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At a Glance
MPW Industrial Services, a growing, privately-held industrial services company with more than 3,000 workers nationwide
User:
Credit & Collections Manager, MPW Industrial Services, Lee Tompkins
Challenges:
- Manage portfolio risk in troubled industries
- Maintain a nuanced understanding of customer financial health to maximize profitable sales opportunities and inform MPW credit terms for financially challenged accounts
- Communicate timely, accurate data to CFO
Solutions:
- Relies on CreditRiskMonitor as an essential tool in his credit information “toolbox”
- Contributes trade data to track risk across all MPW portfolio accounts
- Uses FRISK® score, all reports, and expert user skills to obtain the data his finance organization needs to approve orders and mitigate risks
Key Uses:
- Employs creative credit solutions to enable sales that might otherwise be deemed too risky
- Alerts sales and CFO to material changes that may affect sales and credit policy
Targeting Credit Risk in Troubled Industries
MPW Industrial Services offers industrial cleaning, facilities management and water purification services to thousands of clients across North America.
Lee Tompkins, Credit and Collections Manager, manages the order-to-cash cycle for over 500 customer accounts, many in troubled sectors like energy, paper, and steel. Supporting sales while keeping risk at bay requires a nuanced approach, especially with many customers whose financial health is challenged.
Read Lee’s story to learn how his team successfully manages risk. Best practices include:
- A varied toolkit, including real-time financial data updates, and other time-savers
- A creative process for setting credit terms, and other risk management strategies
- Strong relationships with key stakeholders, from customers to collections to sales
Find out how the credit team at MPW Industrial Services targets risk in troubled industries, and how CreditRiskMonitor enables their success.
Lee Tompkins isn’t your typical credit manager. He’s heard this repeatedly throughout his financial career, and now, as Credit and Collections Manager at MPW Industrial Services, his unique approach to managing 500 customer accounts — including many in risky industries — illustrates just how true that is.
Founded in 1972, MPW Industrial Services is a privately held company offering industrial cleaning, facilities management and industrial water purification services to thousands of clients throughout North America. MPW experts develop technology-based services that get the dirtiest, most challenging cleanups done at lower cost and with less risk. The company is based in Hebron, Ohio, with more than 3,000 employees in over 70 locations.
When Tompkins joined MPW in 2015, he brought 25 years of credit experience and an innovative credit philosophy that relies equally on accurate, real-time data and building strong relationships with key stakeholders, from customers to collections to sales.
Struggling industries require nuanced credit analysis
As a credit and collections manager, Tompkins says, “the same challenge is always there: you’re trying not only to turn invoices into cash from a credit collection standpoint, but also to mitigate risk in a portfolio.” Yet it’s not always so cut and dry. Financial conditions change fast, and MPW’s portfolio includes many public companies in business sectors where accurately evaluating customer financial health can be difficult.
Industries like paper, steel, and energy have recently been challenged by slow economic growth, and in the case of energy, unprecedented liquidity problems. As a result, one-fifth of all of MPW’s receivable dollars are tied to companies that have FRISK® scores in the red zone. Tompkins’s job is to constantly monitor them and look for the “gray areas” so he can help the sales team make deals work.
In these troubled industries, relying only on an arbitrary credit score cut-off or the Altman Z-score can cause you to get too negative, too fast. To account for the industry-wide challenges many MPW customers face, Lee uses CreditRiskMonitor to take other factors—like their days past due, payment index and scores, and FRISK® score—into account. CreditRiskMonitor “is constantly monitoring your portfolio for changes, risks, solvency, upheaval, and liquidity concerns. Information that guides you in your day-to-day, and your quarterly or annual reviews, as it relates to extending credit and collecting money,” Tompkins says.
Using CreditRiskMonitor is like getting out in the field and wearing a helmet. It’s required to do this job effectively.
Creative terms help make the sale
Tompkins has spent time in the field with the sales team, getting familiar with their challenges and building relationships. Trust, he believes, goes a long way toward helping you both manage risk and exploit opportunity. “When you’re the credit manager of any organization, you can have an adversarial relationship with sales, or you can have a very supportive one. It’s always been my style to explore every avenue that I can, to make a sale occur, and not say no,” he says. For good customers, this might mean increasing credit limits. For riskier customers, it could mean asking for a down payment or offering discounted terms in exchange for faster payment.
