One of the wrinkles in the unfavorable factors portion of the May Credit Managers' Index (CMI) was a perplexing deterioration in disputes. "It may indicate that there is a stronger desire to adjust credit arrangements as companies anticipate a period of better growth," said NACM Economist Chris Kuehl, PhD, explaining the sharp decline from 54.7 to 50.2 in May's disputes reading. "It may also reflect the impact of the first quarter slump and the temporary nature of that economic dip."
By and large, however, 2014 has been par for the course when it comes to disputes for most credit professionals. When asked in NACM's June Survey "Over the first half of 2014 have you or your company experienced an increase in customer disputes?" only about a quarter of the respondents answered "yes." The remaining 73% hadn't seen any noticeable rise in disputes this year, with many reporting in the comments that disputes and deductions were at levels comparable to 2013.
As ever, the CMI is a forward-looking indicator and often reflects developments in the economy one to three months ahead of time. The May CMI's rapid drop in the disputes figure, signaling an increase in actual disputes, could suggest that credit professionals can expect to see more disputes in the back half of 2014. In fact, a number of survey respondents mentioned in the comments that they expected to see disputes creep upward, just as the CMI suggested, for various different reasons.
"We just went to an automated cash application process in May, so I expect to see an increase due to this process, until we can work the bugs out of it," said one participant. "We have more pricing issues with a new pricing system," said another.
Others noted that their dispute increases were driven by customers continuing to plead ignorance. "We get disputes over service charges and they are increasing," one respondent reported. "Usually it is the excuse 'I didn't receive.' Lately we have been sending the invoices with the statement to ensure it's received. We still hear the excuse, even when they call about the statement that was included with the invoices."
Cash flow issues seemed to be generating disputes for many other survey participants too, as belt-tightening buyers try to cut down on their expenses as drastically as they can. "I've seen an increase in customers holding payment for the whole invoice versus the disputed portion," said one respondent. "I have to believe this is due to cash flow issues. If they can find anything that is incorrect they just aren't paying any portion of it, nor are they contacting us to resolve it. They wait for us to call and follow up when the invoice is past due."
Look for a new NACM Monthly Survey in July. In the meantime, if you haven't already, be sure to take this month's CMI survey which closes today at 5pm EST.
- Jacob Barron, CICP, NACM staff writer