Why is writing effective credit memos so vexing? Given that a credit memorandum is one of the most critical documents in the life of the loan, it would seem like a straightforward process.However, lenders, credit analysts, and other staff frequently seek tips for writing better credit memos.Writing an effective credit memo is so important to the lending process. The loan committee uses the credit memo in deciding whether to approve the loan, so the lender wants to put forth an accurate and complete picture of the member — not only for the member’s sake, but also for the credit union’s risk management. At the same time, this document can become extremely complex and large because it has a lot of data coming from various sources.Lenders and credit analysts take member information, financial ratios, any global cash flow analysis, the assigned risk rating, proposed loan pricing, and terms of the proposed loan, and must organize all of this into a cohesive credit memo.This information will then be used for the initial loan decision as well as for modifications, renewals, or annual loan reviews later on.In addition, all of this data collected during the loan application and credit analysis should be put together in a way so that credit reviewers or supervisory agencies are able to reach the same decision the credit union did and access the supporting documentation. Not surprisingly, many bankers find the task to be a difficult one.Templates are critical for efficiency and effectiveness in writing credit memos, according to Alison Trapp, Abrigo’s Director of Client Education. “Everyone knows where to look for a certain piece of information,” she says. An automated credit analysis solution that can create customizable credit memos can also help credit unions incorporate four effective credit memo traits:ClearConciseOrganized RelevantEffective credit memos are clearUsing specifics and staying away from adjectives in the writing can help credit memos be more effective.Trapp notes that one person’s definition of a tall man might be 5 feet 11 inches, while another’s might be 6 feet 9 inches. “When you’re writing a credit memo, think about the phrase, ‘significant decline in revenue.’ Stay away from that adjective and instead, give more facts,” she says.Avoiding jargon is another way to make credit memos clearer and thus, more effective. It might be tempting in some industries, such as healthcare or technology, to use a lot of jargon, but that might make it difficult for those outside the industry to follow along, and it might be cluttering up the content.Effective credit memos are conciseTrapp says focusing on your audience or audiences and their needs will help shape the content of the memo.Remember that only the salient points need to be included. One common problem with credit memos is that the writers don’t edit out unnecessary information.“You can’t put everything in there and expect your approver to pull out the relevant points just because you want to cover your bases,” she says. “It’s part of your job to make sure your approvers know what the key elements are to the credit memo.”Being concise also means choosing words carefully and using the fewest words without sacrificing clarity, she says. Reviewing the memo for opportunities to use simpler words is another idea. “Maybe in college or high school you were incentivized to use more words to get to the word count,” Trapp says. “That’s not the point of a credit memo.”Effective credit memos are relevantWhat are the relevant points to include in a credit memo? Trapp recommends looking for the drivers or impacts of various data points, because they usually tell a story. One way to identify the drivers, she says, is to repeatedly ask and answer the question “why?” In other words, if sales for the member went up, describe why. If it was because customers bought more, describe why. If that was because a new version of the product was delivered, describe why. After doing that, the credit memo might, therefore, describe the driver of a sales increase by saying, “Sales went up because customers wanted the additional features in the new version.”Asking “so what?” helps identify impacts. For example, by asking and answering that question about cash flow, the memo writer might be able to explain that the applicant’s cash flow decreased in the period despite a sales increase due to a new, bigger customer with longer payment terms than the typical customer.Effective credit memos are organizedMost listeners and readers tend to remember most accurately the first and last things they hear or read. Organizing credit memos with that in mind can help create more effective credit memos.Trapp says a potential executive summary at the beginning of a memo could include the recommendation, why the credit union would want to make the loan, what could go wrong and the transaction structure. At the end of the memo, the risk rating analysis could include an affirmation of the rating, the