September CMI Inches Up on Strength of Unfavorable Factors
The National Association of Credit Management's (NACM's) Credit Managers' Index (CMI), now available at www.nacm.org, improved slightly in September. The figures continued the growth trend begun in May of this year, driving the CMI to its highest reading in more than three years.
September's growth was driven primarily by increases in the index's unfavorable factors, all of which registered improvements and some by substantial margins. Look for big improvements in accounts placed for collection, dollar amount beyond terms and filings for bankruptcy. .
NACM Economist Chris Kuehl, PhD noted that this reflected a shift in debtor behavior toward friendlier payment behavior with regard to their trade creditors. Essentially, businesses are settling their debts rather than trying to test the waters of late payment. "When times are tough, debtors begin to take advantage of what leverage they have and start to test those that have given them credit. There are more slow pays and many of the negative indicators get progressively worse as companies try to hang on to their cash and test the patience of the credit manager," Kuehl said. "There comes a point when these companies want to get access to credit again and that prompts them to try to catch up and get back in the good graces of those from whom they seek credit. This phenomenon could explain why the data within the unfavorable categories has improved."
Elsewhere in the index, all but one of the favorable factors fell in the overall index, though each of them remain well above 50, the line that indicates each of these categories is still in expansion. Much of this decline in the favorable factors can be attributed to a slide in sales.
For a full copy of the report, complete with charts and graphs, click here.