Accounts Receivable: The Bank of Last Resort

Roanoke, VA, December 11, 2008 – American businesses will become “banks of last resort” as the credit crisis continues to wrack the economy through 2009 and probably beyond. Unwilling or unable to support even long-time business customers with lines of working capital, banks will force these companies to reduce output and employment.

Those are some stark predictions coming out of a day-long roundtable discussion conducted by Credit Today, the leading publication for business-to-business credit extenders. The meeting included the top minds in credit reporting and the top risk executives at the largest credit insurers in the world.

“There was probably more knowledge of current business conditions in one room than anywhere else on the planet,” said Credit Today publisher Rob Lawson. Each participant is an expert in gathering and assessing relevant information on trade (business) credit risk.

“Much has been written about credit problems at investment firms, banks and insurance companies, but we wanted to focus on the credit risks faced by ‘main street’ businesses. What we learned was nothing short of astonishing,” said David Schmidt, Credit Today contributing editor and the moderator of the meeting.

“This is a critical time for businesses around the world, with credit management right at the center of the storm. The ‘rules of the game’ truly have changed,” said Schmidt. “Metrics of credit-worthiness that credit analysts have relied on for generations aren’t working in today’s environment.”

Key findings at the Roundtable include:

• DSO (Days Sales Outstanding, a key measure of the health of accounts receivable) is rising dramatically, meaning payments are slowing as buyers are using their suppliers as their “bank of last resort.”

• Top management is often in denial about the severity of the problem in their customer bases, and how that will soon play out.

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