Weekly Blog by Philip King, CEO of the ICM - 'Banking on insurance'

There was an interesting piece in The Times on Monday talking about business lending by banks and a proposal for a Guaranteed Repayment Insurance Policy. Apparently the scheme would involve the issue of an insurance policy that could be purchased by a small business and offered to banks as security for a loan. The Government's new Business Bank is considering offering a subsidy to insurers under which it would underwrite 15 percent of the cost of any default.

The theory is that such an offering would remove one of the obstacles to business lending when the collateral demanded by the banks is so high that the taking out of a loan becomes prohibitive or too personally risky for the borrower. Small business owners would, it is thought, be more comfortable paying the premium than putting their home on the line as security.

BIS says it is only currently looking at the proposal and has made no commitment, and I agree it is right to be looking at new and innovative ways to increase the flow of money into a much needed part of the economy. I can see the attraction to a small business whose owner is fearful of losing his house if the enterprise fails but, given the paucity of cash available to businesses in their earliest days, finding additional money to pay for an insurance policy on top of all the other overheads will be a challenge.

As always the devil will be in the detail and I have no idea what the pricing model might be but I'm afraid I'm a bit sceptical. It already worries me that someone can start a limited company with no business knowledge, no awareness of their obligations and responsibilities as a director, and no capital. This scheme would, I fear, encourage the taking on of an additional expense in return for lower personal risk at a time when the business is least able to afford it. The consequence of that will be reduced profits - or increased losses - and a greater propensity for failure.

Weekly Blog by Philip King, CEO of the ICM - 'A chorus of disapproval'

I was at the ICAEW Insolvency & Restructuring Group Annual Conference in London earlier this week and took part in a panel looking at 'Breaking down barriers between participants in the insolvency process'. It was a good debate, and the whole conference had some excellent speakers and content, not least a presentation by Justin Urquhart Stewart on the global economy that was both insightful and highly entertaining. The reason for writing about the conference here, though, is that I had an issue with three views expressed by different presenters, with which I personally disagreed.

The first view was that the low rate of corporate insolvencies is likely to continue and unlikely to rise even when the economy starts to recover. I've had a long-held belief that insolvencies will spike when things get better and that remains my view. The demand for cash in struggling businesses will inevitably put them under more pressure and a greater likelihood of failure, and it will be accompanied by an environment in which the banks and other creditors will take a less tolerant view of businesses in distress. We were told that this recession is likely to be different from previous ones and the cyclical rise is less likely to happen. I disagree.

The second, from a politician, was that one of the prime reasons for the zombie companies about which we read (and I've written) so much is the failure of the banks to lend. I questioned the linkage he'd suggested and he clarified his point which was that the original failure to lend had created the shortage of working capital that had created the 'zombie state'. I acknowledge there will be some cases where having more working capital would have made the business stronger and allowed it to perhaps expand and thrive but, more generally, the problem must be that the underlying business model is flawed such that either turnover or profitability is inadequate to sustain the operation. Yes, we want the banks to lend more (to businesses that will be able to repay) but not if it means they will become a bigger write-off in due course.

The third was from an eminent senior banker who said he had yet to see a 'zombie company'. Maybe his definition is different to mine but I see, and hear about, plenty of businesses that are living from day to day covering the interest element of their debt with difficulty and knowing they are in no position to reduce the capital borrowing. And that goes for individuals too who are borrowing from one source to cover the minimum repayment on another.

I guess the value of conferences like this is that we learn, we hear different views, and we get the chance to challenge - or reinforce - our own thinking. I'm often wrong, indeed it's one of my well-known strengths, but I'm not sure I am on these issues.
 

Weekly Blog by Philip King, CEO of the ICM - 'The value of true leadership'

The Financial Times reported this week that "if the International Monetary Fund's latest forecasts are right, then meaningful growth looks set to elude Britain for another two years." So stagflation is here to stay.

 

I've been listening to Jim Collins' 2011 book 'Great by Choice' and the results of this research are fascinating. The sub-title is 'Uncertainty, chaos and luck – why some thrive despite them all' and, following his standard research approach, Jim (together with his colleague Morten Hansen) looks at truly successful businesses and compares and contrasts them with a direct competitor which they have out-performed by a factor of at least ten times over a defined period. I'm only half-way through the book but what is already apparent is that the successful examples are, to a great extent, the result of having a great or enlightened leader. He talks about three common elements: Fanatic Discipline, Empirical Creativity, and Productive Paranoia but comes back to an individual that led the business' approach and made a real difference.

