Weekly Blog by Philip King, CEO of the ICM - Merlin hype misses the point

There has been plenty of hype this week with regards the banks seeming to miss their quarterly lending target to small businesses. They agreed to lend £76bn to SMEs this year, equating to £19bn per quarter, and the £16.8bn achieved to date leaves them 12% short http://www.bbc.co.uk/news/business-13489884.

I am conscious of not wanting to repeat earlier rants but there are one or two points worth mentioning. Firstly, you obviously can't assume one quarter is going to be the same as the previous one, so to simply multiply by four is naive. Secondly, the agreement was only announced in February when we were already well into the first quarter. Thirdly, and acknowledging that I am repeating myself, it's nonsensical to 'force' banks to lend.

The granting of credit is based on trust that the supplier will deliver the goods, services, or funds required, and that the customer will pay in accordance with the agreed terms. Banks, just like trade creditors, need to set their lending policy and criteria in order to maximise sales and profit while maintaining risk at an acceptable level. It was lending too much to customers who were insufficiently credit-worthy that contributed to the credit crunch in the first place both at a local and global level.

The 'disconnect' between the views of the banks, government, and business organisations remains, and the media takes the opportunity to exploit the differences at every turn. I for one wish we could see a more cohesive message being delivered to business. They should be more prepared to share information about their business so that lending decisions can be better informed; they should recognise that there is often cash (debtors) sitting in their business that could be released by applying good credit management principles; and they should consider other financing options beyond a loan or an overdraft.

And as for the government - and again as I have said before - they need to stop promoting the reduction of financial reporting under the misnomer of reducing red tape. Numbers still have to be produced so red tape is, at best, a fragile argument. Less information will result in less credit. It is a simple equation.

On that subject, the ICM 30-second survey has just gone live. Please let us have your views here.

Next week will be another guest blog by CreditManagement magazine's Managing Editor, Sean Feast, and I'll be back the week after.

Weekly Blog by Philip King, CEO of the ICM - What would convince you?

A few weeks ago, in the light of an Insolvency Service consultation, I started making noises through my blog, the pages of Credit Management magazine and the ICM Briefing to gauge the depth of our Members' feelings. I also started a discussion on the ICM Credit Community LinkedIn group http://linkd.in/iF2Q0b asking a simple question: Do you engage in insolvencies after you suffer a bad debt?

The fundamental issue for me then and now is how we get credit professionals to engage more actively in insolvency procedures to ensure they get the best outcome, and so that they are better able to monitor the activity and efforts of the IP. I sought to find out what might encourage our Members to engage more, or whether they simply saw it as a complete waste of time and effort. The responses have been most interesting, with some clear themes emerging.

One of the themes is that credit professionals who understand insolvency procedures understand that engagement delivers tangible benefits. They are better able to ensure the best outcome for their business (even though that outcome is rarely, if ever, likely to be particularly good and merely the best of a bad job!): sometimes, knowledge and engagement can identify options that might not otherwise have been considered.

A further theme is that credit professionals who do not understand insolvency currently will very much need to in the future. I'm glad to say these are still very much part of the ICM qualification pathway; they are included in our short-course menu, and are often the subject of debate and discussion at our regional and branch events.

The one question that wasn't really answered was what would encourage those credit professionals who consider involvement a waste of time and effort to do so. We might not have all the answers just yet, but the ICM has started to work more closely with organisations like R3 and the IPA and is increasing awareness of the key issues with a regular column in the magazine. It is a start, but there is much more to be done if we're going to convince the unconverted!

www.icm.org.uk

Weekly Blog by Philip King, CEO of the ICM - 'Better late than never!'

The news about the 'Phoenix Four' received much coverage in the weekend's press and I was reminded of the events and mismanagement that had drifted out of my consciousness in the six years since the collapse of MG Rover. There can be no doubt that the combined 19 years disqualification is justified but questions remain. Dominic O'Connell writing in the Sunday Times last weekend said:

'That should not be the end of the matter. MG Rover's demise left £1.3 billion of debts and made 6,000 unemployed. At the time of its collapse, the Phoenix Four said they would put the remaining assets that were not caught in the collapse into a trust for the workers. They have not. The company's pension scheme has been forced into the state lifeboat fund, with a cap on payouts to retirees. The offshore trust set up to take the retirement benefits of the four has not done so. The Pensions Regulator should speed up its investigation into the status of that trust - six years is already far too long. The Financial Reporting Council must now look at the accounting issues thrown up by the collapse, in particular a little known aspect of the affair, the role played by Deloitte. The official inquiry found the accountancy firm made £30 million in fees in the five years the Phoenix group ran MG Rover. Maghsoud Einollahi, a partner in Deloitte's corporate finance division, had such a close relationship that questions were raised over whether he was a "shadow" director. Vince Cable, the business secretary, must also defend the decision to take no action against Kevin Howe, MG Rover's chief executive.

For those who lost their jobs, I'm sure the events of 2005 remain as vivid as ever and they will want to see answers to the questions raised by Dominic.

The whole debacle reminds me of how lightly the directors of some businesses take their responsibilities and credit professionals should do everything they can to ensure they are called to account. That is why, in the press release accompanying our response to the recent Insolvency Service consultation: http://www.icm.org.uk/home/icm-news/513-icm-calls-for-radical-change-to-ip-regulatory-framework, we encouraged credit professionals to engage actively in the insolvency process. Even when it might seem futile, we need to play our part in seeing the right - and best - outcome is achieved.

Weekly Blog by Philip King, CEO of the ICM - Big Society and professionalism

I read an interesting article in The Times last week that struck a chord with me, and with the ICM. It was written by Jonathan Shepherd, Professor of Oral and Maxillofacial Surgery at Cardiff University. He is also a Trustee of the Royal College of Surgeons and a Fellow of the Academy of Medical Sciences. Now stay with me on this as I know you are wondering what the link is!

Jonathan was talking about debates around 'The Big Society', and how they seldom - if ever - make reference to the professions and to the national institutions that support them. He said it was especially surprising since doctors, engineers, teachers and many other professional groups are defined by their distinctive contributions to civic society and to public services. Their standard-setting professional bodies are self-funded, charitable organisations, and he bemoaned the fact that, in true British style, their virtues remain understated despite their influence on professional behaviours, compliance with evidence-based practice, training ethos and delivery etc.

Now I am not so delusional as to set the Institute of Credit Management alongside the Royal College of Surgeons but there are similiarities. We promote good practice through such initiatives as the Quality in Credit Management Award (QiCM) scheme, we deliver a programme of learning and development that enhances the careers and effectiveness of those working in the credit management field, and we advise and support businesses generally in order to help them manage their cashflow more effectively and thereby stay in business.

All of these activities deliver cash for business and support an economy that so badly needs to see effective growth and development. Our work with, and for, the Department for Business is surely a genuine example of 'The Big Society' that Mr Cameron craves? We provide guidance that would otherwise be a drain on the public purse, and our members - often in their own time and at their own expense - work towards qualifications and build underlying knowledge that adds real value not only to their organisations, but also to the wider business community.

We are not doctors or structural engineers, but neither should we underestimate the contribution that we're making to business, the economy and to society by being professionals in credit management.

http://www.icm.org.uk