Welcome to my “professional” blog.  I will use this space to talk about issues we are facing at ECG Collateral Services, Inc.    Hopefully this will become somewhat of a resource for others in the same field or for those facing the same or similar issues…..

I’ve been in this line of work (collateral/due diligence auditing) for a long time, over 20 years.  I am still learning new things and still trying to perfect the things I already know.  If nothing else, perhaps this blog (through the prospect of public exposure and humiliation) will spur me on to finally master those traits that either still elude me or that occasionally fall by the wayside. Continue reading

4 Ways To Improve Inventory Management for Your Growing Business

Photo: Pixabay

Growth is one of the main goals for most businesses. However, achieving this goal can create new challenges that businesses must deal with to sustain that growth. One vital challenge to overcome is learning how to effectively manage inventory when product lines are expanding due to increased demand. Here’s some advice from ECG Collateral Services:

1. Improve Demand Forecasting

Accurate demand forecasts are essential for effective inventory control. If your forecast is off, you are likely to experience either shortages or surpluses in your inventory. The first part of improving your demand forecast is identifying where each of your products is in the product lifecycle. Products in a growth stage are likely to see an increase in demand, while products in a maturity stage may see fluctuating or decreasing demand. You then need to apply variables such as seasonality, qualitative information sources and trends to achieve an accurate forecast.

2. Prioritize Your Stock

When businesses expand the variety of products they carry, there can be a temptation to reduce the quantity of each product across the board to have enough shelf space for all of the products they sell. However, this can increase the risk of being sold out of your most popular products. A better strategy is to prioritize each product line by its value to your business.

ABC analysis is a straightforward technique many businesses use to prioritize inventory. The goal of ABC analysis is to divide products into categories based on which products have the best sales and highest profit margins so that you can stock more high-value items and fewer lower-value items.

3. Employ Automated Solutions

Inventory optimization software can be used to automate stocking policies, demand forecasting and replenishment tasks. These programs automatically factor in supply and demand variables and adjust inventory levels to make sure you have enough inventory in stock to cover sales forecasts, but don’t have so much stock sitting around that there is a potential for obsolescence or a high opportunity cost.

Inventory planning software can be used to automate your inventory prioritization process. These programs factor in the demand volatility of each product line, the value of each product and the frequency each product gets picked. You can adjust the software to focus on different priorities, such as products with predictable demand and high pick frequencies over less-predictable products that get selected less often.

4. Improve Scheduling and Time Tracking

Data shows that labor costs can account for as much as 70% of total spending. When your business is growing, it is especially important to accurately track and manage your labor resources.

If you have been using manual timecards, consider switching to an easy repeated scheduling and time-tracking solution. These software packages make it easy to set and adjust repeating schedules and notify employees of schedule changes. Additionally, they can integrate with timecard apps that automatically track employees through their smartphone’s GPS. This makes it easier for you to figure out where your employees are at any given time and get automated notifications when they clock in or clock out.

A growing business is a great thing to have. However, failing to update your inventory and employee management systems to keep up with your business can cause that growth to stall. Implementing these four strategies can help you avoid inventory problems and better manage employees while continuing to expand your business.

The “F” Word

Even though it has five letters, for most lenders fraud is a four letter word.  Usually the course of action when fraud is found is not to go running to the nearest prosecutor or law enforcement agency to have the perpetrators charged, but rather to call a meeting with the principals involved and to work out a reasonable way for the lender to walk away from the transaction with no loss or as small a loss as possible.  The threat of litigation and possible prosecution is usually enough to ensure the cooperation of the offending parties.  Of course, lenders will press charges when a fraud is so egregious that there is no way a lender will get paid back, if it causes harm to other parties, or if a lender feels they may have a better chance of collecting more if the offending parties are prosecuted. Continue reading

A Picture is Worth a Thousand Words


Generally I am a proponent of graphs and tables.   I think that when presenting data in due diligence or collateral examination reports, graphs and tables present it in a pure and unbiased state.

Pure data is the best way to underscore a point or opinion.  For example, if after performing test counts an examiner determines that there is a need for a reserve due to large negative variances, a table that shows this will only help support this position.  A table that is formatted and presented efficiently will help the reader understand the issue quickly and easily. Continue reading

When it comes to communicating with customers, less is not more.

This post is one that I would like to avoid writing, as I am going to admit committing one of the cardinal sins in due diligence/collateral auditing and being a service provider in general.  Not only have I committed it, but I have committed it twice in the last month!  Hopefully by admitting it here, I can help someone else avoid the same misstep.  The issue I am going to be discussing is timely communication of audit findings (or the lack thereof).

Before I go on, let me assure any current or prospective clients that the instances mentioned below are exceptions and not the rule.  Throughout my career I have practiced what is preached; however, I am human and sometimes I just mess up.  Of course I have reasons for the transgressions discussed; however, those reasons do not excuse the fact that they occurred.   I take full responsibility for them and I will not bother to try and justify them by discussing the reasons involved.  Continue reading

Liars Figure and Figures Lie


Examiners love numbers.  We like to work with them, write about them and interpret them.  We use numbers to describe pools of collateral and/or the results of our analysis of those pools.  Some of our favorite numbers are averages, variances and other statistical metrics.

Often we gain great comfort in the results of testing as well as make bold proclamations about those results due to an average result or “net variance.”  Unfortunately, our reliance on these comforting metrics is often misguided and worse, can lead to misinformation in our reports. Continue reading

Contras – Month end balances may not be enough

I recently completed an audit where the lender was backed into an over advance through contras. (the over advance occurred before ECG was called in)  The way that this occurred is pretty interesting.  When I was involved with training audit staffs, we often cautioned against this very thing happening.  This is one of the few times  that I have actually seen it occur. Continue reading

Technology and the Field Examination

One of the benefits of having been around for a long time is that you have an appreciation for just how far things have come.  On the other hand, you also have insight as to just how far we still have to go.  During this post, I’d like to remind everyone of how good we have it yet at the same time expose where we have perhaps missed the boat or have yet to fulfill technology’s promise.  This post will not address performing an EDP audit or an audit of a company’s MIS systems.  It is intended to address how the field examiner utilizes technology that is prevalent and easily accessible. Continue reading

Accruals and Dilution

When performing exams, a recurring conversation that we have with borrowers (and sometimes lenders) is the idea that accruals for potential offsets such as co-op advertising and volume rebates should not be reserved for because the subsequent credits are captured in dilution.  This is not the case.

The example below illustrates why the accrual should always be reserved for. Continue reading

Footing and Cross Footing an AR Aging with Monarch


We are very pleased to have our first guest contributor; Mr. David Gross. David’s company, www.MrMonarch.com, provides Monarch Training and consulting to a wide range of clients, David also has a course designed specifically for Commercial Lenders, please feel free to contact him at 440.646.0332 or [email protected].

Below is David’s post on re-aging and re-footing an AR report received from a client: Continue reading