 

The early part of the book is a captivating comparison of the attempts by Captain Scott and Roald Amundsen to reach the South Pole. He argues and demonstrates that they were both operating in similar environments but that the difference was their approach both before and during their expeditions. For Amundsen it was a race to victory and a safe return home while, for Captain Scott, it was a devastating and tragic defeat. Events that date back to 1911 have some strong and powerful lessons for today.

If we're in a prolonged period without growth then the approach we take to our roles and to our businesses will determine the outcome and – wherever we sit within an organisation – we can have an impact and have to choose whether it will be positive or negative. I know I'm currently looking closely at what I need to do differently in the months ahead.

 

When it comes to great leaders, there's been a huge amount written following the recent death of Margaret Thatcher. It's been interesting to listen to commentators and contemporaries, some of whom are great supporters and others vociferous detractors, all share one view. She was passionate in her beliefs, she was fiercely loyal to her country, and she has left a lasting legacy on British politics. In an era when bland sound-bytes and immediate short-term company results are too often the focus, real leaders are few and far between and we need more of them driving us back to growth.

Weekly Blog by Philip King, CEO of the ICM - 'New Directive leaves authorities doing the maths'

So, the deadline for transposition of the EU Late Payment Directive 2011/07/EU finally arrives this Saturday and the UK government has met the deadline and even issued a Users’ Guide that can be found here.

 

I don't want to go into great detail about the Guide, Directive or Statutory Instrument here, but one paragraph in the Guide has really caught my attention. The paragraph in question within the 'Payment between public authorities and business' section says: ‘If you are a Public Authority..........If you do not pay within the deadline, you are obliged to automatically pay the outstanding amount that includes daily interest for every day payment is late based on 8 percentage points above the Bank of England’s reference rate plus the fixed amount, depending on the size of the unpaid debt. The onus is on you to pay your supplier on time and the supplier is not obliged to remind you that payment is outstanding."

 

The public authority customer is therefore expected to proactively recognise that it is paying late, calculate the late payment charges/interest and add the amount to the remittance regardless of whether the creditor asks for the amount or not! Now, I don't want to be a cynic but what are the chances of this actually working in practice? I can see all sorts of issues and difficulties: how, for example, are authorities going to know they are expected to do this? Who is going to make the calculation and approve the additional payment? How is the increased value going to be matched to the original purchase order? I'd be interested to hear views from readers with their opinion of how they see this working. Please email me at ceo@icm.org.uk or go to the ICM Credit Community LinkedIn group, or the Discussion Forum on the ICM website members area’ and let me know.

  

Finally, I have to mention Start-Up Loans. I'm privileged to have been involved on the Board of the company since its launch and I'm incredibly proud of its success as demonstrated by the announcement this week that the scheme has exceeded expectations as 2,000 aspirational young entrepreneurs have now received support (a loan supported by mentoring) to help get their business venture off the ground. The scheme has already reached its £10 million pilot spend, and a further £5.5 million injection of funding was approved this week in Parliament to fulfill its pipeline until the end of the month. The Government has made £117.5 million available to fund the Start-Up Loans scheme up to 2015. Amidst all of the sometimes dubious schemes our government has come up with in recent times, this is one where it appears to have got it right.

Weekly Blog by Philip King, CEO of the ICM - 'Tangible examples of best practice'

One of my most enjoyable tasks is presenting the ICM's Quality in Credit Management Award to companies that have achieved the challenging accreditation. And it is happening with increasing regularity: we now have 29 accredited organisations and many more underway. This week I was privileged to present the award to the team at Venn Group in London.

Every organisation I visit is a demonstration of best practice but one thing in particular stood out for me at Venn Group: the way in which credit management practice and principles are integrated into the entire business. At the presentation of the award, the owners of the business and directors from every function were present and it was apparent that credit management isn't just a function within the business. Rather, cashflow is recognised as vital and every activity across the organisation from those who acquire business onwards recognises the importance of contributing to its management and control. I often talk about the importance of credit management sitting at the heart of the business and it's great to see a tangible example of it in practice.

 

On Monday, I presented at the launch of the ICM's partnership with Bank of America. The partnership is ground-breaking in the way it has been created. It will deliver an opportunity for all members of the Credit Risk Management team to develop skills, gain qualifications, and contribute to the validation of the quality of its operation. The excitement, passion and commitment of the team in Chester was fantastic to see and truly inspirational.