For instance, last year a client had receivables on the books deep into six figures. Planned seasonal services would have exposed MPW to hundreds of thousands of dollars more. Around the same time, the company acquired another struggling company and its risk of bankruptcy skyrocketed. Fortunately, CreditRiskMonitor alerted Tompkins in time.
To mitigate MPW’s risk, Lee offered the customer aggressive payment terms. As a result, when the company filed for bankruptcy approximately six months later, MPW’s risk exposure was in the low five figures, down from a high of over a half million dollars. “When I think of the money spent on CreditRiskMonitor as compared to what we could’ve been hit with,” Tompkins says, “the savings are huge.”
Trade data puts MPW's A/R in context
As a trade contributor, MPW contributes trade files from multiple divisions and receives customized reports on its dollar risk exposure based on CreditRiskMonitor’s analysis of that data. Tompkins says, “The thing that CreditRiskMonitor does, that has such value, is the slicing and dicing of your portfolio, not everyone else’s.” On top of that, trade data gives you “that ability to look at your hidden slow payers, predicted slow payers, and receivables at risk, and see the number of customers and dollars involved.”
When I think of the money spent on CreditRiskMonitor as compared to what we could’ve been hit with, the savings are huge.
Custom reports simplify credit review
The Hidden Slow Payers, Receivables at Risk and Receivables Snapshot reports are particularly valuable when Tompkins needs to provide his CFO with key metrics for understanding portfolio risk. He also appreciates being able to download customized data from CreditRiskMonitor into an Excel spreadsheet when he and his CFO review credit limits by customer. In addition to viewing all the necessary financial metrics, they can easily see historical and seasonal trends, and even relevant industry data by SIC code.
Tompkins also relies on CreditRiskMonitor data to create a special one-page report that his CFO uses to evaluate credit limits beyond a specific credit granting authority. His customized snapshot depicts creditworthiness at a glance with a color-coded, graphical presentation of relevant data, including FRISK® score, Altman Z"-Score, Moody’s rating, days past due, key ratios, total revenue, net income or loss in previous year and return on equity.
Expert advice
Tompkins recommends new users take a look at the tool for just a few days to “quickly see the added value of being able to support your finance and sales organizations. It’s not just risk mitigation; it’s growth, too.” Then experiment with how you can customize it to serve you best. “Using CreditRiskMonitor,” he says, “is like getting out in the field and wearing a helmet. It’s required to do this job effectively.”
We thank Lee Tompkins for his loyal and innovative use of CreditRiskMonitor since 2008, and we look forward to supporting his team for years to come.
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At a Glance
Anixter International, Inc., a $7.6 billion Fortune 500 wire, cable and communications industry leader based out of suburban Chicago
User:
Global Manager, Accounts Receivable Risk and ReportingAnixter International, Inc., Mike Ellis
Challenges:
- Getting paid within terms to ensure working capital
- Working with sales teams to bring in creditworthy customers
- Staying on top of companies at risk on a global scale
Solutions:
- Weekly, sometimes daily monitoring of financial changes involving at-risk companies
- Integrating CreditRiskMonitor data into internal reports for a clear, holistic picture of a customer’s risk potential
- Minimizing risk by using CreditRiskMonitor’s FRISK® score and High Risk Reports
Key Uses:
- Daily FRISK® score analysis by Ellis and his team
- Site content, including Bankruptcy Case Studies and High Risk Reports
Anixter Creates Team Cohesion, Anticipates Risk with CreditRiskMonitor Data
A $7.6 billion Fortune 500 company, Anixter International, Inc. was founded in 1957. Headquartered in Glenview, Ill., Anixter is one of the largest producers of wire and cable products, which are used in virtually every type of setting from large, corporate offices to small businesses and personal homes. Also a leader in communications and security, Anixter provides companies with the infrastructure solutions needed to keep a business running smoothly.
Mike Ellis, Global Manager of Accounts Receivable Risk and Reporting for Anixter, pulls daily reports from CreditRiskMonitor on all portfolio companies at a FRISK® score of “3” or worse. This process provides Ellis with valuable insight into the financial health of his portfolio companies long before bankruptcy becomes an issue.
