Weekly Blog by Philip King, CEO of the ICM - 'Better Late than Never'

There's been a late payment furore this week, in my world at least. I was interviewed on 5Live Investigates on Sunday and then on Monday the Prime Minister announced that BIS is going to launch a consultation on the subject.

In the midst of Cameron's announcement he repeated the suggestion made by Vince Cable in August that there might be penalties or fines for late payment. Quite apart from the debate about the practicalities of implementing such a step, the point missed is that the Late Payment legislation introduced in 1998 and strengthened by subsequent Statutory Instruments, most recently in March this year, allows for a fixed fee to be charged and supplemented by additional recovery costs for invoices paid late. The Institute's press release issued on Monday makes the point that the late payment charges are, by definition, a fine or levy for late payment.

Lord Digby Jones entered the fray stating that the Prompt Payment Code wasn't effective. He said it was merely a nice statement of intent. But that's exactly what it is: a voluntary commitment to treat suppliers fairly and pay them according to the terms agreed! If it had the teeth that he is demanding, it would cease to be a voluntary code. Now I'm not saying it couldn't be improved nor am I disagreeing with the sentiment for other or more stringent measures but I do get frustrated when people say something isn't working when it's doing what it says on the tin!

Some critics have suggested that I'm personally responsible for the Code and its defender-in-chief. I'm not, the ICM simply hosts and administers it for government but let's not dismiss the benefits out of hand: nearly 1,500 organisations have signed up, including 72 of the FTSE100; many have made fundamental changes to improve their internal systems and processes; and a dialogue has started where conversations didn't previously exist. If the Code didn't exist, by the way, the debate wouldn't be taking place and the issue wouldn't be getting airtime in the way it is. These are tangible benefits and should neither be ignored nor trivialised.

The fact is that the Prompt Payment Code was introduced as a measure to drive a change in culture complementing other measures such as the late payment legislation, naming and shaming by business organisations, and good credit management practice which - all too often - is missing from business relationships. This last point was driven home to me at an ICM Regional Roadshow in London yesterday when attendees heard about the breadth of influence credit management has, and the value it adds, across the entire business.

Credit management isn't just about collecting cash from recalcitrant customers. Good credit management starts before an order is even received by assessing the risk of a potential customer, establishing its identity and status, ensuring that it is good for the sums of credit likely to be incurred, submitting invoices correctly and promptly, understanding its invoice processing and approval systems so that they can be met, and taking swift action if payment isn't going to arrive when it's expected.

I'm capturing a huge amount of activity in a single sentence and not doing it justice but my point is this: we have to change the culture to one where treating suppliers fairly is part of the corporate responsibility agenda and we have to stamp out exploitation of small businesses by organisations that wilfully take advantage of their supplier base but that's not the whole story. We also have to help businesses to help themselves by getting the basics right. Unless we do that, we'll never see the improvement we all seek.

Weekly Blog by Philip King, CEO of the ICM - 'Towards a better future'

This will be my last blog for 2011 so I'm pleased to focus on a couple of real positives.

First, congratulations to Martin Lewis for passing the 100,000 signatories threshold with his petition to make financial education a compulsory part of the school curriculum. The milestone is significant because it means the subject must now be discussed by Parliament, and it's an important subject well worth debating.

The report generated by the All Party Parliamentary Group on Financial Education for Young People says that "two-thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don't have the right skills to properly manage their cash". If we allow children to leave school without the necessary skills to manage their money we are going to reap the deserved harvest in years to come. As credit professionals we know only too well the impact of over-indebtedness and that is why the ICM has encouraged its members to engage in the DebtCred project delivering financial education to 14-19 year-olds.

DebtCred is just one initiative and there are numerous similar projects, materials and voluntary activities all with a similar aim and many accredited by pfeg (Personal Finance Education Group) that exists to help schools plan and teach financial capability. A huge amount of good work goes on but it is all ad-hoc and dependent upon the willingness and appetite of individual schools and indeed teachers to engage. When financial education is a compulsory part of the curriculum, all children will receive training in what is a vital skill. I've heard the argument that there is little point in addressing financial education until basic numeracy and literacy skills are adequately addressed. Of course that is true, but the two are not mutually exclusive; even someone who can't read or write has to manage their money, and both should have focus within the curriculum.

Secondly, the Forum of Private Business has been engaging many organisations in preparing a letter to Mark Prisk, the Business Minister urging government to have a clear and detailed plan to address the issue of late payment which can, and all too often does, cripple a small business. The Institute is a co-signatory to the letter and it suggests a number of specific actions that might be taken.

Government has done some good things with its Prompt Payment Code (hosted and administered by the ICM), and its current Finance Fitness campaign but more needs to be done and it needs to be done more cohesively. I'm writing these words shortly after being interviewed on BBC Radio 5Live Wake up to Money and my message is clear. Government needs to recognise late payment for the issue it is and formulate a plan to address it. The business culture needs to change such that paying on time is the norm rather than the exception. But businesses themselves have to be smarter at getting the basics of credit management right, and we credit professionals need to be willing to share our skill and expertise so that our customers can deliver cash for their businesses just as we deliver cash for ours.

The recently launched ICM Online Services (icmOS) SME Collection Toolkit is an attempt to provide a practical tool to achieve that aim.

The ICM press release can be found here, the FPB release here, our Managing Cashflow Guides here, and the icmOS SME Collection Toolkit here.

If you would like to listen to Philp's interview on BBC Radio 5Live click here.

I hope 2011 has been a good year for you and - after some relaxation time at Christmas - I hope 2012 will be even better. See you next year!