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Five Key Credit Services
The credit team offers services in five key areas: new customer setup; new customer credit; portfolio underwriting;
problem accounts with collections, bankruptcy and bad debt; and reporting. In addition, they offer services to business
units in evaluating acquisitions, developing customer relationships and resolving problems. A separate shared-services
operation manages routine, daily collections.
Cargill's roots date to 1865 and a grain storage warehouse in Iowa. It grew with the expansion of the railroads into a
regional grain trader, and in the 1940s began to diversify. Calahan says they now operate up and down the food chain.
Customers include crop producers, livestock producers, food manufacturers and retailers. Cargill is involved in processing,
marketing and distributing commodities such as cotton, oilseed and sweeteners. They're in everything from grain elevators to
fertilizer to beef production and processing. The company is involved with animal nutrition, chocolate, flour, soybean
processing plants, energy, ethanol and bio-diesel operations.
With Cargill's size and complexity, Calahan says, it's critical that the credit staff be able to return credit decisions
as soon as possible. While international decisions take longer, once analysts receive financials, references and other
information, they set to work on a recommendation. "One of the keys to sales is service, and one of the keys to service
is being able to qualify your customers for credit." If for any reason the credit team was falling short, Calahan says,
they would increase staffing or take other measures to meet the deadline. "It's that important. We can't have a person
out there hanging and not be able to deliver a credit decision. It's service, and it's service as fast as we can deliver it."
Shared-Services Benefit Smaller Operations
Cargill's business includes 12 platforms comprised of 84 different business units. While there are overarching corporate guidelines,
each sets its own credit policies. Cargill Meat Solutions and Animal Nutrition takes care of its own credit and collections, for
instance, as do Cargill Salt and others.
Calahan and his colleagues handle credit for 20 of the 84 business units. Their operation has a database of roughly 100,000 customers.
Approximately 80 percent are allocated credit, with an aggregate extended credit of $2 billion. For the system to run smoothly, the
credit staff works with the business units they serve to develop detailed service-level agreements outlining exactly what the credit
team will do, what they need from the business units, and what reporting will be provided. The 24-hour promise on domestic decisions
is detailed in the agreement.
Credit Charges Fees for Its Services
Business units are charged a fee for those services that becomes part of Cargill's internal accounting. The credit team's internal
customers also provide oversight: The director of credit reports to a governing board of six controllers, with permanent and rotating
membership from the 20 business units the team serves. Calahan says the shared-services credit team represents a best practice for a
company Cargill's size. It benefits business units that are too small to have their own credit operations. "When you deal with a
department with 13 people, you have varied skill sets and close to 100 years of experience. That gives you depth of knowledge."
Four of the 13, including Calahan and the international specialist, are senior analysts. There is also a director, and the rest are
credit specialists who handle account setups and new credit. Calahan began working in the credit industry in 1976, and was divisional
manager of credit for North American and world grain for Continental Grain Co. when Cargill acquired it in 1999. "Credit is one of
the places where it pays to have a long memory," he says. The shared services division also brings international experience, as well
as industry and intra-company contacts that help credit staffers stay in front of potential problems.
The setup also offers backup. "If one person is gone, we have someone who can step in and perform, with no interruption of service."
Most members of the credit department are based at the company's Minneapolis headquarters, while Calahan is in Kansas City and the
international credit specialist is in Coral Gables, Fla. When Credit Today spoke with Calahan, the 11 staff members based in Minneapolis
were off-site in training at Lake Minnetonka, and Calahan was helping field calls.
Special projects are included in the bargain. "Last week one of our major business units announced an acquisition," Calahan says.
It required that the credit team set aside time to merge the customer databases. "When we've got notice...we can budget our time."
Technology Helps Get the Job Done
Rules-based scorecard using bureau data.
Communications Help Prevent Pitfalls
Given Cargill's size, collaboration among business units, and even between the shared-services credit team and other credit specialists
at the company, is a priority. Calahan says it's critical that they share, not only operational information, but information about what's
happening with the industries they serve. He credits Alan Snowden, director of credit for Cargill Meat Solutions, for coming up with the
Credit Broadcast Wire, an email sent daily to the company's credit professionals. "He's the inventor and author and editor, and puts a
considerable effort into that daily."
Many customers do business with more than one Cargill operation. Because of that overlap, the daily email can alert analysts to potential
pitfalls. The content varies, and can include daily credit bulletins,industry trends, country analysis and credit tips and insights. It
also includes reports on company events and new initiatives, as well as links to a daily agricultural news wire and other news that
affects Cargill customers.
Not all the information is relevant for every credit employee every day, "but nevertheless everybody gets it." If one unit has a customer
whose credit is going sour, that note might find its way onto the company's informational email. In one instance, a business unit used the
internal communication to alert others to problems with a particular customer. Because there's no collective database, "we did not know the
other folks were trading with them," Calahan says. "But when we have that communication and share problems, we are able to coordinate our
exposure and our efforts." If two Cargill units are having problems with a customer, they might as well coordinate and go after the
balances collectively.
Management Sets the Tone for Credit
While units operate independently, Calahan says the credit functions run more smoothly because corporate management puts an emphasis on them.
"It's not the credit staff driving the ballgame, it's management." Corporate guidelines help set direction on credit policy. That information
is shared when new sales employees walk in the door. "I'm going to Minneapolis the second week in September to give a presentation to new hires
in sales," he says. "The business units I provide service for make it part of their responsibility."
Restructuring Would Merge Credit, Collections
Calahan says the company is constantly reviewing its approach to improve processes and functions. Areas that have been identified as
"best practice" for credit include customer visits (with common characteristics of every visit), what to do in the event of a bankruptcy,
and how frequent accounts should be reviewed based on size of credit limit and other assorted "triggers."
The staff is looking at a restructuring that will allow the credit team to operate more efficiently. The team also will shift from a
director of credit to team leaders, and will do more to leverage the corporate connection between business units.
The company right now is determining how to best merge its independent credit and collections shared-services operations. Combined,
about 250 people work in collections and credit globally. They do communicate problems via the broadcast emails, Calahan says, "but
seldom do our paths cross."
Under the current system, one business unit might need a credit line of $25,000 in order to do business with a customer. The credit
team reviews the customer's information, and if all is in order, sets a limit of $25,000. Going forward, the shared services team will
take a harder look at the credit limit based on a customer's history and financials.
"If the business is worth [a credit line of] $100,000, why would I only give them $25,000?" Calahan says. If a customer is a good risk,
Cargill will issue a higher limit. Unused credit would be available, not only to the business unit that first established the account,
but to any Cargill business unit served by the shared service. It will give the sales force the flexibility to approach a customer
without having to go back and set a higher limit.
"It's a very good idea, and so much do I think that it is best practice in the credit community that I'm already taking that approach
in the business units I serve," Calahan says.
"There are some incredible things in this new process," Calahan says. "Also, when you're as big as Cargill, you want to establish one
face for the customers."
The change, he says will allow the company to heighten its profile, and address more customer needs through innovation. "We've got
some cool things going on."
Cargill senior credit analyst Paul Calahan can be reached at paul_calahan@cargill.com, or 913-323-6330.
Cargill Inc. Credit Department at a Glance
Corporate HQ:
Minneapolis
Industry:
International provider of food, agricultural and risk- management products and services
Employees:
149,000 in 63 countries
Size:
Second-largest privately held company in United States
Size of customer base:
In the shared services unit, 100,000 customers, with 80,000 extended an aggregate credit of $2 billion
2005 sales:
$71 billion
Average DSO:
Varies
Director of corporate credit reports to:
Governing board of controllers for Cargill business units
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