, I mean, don鈥檛 rule out this particular tool because you鈥檙e not familiar with it. And I did. I made that mistake for years. And you know what, I鈥檓 credit manager enough to admit it.
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Joe Ketzner听 33:41
Well, I鈥檓 glad. I hope our conversation helped to spur that along a little bit
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Thea Dudley听 33:45
It definitely did. So you know, Bobby and I had an amazing conversation. I鈥檓 like, we have to talk about this on the podcast. Sowhen, when you see what鈥檚 coming up for the next decade, any predictions, any anything, you鈥檙e like, hey, you should be watching for this. Or, like, if I had a crystal ball, I鈥檇 be on a beach.
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Joe Ketzner听 34:05
From my standpoint, if we鈥檙e going to look at the next 10 years, let鈥檚go back five years. Who could have predicted the last five years? Good point. It鈥檚, it鈥檚, it鈥檚 such a dynamic world that seems to have large scale changes. I mean, look at the tariffs. They come on one day they鈥檙e off the next day. You can鈥檛 manage that like that鈥檚 just not something that businesses know how to manage. They鈥檙e looking six to 18 months plus, out into the future of what they can do. So the next 10 years, no idea that it鈥檚 gonna be it鈥檚 gonna be a ride. Let鈥檚 hope for smooth sailing, and the last five were calm.
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Thea Dudley听 34:50
I guess we鈥檒l see. Bobby. You got anything you want to add to that?
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Bobby Williams听 34:54
Yeah, I would say just from a business information credit assessment standpoint. We, I think you鈥檙e going to see an accelerating trend to use non traditional data to make decisions offof sentiment data.
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Thea Dudley听 35:09
Let鈥檚 talk about non traditional. So what do you got in mind there?
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Bobby Williams听 35:12
Yeah, well, non traditional. I mean, it runs the gamut. I mean our own company, for example, we we have non traditional data that we provide that nobody else has, so it鈥檚 proprietary and non traditional, specific to how somebody鈥檚 insurance behavior has been over the last five years. Okay, that鈥檚 that鈥檚 an interesting aspect. But you know, beyond that, you鈥檝e got other data points that I think are again going to be an accelerating trend sentiment data. By by that, I mean, you know, not credit references, but like facilitators of customer reviews, supply chain reviews, how does a business operate within its community, etc, etc, I think those are going to be some variables in the credit decision making process that today or just kind of left on the cutting room floor, but there are companies that are already doing some of that, but I think we鈥檙e going to see more of that over time, because that鈥檚 going to be some of those soft indicators that you know, you know, part of the 3c of credit kind of address that right now don鈥檛 get tackled too often. You know is, you know, is somebody willing to pay? You know, it鈥檚 not, are they paying, or are they can they pay? But are they willing to pay? I think with sentiment data, you鈥檙e going to get a little bit more deep in that here in the next few years.
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Thea Dudley听 36:40
Interesting. I that鈥檚 a whole nother. That鈥檚 a whole nother podcast. We could be like, talking on All right, so we鈥檙e kind of wrapping up. Is there anything that we that you absolutely need to know about credit insurance that we haven鈥檛 talked about that you鈥檙e like, look, we missed this, you know, I, I鈥檝e got to get this in here.
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Joe Ketzner听 37:03
The biggest thing is it鈥檚 customized to everybody. So taking or hearing this podcast and making a decision might not be the best way to look at it, but having a conversation with somebody that鈥檚 an expert in trade credit that can actually talk to your listeners about what their situations are, is going to be the best way to makesure that this product is or is not a fit at this point in time, the our penetration is still very low from an industry standpoint. So we鈥檙e our goal is to evangelize what this product is and how it works, because there鈥檚 a lot of people that don鈥檛 understand it. So the biggest thing that I ask everybody is, let鈥檚 have the 30 minute conversation. Let鈥檚 see if it makes sense, and if it does, we鈥檒l take it to a second date. If not, we鈥檙e just gonna move on.
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Thea Dudley听 37:54
Now I can tell you, I my view of credit insurance was pretty low. I dorealize it is a great tool as I have matured and got to experience some other opportunities. You do realize that it鈥檚 something that can come into play. A lot of it is just understanding it and knowing what your policy says and what you鈥檙e trying to do with it. I really appreciate your time today. This is a topic that a lot of credit people don鈥檛 get to explore and ask a lot of questions. If anybody has any questions out there that we didn鈥檛 cover and you鈥檇 like to see revisited. You know, guys, you know how to get a hold of me, thea@creditoverlord.com or send something over to the magazine. We鈥檒l get those answered for you. This wraps another episode of 麻豆传媒 talks credit with Thea Dudley, the credit Overlord, and you can find us on Apple, Spotify and YouTube any day of the week for the past episodes, we come out every other Tuesday, and if you miss us and want to fill in that other Tuesday, you can catch Sally on 麻豆传媒 talks social media on the in betweens. Until then, we will see you next time. Thanks for joining me this week. Your only place for practical strategies, navigating trade credit and the 麻豆传媒 space.