Read Mike’s story to learn how his team successfully manages risk. Best practices include:
- Weekly, sometimes daily monitoring of financial changes involving at-risk companies
- Integrating CreditRiskMonitor data into internal reports for a clear, holistic picture of a customer’s risk potential
- Minimizing risk by using CreditRiskMonitor’s FRISK® score and High Risk Reports
A $7.6 billion Fortune 500 company, Anixter International, Inc. was founded in 1957. Headquartered in Glenview, Ill., Anixter is one of the largest producers of wire and cable products, which are used in virtually every type of setting from large, corporate offices to small businesses and personal homes. Also a leader in communications and security, Anixter provides companies with the infrastructure solutions needed to keep a business running smoothly.
From robust office security systems to a conference room’s wired Internet access, Anixter is in the business of keeping the world’s digital communications afloat. Global Manager Mike Ellis ensures streamlined communication internally while assessing risk and mitigating potential loss. Ellis uses data-driven reporting and consistent account monitoring to drive the decision making process of Anixter’s management team and sales staff.
The important role of working capital
Staying ahead of risk and getting paid on time are at the top of Ellis’ list. It is Ellis’ job to ensure the strength of Anixter’s extensive portfolio, which means pinpointing even the slightest of changes in the credit health of his customers. Mitigating risk is Ellis and his team’s primary goal.
“No public company goes bankrupt overnight,” he says. Thirteen years with the company and use of robust monitoring systems provide Ellis with the background and information needed to make crucial decisions about the company’s customer portfolio.
We rely on CreditRiskMonitor because they pull this data for us, which saves us time.
Using data to open the communication doorways
In today’s ever-changing, digital world, businesses must adapt to stay healthy, and that means opening communication lines between teams. Credit and sales can have a frictional relationship, but Ellis and his team work diligently to bring the two teams together.
“We’re using the sales relationship to accomplish AR goals, and we’re trying to be more engaged with the sales team before an order is placed,” said Ellis. He wants his credit department to be more than just the “center that says no,” and helping the sales team understand credit as a function - rather than a prohibitor—helps Anixter reach its sales goals.
It’s the tools provided by CreditRiskMonitor—the FRISK® score, High Risk Reports, and consistent monitoring— that help bridge the gap. The information provided by the service helps sales better understand how credit decisions are made.
Setting up for credit success
Ellis and his team pull daily reports from CreditRiskMonitor on all portfolio companies at a FRISK® score of “3” or worse. This data is then combined with the company’s internal AR report, infused with trend data, and reviewed from a holistic perspective. The data is closely monitored “day-by-day or week-by-week to see if the score of the company is decreasing or increasing,” said Ellis.
This process provides Ellis with valuable insight into the financial health of his portfolio companies long before bankruptcy becomes an issue: “By the time something goes wrong, we’re able to scale back on the operations to minimize our risk, and our sales people are actually thankful for it.”
We rely on CreditRiskMonitor because they pull this data for us, which saves us time. Every five minutes freed up can be four more [sales] phone calls.
CreditRiskMonitor's High Risk Reports spell out proof
An avid user of CreditRiskMonitor’s High Risk Reports and Bankruptcy Case Studies, Ellis extracts the data and integrates the scenarios into Anixter’s day-to-day operations. “I want to know how these companies go bankrupt,” Ellis states, and finds the reports provide him valuable insight into patterns and trends that could spell bankruptcy for the companies he works with directly.
In Ellis’ eyes, cash is still king, and knowing how a company is leveraged, whether in debt or in cash, is powerful information in a credit department’s arsenal.
“We rely on CreditRiskMonitor because they pull this data for us, which saves us time,” said Ellis. “Every five minutes freed up can be four more [sales] phone calls.”
Wish list and advice
Ellis’ wish list includes private company financial data. “I know this is like pulling a rabbit out of a hat, but if we had a searchable database, where 30 percent of our private companies had financial data on record, that would be phenomenal.”
As for advice when dealing with sales teams, Ellis implores credit managers and teams to use the numbers: “Lead them through the math, and let them think and calculate.” This process—providing the Anixter sales teams with the financial information and the numbers — allowed them to see that credit managers make decisions that are calculated and backed up by data.
CreditRiskMonitor continues to roll out new services to aid Mike and his team, as well as all our customers. We know private company data is high on everyone’s wish list and we’re excited to be beta testing a new solution for private company financials. In the meantime, we look forward to building our relationship with Mike and Anixter as a whole, as they work to bridge the gap between credit and sales and stay on top of risk management.