positives and negatives, and the triggers to change the rating, assuming a pass rating for a new deal.Surprisingly, many credit unions are still creating credit memos by copying and pasting information from previous documents and from their various data sources. Some might use and re-use templates this way, but that still requires proofreading to make sure a previous client’s data wasn’t inadvertently left in a field.Often, credit unions will use an old version of a credit memo and just add a new section to it, without cutting anything, and this can contribute to excessively long memos.Using an automated credit memo solution that allows the credit union to customize the memo template helps standardize credit memos, which can be helpful in some cases. Loan committee members who always know where to look in a memo for certain information may be able to review memos more efficiently.An automated solution for credit memos can also make it easy to review the format periodically to make sure the template is streamlined and meets the needs of the various audiences. Doing this annually is a good idea, Trapp says.“Understand why you organize the credit memo the way you do,” she says. “Sometimes it just doesn’t make sense according to the four best practices.” 1SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Mary Ellen Biery Mary Ellen Biery is a Senior Writer and Content Specialist at Abrigo. Mary Ellen is a veteran financial reporter whose work has appeared in The Wall Street Journal, Dow Jones … Details
9 Derby St, Hendra.NEVER before lived in, this new house at 9 Derby St, Hendra, is a collaboration between Profile Architecture and Davlen Developments and has a modern yet functional feel. 9 Derby St, Hendra.Agent Leigh Kortland said spread over three levels of open-plan living space, the residence on the cusp of T.C Beirne Park was beautifully designed with interesting features at every turn.“A soaring 6m breeze corridor is the centrepiece of the home, bringing an abundance of north-easterly sunlight and cool Moreton Bay breezes inside,” Ms Kortlang said.“From its clever use of windows to its connection between indoor and outdoor living and its location across the road from the heritage-listed Glengariff villa, this residence really is such a special offering.” 9 Derby St, Hendra.Other features of the house include a 6-Star energy efficiency rating and ducted airconditioning and ceiling fans to three of the bedrooms. HMAuction: On site, September 9, 11amAgent: Leigh Kortlang, Ray White Ascot 9 Derby St, Hendra.More from newsFor under $10m you can buy a luxurious home with a two-lane bowling alley5 Apr 2017Military and railway history come together on bush block24 Apr 2019Meticulously crafted with luxury finishes and appointments throughout, the house has 5.5kW solar energy, multiple indoor and outdoor living areas, state-of-the-art appliances and an open-plan ensuite in the main bedroom.On entry to the middle level, a kitchen, living and dining space extends to a terrace including a jet-spa pool. 9 Derby St, Hendra.Along with a range of European appliances, the kitchen has a large butler’s pantry, ample storage space and reconstituted stone bench tops.To the rear of the floor are a bathroom and two bedrooms, including the main. Both bedrooms have walk-in wardrobes, while the main has a private balcony. Its open-plan ensuite is an outstanding design, with double vanities and a freestanding tub, while being flooded by natural light. Upstairs, a central hallway looking to the living hub below connects to a bathroom and three more bedrooms. Two of these bedrooms have built-in wardrobes, while one has a walk-in wardrobe, an ensuite with double vanities and a private balcony with street views.The lower level of the house is given over to a rumpus room with a kitchenette and bi-fold doors to an outdoor area. There is also a laundry with external access.
DAWSON CREEK, B.C. – Worksafe BC investigators are continuing to investigate after an explosion at an Encana facility northwest of Dawson Creek on Monday.The explosion happened at around 9:00 a.m. Monday at Encana’s Montney Water Resource approximately 20 kilometres northwest of Dawson Creek near Farmington. Worksafe BC spokesperson Trish Chernecki said their preliminary survey of the scene showed that that the explosion involved a storage tank at the facility, but could not say what caused the explosion, whether it originated from the tank, or what the tank contained. Worksafe officers responded to the incident and conducted an initial response before standing down while the RCMP investigated, along with Emergency Management BC officials, and officials from Encana and the BC Oil and Gas Commission.Chernecki added that the RCMP turned the scene over to Worksafe BC investigators on Tuesday afternoon at 1:10.- Advertisement -Investigators should be submitting their preliminary report by early next week that will have more information on what possibly caused the explosion.