 

It's been another great week and I'm trying hard to forget the fact that I had to decline an invitation to Buckingham Palace on Monday for an event hosted by the Duke of York to launch the Start-Up Loans Company Ambassadors Scheme!

Weekly Blog by Philip King, CEO of the ICM -'Directors must take responsibility for their actions'

I received the report from the House of Commons Business, Innovation and Skills Committee on The Insolvency Service (Sixth Report of Session 2012/2013) recently. In more everyday parlance, this was the report from the Select Committee that met last October and heard evidence from the Insolvency Service, R3, the Insolvency Regulatory Bodies and others. One of the comments in our submission has been somewhat over-stated,  and our words used out of context, but I am particularly pleased at the inclusion of another reference which says: 'The Institute of Credit Management summarised the concerns of many of those who submitted evidence to us when they commented: "We would be greatly concerned if the reductions in budget [of the Insolvency Service] resulted in a degradation or reduction of Disqualification Unit activity. We believe any such dilution of activity would send entirely the wrong message to delinquent directors at a time when corporate insolvencies are likely to increase".'

 

In connection with the disqualification of directors, the report points out that 'disqualifications have halved over the last couple of years………whilst the number of directors disqualified each year has remained relatively stable over the past decade (approximately 1,200 a year), the number of cases of misconduct identified by Insolvency Practitioners in the same period has risen from 3,539 to 5,401…..the disqualification rate has fallen from 45% in 2002-03 to just 21% in 2011-12.'

 

It is widely accepted that the UK is one of the easiest countries in which to start a business, and that's good, but business owners need to show some responsibility in return for the 'veil of incorporation' which limited company status affords them. If a company can be formed with £1 issued capital and the directors have no personal liability, there have to be consequences if they are found to be guilty of misconduct that leaves their creditors out of pocket. Insolvency Practitioners are required to submit a return identifying where they believe misconduct to have occurred and they have the right to expect their report to be acted upon. Currently only 20% of reports are taken forward to disqualification and that's not good enough so I'm delighted that the Report recommends 'that the Department provides the Insolvency Service with sufficient, and if necessary, additional funding to disqualify or sanction all directors who have been found guilty of misconduct.'

 

Let's encourage entrepreneurship and initiative but let's not turn a blind eye on sharp practice that leaves suppliers with bad debts and impacts negatively on their business and the wider economy. I happen to believe there should be a minimum amount of issued capital required to form a limited company so that directors and business owners take their responsibility more seriously but I'll save that argument for another day. In the meantime, let's hope the Select Committee's recommendation is fulfilled. It definitely needs to be.

Weekly Blog by Philip King, CEO of the ICM - 'Doing the right thing'

I spent Monday afternoon as part of a panel of 'experts' on a Guardian Small Business Network online Q&A session addressing Effective Cashflow Management.

 

Much of the advice offered would have been no surprise to readers of this blog. Such basic tips as: know who your customer is; agree payment terms in advance and in writing; invoice promptly and accurately; and don't be afraid to ask for money that is owed to you and is rightfully yours. The usual reminders that cashflow is vital, and that payment terms should be discussed along with all elements of a deal and not as an afterthought, also prominently featured as good advice, as well as the reminder that credit should not be offered unless you are confident that the customer can repay the amount involved.

 

All of this leads me to Comet, where administrators were appointed after it became clear that the company couldn't pay for the stock it needed for Christmas after suppliers demanded payment in advance following the withdrawal of credit insurance cover. It's always disappointing when long-established high street names collapse, and the Comet situation is no exception, but I have to take issue with some of the media coverage over last weekend.

 

It incenses me when it's suggested that suppliers have caused the collapse of the business by unfairly refusing to supply goods on credit terms. Credit is not a right, it is a privilege and is one of the tools available to businesses in creating profitable sales through the provision of extended payment terms. As above, credit should only be granted when you're confident that the customer can repay the amount involved.

 

Several writers expressed concerns about Comet's survival when OpCapita bought the retailer in February. I'm not going to get into the debate about the financial engineering involved here but suffice to say unsecured creditors are likely to lose substantially more than the investor who was going to save the business, so if questions are going to be asked and brickbats thrown, let's aim them in the right direction. And there are certainly questions to be answered.

 

Credit professionals weren't the cause; they were dealing with the symptoms and, if they were reducing credit availability, they were doing the right thing for their own organisations.

Weekly Blog by Philip King, CEO of the ICM - 'Reading between the lines?'

Last week Vince Cable announced that the Government was tabling the Statutory Instrument to implement the planned changes to accounting thresholds.  The accompanying BIS press release heralded the fact that allowing 36,000 more companies to choose not to have an audit "will help save UK companies millions every year and free them up to expand and grow their business, which ultimately benefits the entire British economy".

 

How frustrating it is to see the Government fail to grasp a fundamental principle of trade credit and business. Suppliers make credit decisions based on the information available to them; the more information, and the more reliable it is, the better will be the quality of the decision.  It follows that, where the information supports it, credit will be more readily available to the business requiring the goods or service.  Most likely, 36,000 companies will now follow the implicit steer from Government and leave potential suppliers struggling to justify the granting of credit.  Will that aid economic growth? I think not!

 

We should remind ourselves what audits do.  Formally, they ensure the accounts represent a true and fair view of the company's financial situation giving suppliers confidence in the status of the business they're being asked to support through the provision of goods or services on credit.  But they do much more besides.  Very often, they highlight errors in the business's accounting system, records or processes, they identify any gaps or omissions that could be attributable to inefficiency or, worse, fraud, and they provide an independent and objective view of the business.  A good auditor can be very useful to a business; I know the ICM's auditor takes a real interest in its business and our discussions go far beyond the accounts and the numbers.

 

Interestingly, only this week, I saw a draft article for a European magazine by a university academic referring to the positive impact of the changes in 2006 that obliged German companies, especially small and medium-sized ones, to disclose financial statements and the resulting increased transparency!

 

I understand the thinking behind the changes and I have no problem for micro-businesses with very low turnover where accounting is cash-based and simple, but we're talking here about businesses with turnover up to £6.5m and 50 employees.  When an error eventually comes to light and the company fails because it's too late to do anything about it, there will be impacts on the business, its suppliers, its employees and the economy.  The suggestion that something that can be so invaluable is an unnecessary regulatory burden is misguided, naive, and unhelpful.

Weekly Blog by Philip King, CEO of the ICM - 'The case of the pickled onion'

I belong to a Vistage Chief Executives Group which provides its members with the opportunity to hear expert speakers, to share issues with other Chief Execs from different unrelated sectors and industries, and coaching. I attended a session yesterday with a workshop on negotiation run by Malcolm Smith.  He was one of the best speakers I've heard and his style, passion and energy were very impressive.  A couple of things seem worthy of mention.

We hear a great deal about large retailers exploiting smaller suppliers by demanding long and extended payment terms, and one of the things I always say is that this behaviour isn't restricted to the issue of credit. Buying power will manifest itself across all areas including credit terms, margin, price, rebates, packaging and so much more.

Malcolm shared a story from earlier this decade about how a supplier in the US was put out of business by the behaviour of a large retailer.  I don't want to go into too much detail here but, in essence, a small supplier won a contract to supply the retailer with its pickled onions which would retail at their almost standard price.  Buoyed by the prospect of massively increased sales, the company expanded by setting up new processing plants and scaling up to meet the expected demand and everything went well.  Two years later, after a process involving merchandisers, auditors (who were on the supplier's site for eighteen months), and procurement experts, the selling price was reduced to less than half and the quantity for that price was increased from a small jar of a few grams to one the size of an aquarium that was too big to carry in one hand and was branded as a 'gallon jar of pickles for $2.97'.  Not surprisingly, we were told, the company went out of business and I guess it's a case of the classic ‘if it sounds too good to be true, it probably is’.

I understand how difficult it must be to resist the demands of a large customer when that customer might be the gateway to a brilliant future but, if the ultimate price is too great, what's the point?  I've been quoted frequently saying that businesses shouldn't just roll over.  First say no, then get back to the table and negotiate what can be obtained in return, before finally walking away if that's the only option.  Accepting business, however good it seems, at suicidal terms can only be a recipe for disaster.

One of the things Malcolm talked about yesterday was the need to have a list of ‘tradables’ that could be introduced to prevent the negotiation being only about price.  I was delighted that one of the key ‘tradables’ on his list was payment terms – "yes, I can reduce the price by x% if you guarantee to pay me within 14 days rather than your standard 30, 60, or 90 days".  The thing he clearly understands that so many businesses, politicians and others do not is that payment terms are as much a part of the overall business transaction as price, colour, delivery or anything else.  When payment terms are left to be discussed after everything else has been put to bed, the only loser is likely to be the supplier!

Weekly Blog by Philip King, CEO of the ICM - 'Just the job'

Some of you who know me will know that, since I spend a fair amount of time on the road, I am an avid listener to audiobook biographies as I drive.  Last weekend I finished listening to the biography of Steve Jobs by Walter Isaacson. The audiobook is unabridged, and on 20 CDs lasting 25 hours so it took a few weeks, but what a listen and what a story!

  

I wouldn't suggest that he was an ideal role model for, in many respects, the book suggests Jobs' style and communication skills left much to be desired.  Nevertheless, he had some qualities without which Apple wouldn't have grown from a start-up in his parents' garage to the world's largest company, and without which the Apple products wouldn't have earned the reputation they have for simplicity, quality and intuitive use.  He brought ideas, art and technology together in ways that invented the future.

  

His ability to focus on a small number of projects or details to the exclusion of everything else allowed him to ensure they received absolute and undivided attention.  His relentless drive for perfection meant he never settled for second best and never compromised any of his design principles.  His ability to see the future for his and other products and predict likely trends enabled him to spot opportunities in the market that would otherwise have missed and indeed were often missed by other players already in those very markets.

  

Some leaders push innovation by being good at the big picture, others by mastering details, but Jobs did both relentlessly and delivered a range of products over 30 years that transformed whole industries.  He quoted Henry Ford as saying "If I'd asked people what they wanted, they'd have said a faster horse; our job is to show people what they can have"; Jobs believed Apple should show people what they were going to want before they knew it themselves; he said Apple's task was to read things that were not yet on the page.  When you look at the graphical interface introduced on the Mac, iTunes music downloads, iPods, the iPhone and, most recently, the iPad, it's hard not to accept that he did exactly that.

  

Perhaps the most interesting aspect of his personality was his frequently cited "reality distortion field' which resulted in him seeing things as he believed they should be rather than as they really were, and in him refusing to accept that something couldn't be achieved.  At the end of the book the author says that almost all the many people he interviewed would share a litany of examples of how badly Steve treated them but end by saying how he got them to do things they never dreamed possible and which they didn't believe they were capable of.

  

If you get the chance, it's a cracking good read (or listen) and has some great good and bad examples from both of which there is much to learn.

To find out more about the Institute of Credit Management visit www.icm.org.uk

Weekly Blog by Philip King, CEO of the ICM - 'Pomp and circumstance'

Well, my wife Mary and I celebrated our 34th wedding anniversary last weekend. Although our celebrations didn't quite match up to those of the Queen's Diamond Jubilee, we nevertheless had a great time and it was good to have an extra couple of days off!  The royal pageantry was amazing and impressive, and I confess to being mesmerised by the way images were projected onto Buckingham Palace during Monday's concert. Even on television, it was simply awesome, and it was certainly one of the weekend's highlights for me.

On a more everyday subject, I was interested to read the report about bank loan appeals last week.   Professor Russell Griggs, who I know well, was appointed independent arbitrator under last year’s Project Merlin pact between Government and the banks, with a remit to adjudicate when companies with sales of up to £25 million feel that they have been unfairly refused credit.  Most appeals were from retailers, construction companies, restaurants and hotels complaining about limits placed on overdrafts or credit cards. Half of the amounts in dispute were sums of less than £5,000, although a few were higher than £1 million.  During the first year of the scheme, 114,000 applications (14 percent) were declined by the Taskforce banks, of which 2,177 were taken to appeal.  Of these, the report reveals that 39.5 percent were successful.

Professor Griggs says he thinks the numbers are reasonable, given that no one had any idea how many appeals there would be, but that the banks need to ensure all customers know they can appeal, which not all do currently and that needs to change.  He adds the suggestion that, if more knew they could appeal, there is a possibility more might apply for credit in the first place.

That is perhaps one of the most worrying comments in the whole report.  My experience of talking to many SMEs is that there is limited awareness of the appeals process, even from companies who genuinely believe they, or their financial numbers, have been misinterpreted by a banker.  We can all play our part in making small businesses aware of the process, details of which can be found at: http://www.icaew.com/~/media/Files/Technical/Business-and-financial-management/SMEs/BBF%20Factsheet%20Appeals%20Process.ashx

Weekly Blog by Philip King, CEO of the ICM - 'Shooting the phoenix'

I sat on a panel at an Insolvency for Creditors event last week and there was, not surprisingly, some vigorous discussion about Pre-Pack Administrations.  There were equally strong feelings expressed at the ICM Think Tank this week when the subject came up again, and I expect to hear similarly robust views when I attend a Round Table chaired by Norman Lamb, the Minister responsible for the Insolvency Service (IS), this week.

Pre-Packs are an emotive subject but what seems to raise temperatures even higher is the issue of phoenix companies where the same directors seem to be able to acquire their previous business for a very low valuation and continue running it – often with only a slightly varied name – but without the burden of previous debts.  Often they leave unsecured creditors with a legacy of unpaid debt and the emotional reaction can hardly be a surprise.

Two sentiments were expressed at last week's event.  Firstly, Insolvency Practitioners need more power to be able to take action against directors who have clearly abused the privilege of limited liability and, secondly, the Insolvency Service should disqualify more directors.  Some in the audience were probably surprised to hear that 1,200 directors were disqualified last year and, of these, 125 were banned from holding a directorship for 10 years or more.  I accept it could be argued that these numbers should be higher but I am more concerned that there was little awareness of them.  If the credit professionals attending were surprised then so would current company directors be and the disqualification activity cannot be acting sufficiently as a deterrent.

Details of recent Insolvency Service press releases can be found here http://insolvency.presscentre.com/ and I would urge the IS do more to promote their disqualification activity.  Plenty more could and should be done, but getting this message out would be a good start.

Weekly Blog by Philip King, CEO of the ICM - ' The long and the short of it'

I've been to some interesting meetings this week but one, in particular, reminded me of the importance of looking at both the short and the long term.

Businesses often make decisions that seem right at the time but can then look back two, five, or even 30 years later and realise how flawed their thinking must have been.  I was reading a book recently that reminded me that, in 1982, IBM didn't buy Microsoft because - at $100 million – it was too expensive, and there are countless other examples of businesses failing to take, or turning down, an opportunity that would have been transforming.  I've been listening to Steve Jobs' autobiography in the car over the last few weeks; Nolan Bushnell's decision not to invest $50,000 in return for 33% of a company that recently hit a valuation of $600 billion must stand out as the biggest of all big missed opportunities (although he's done pretty well out of speaking in public about that missed opportunity)!

It's all too easy to make decisions for the short-term that fail to cater for the long term needs of the business and we often see very senior people lose their jobs (football and FTSE100 companies are primary examples) because short term results are not good enough.  The problem with this is that short-term expediency ends up driving the organisation and that often isn't best for the business, its people, or the economy.  CIMA published a fascinating report recently called Rebooting Business: Valuing the Human Dimension.  The report draws on the experience and views of a number of senior business leaders and to quote from the summary:

"If they get the human dimension right, companies will be able to focus their resources on the right things and create value for the long term.  One of the greatest challenges to realising the potential of the human dimension is the level of focus on quarterly reporting and short-term results. The value that people add will not appear in the quarterly reports and may not be apparent in the short run, but it must be given its due if we expect to make the right decisions.  Adopting strategies that will sustain success for a business is not a 'nice to have'………….."

One of the ICM's key priorities is to work with organisations and individuals to raise the value of the human dimension in business by developing the careers of credit professionals and by raising the performance of the teams they work in and run.  It's great to hear serious business leaders recognising that people are as important as numbers, and need to be a priority for sustainable business.

Weekly Blog by Philip King, CEO of the ICM - A journey of discovery'

My contribution this week is going to be short and sweet, or perhaps not quite so sweet, and it's about a payday loans company. But I'm not adding to the many column inches and hours of airtime devoted to the subject in recent weeks. Indeed, the OFT's announcement a couple of weeks ago that it has launched a review of the sector makes me think it's best to wait until the outcome of that review is known - and the dust has settled from the publication of the BIS Select Committee's report this week - before adding my two pennyworth to the debate.

My comments relate instead to a story in The Times on 17 February after Cash Converters UK had issued its results for the six months ended 31 December 2011. It said that 'it's nascent lending business had shown a big rise in bad debts' rising from 9% to 11% between 30 June and 31 December. The company said: 'The UK business reviewed its lending criteria in November 2011 and as a result has made certain adjustments to their procedures. This action, combined with the appointment of a new collections manager, should reduce the bad debt percentage going forward. Over time, as the new business matures and our customer information database improves, we would be targeting a significant decrease in the level of UK bad debts.

'Cash Converters appears to have discovered what many of us already know: that tightening lending criteria, having better customer information, and appointing a new collections manager reduces bad debts. While it seems to be stating the obvious, I'm pleased it reinforces my view that professionalism is vital and adds real value. When good practice is applied to policy and process, and good credit professionals are employed, then businesses can only benefit. This is the message at the heart of everything the ICM stands for and drives.