Weekly Blog by Philip King, CEO of the ICM - Dodging the silver bullet'

It has been a busy week. I went to the ICTF (International Credit & Trade Finance Association) Symposium in Paris on Sunday and presented to the delegates on Monday afternoon about the EU Late Payment Directive which is due to be implemented by March 16, 2013. Yesterday, I attended a Round Table at the House of Commons organised by the Forum of Private Business and Graydon discussing their ‘Research on Payment Culture', and this morning I attended Mark Prisk's Small Business Economic Forum at BIS.

The common theme with all three has been the impact of late payment on business and economic growth, a subject I also addressed in my blog last week. I've been looking at the EU Directive in much more detail and it includes some good elements building, as it has, on the 2000 Directive. Nevertheless, I remain sceptical about legislation being the silver bullet many suggest. Two of the primary reasons for the ineffectiveness of the current Directive are ignorance and reluctance. Huge numbers of businesses don't even know about the Directive and many of those that are aware of it don't know how to use it properly. Even if they know about it, and know how to use it, businesses don't want to upset their customers by raising an invoice for late payment charges and interest; they believe it will impact negatively on their relationship as a supplier. 

Consensus among the politicians, business organisation leaders, accountants and journalists at yesterday's Round Table was that it is the culture in business that needs changing. Legislation may play a part but it won't be the sought-after panacea. One of my most common themes when talking about cash-flow management is the need for payment terms to be integral to general trading discussions. Payment terms and arrangement shouldn't be sitting stage-left waiting to come on stage when everything else has been discussed and agreed! They should be discussed alongside price, discounts, colour, quantities, quality, delivery arrangements, and everything else that needs to be agreed.

Cashflow is vital to suppliers; the supplier's strength and sustainability of the supply chain is vital to buyers, and these issues are not mutually exclusive. When managed properly, credit terms can deliver more, to the benefit of supplier and buyer alike.

That's what credit management is about and why it's so important and central to business success.   

Weekly Blog by Philip King, CEO of the ICM - 'Supporting the Business in You'

A campaign was launched by David Cameron in Leeds on Monday. 'Business in You' is a partnership between private enterprise and Government to highlight support for start-ups and growing businesses and encourage entrepreneurial spirit in 2012. It will run throughout the year and I'm delighted to say the ICM is actively engaged as one of the initial supporting organisations.

The campaign aims to highlight the fact that many people are sitting on an idea that could become a business, and many businesses have the potential to grow whether that's by launching new products, entering new markets, exporting for the first time or more widely, or by accepting the challenge and going for growth despite the negative malaise that surrounds us. The campaign website can be viewed at: http://businessinyou.bis.gov.uk/

I was at a meeting at BIS with many other of the supporting organisations on Tuesday and there are some really inspiring case studies being shared, and some innovative support solutions being offered by organisations as diverse as the Forum of Private Business, CBI, Institute of Directors, British Bankers' Association, ACCA, ICAEW, Intuit, Microsoft, Paypal, and Mitie to name but a few. Interestingly this is less about a government campaign with private sector support, and more about a collaboration that brings together the best from both the public and private sectors. And encouragingly, this isn't a government short-term soundbite-style gimmick but a long-term activity lasting for the whole year with links into many events and propositions. So how does the Institute of Credit management fit into this?

One of the challenges for all businesses, and particularly for start-ups and growing organisations, is making sure they have enough cash to sustain the business and its requirements. Managing cash-flow is vital, and the over 275,000 downloads of the ICM's Managing Cashflow Guides are testament to how relevant the subject is, and what an appetite there is to gain the necessary skills to manage it better. I hope the 'Business in You' campaign succeeds in encouraging more entrepreneurs to create a start-up, and more businesses to successfully expand but if it also helps businesses to manage their finances better and therefore survive longer, then it will have delivered something really worthwhile. I am proud that the ICM is among its supporters.

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!

Weekly Blog by Philip King, CEO of the ICM - 'Merlin loses its sparkle'

Vince Cable has apparently, and allegedly, admitted that Project Merlin has failed. The Merlin agreement with the major banks guaranteed that lending to small businesses would increase to £76bn in 2011 but his acknowledgement that 'new mechanisms' would have to be considered is a tacit recognition that Merlin hasn't worked. The Chancellor's announcement last week of his 'credit easing' plan of a new credit line for business is further evidence.

As I said at the time, the idea that commercial banks could be 'forced' (as some commentators described it) to lend seemed farfetched at best. Commercial banks have a responsibility to ensure that their lending risks are justified and their lending policies are sound. We've all seen spectator examples in the press of where they may have got it wrong but receiving much less publicity are the numerous cases where they've declined to lend and have been right to do so.

I won't pretend to fully understand the concept of 'credit easing', the detail of which has yet to be made clear, but Phil Orford, the Chief executive of the Forum of Private Business asked three very sensible questions in a recent blog about a scheme which it would appear would require Treasury officials, or officials of an agency specifically appointed for the task, to have a start making judgments on lending taxpayers' money to private sector firms:

• How will they decide which companies deserve a loan from the taxpayer?


• How will the money be channeled to the businesses that need it?


• If these businesses are safe bets, why aren't private lenders already lending to them?

All will become clear in due course and I'll be fascinated to see exactly how it will work.

The other issue that needs to be addressed is how to encourage those business with outstanding debtors to use best practice in credit management to release that money and therefore reduce their external cash requirements. It might even save them having to look for working capital funding at all, but more of that next week by which time I'll have met with two MPs - one Conservative and one Labour - and discussed such matters.

Weekly Blog by Philip King, CEO of the ICM - 'Disagreements and mixed messages'

As I mentioned last week, the momentum over the Doing Business Together initiative is gathering pace. The Business Secretary, Vince Cable, has clearly thrown his support behind DBT and the meeting last week in Richmond brought some real heavyweights to the table from the world of business and credit. But there are some issues.

There are, for example, some mixed messages coming out, especially from the politicians. On the one hand, the Government support EU moves to cut red tape for SMEs by reducing their obligations over the detail of financial reporting, while on the other they believe that financial data is essential for granting credit and therefore facilitiating growth.

Businesses need to be educated about the importance of producing, using and sharing information: they need to produce accounts, because in doing so they will be able to manage their businesses better; they need to use the information they have, and so identify how and where they can free up cash in their business; and they need to share that information to access finance or negotiate better terms with their suppliers.

I was also invited this week to the ABFA (Asset Based Finance Association) Conference, sharing the platform with my colleagues from the FSB and FPB among others in an event chaired by Fiona Bruce. The conference created a vigorous debate about late payment legislation. I disagreed entirely with the FSB position: legislation really won't change anything even though we might all wish it would.

Finally, I note an interesting thread on the ICM Bulletin Board this week about alternative approaches to cash collection. It touched on one of my soapbox themes: good credit management adds value across the entire business - creating profitable sales, improving the quality of the organisation at all levels, retaining customers AND maintaining vital cashflow; knowing - and understanding - our customers is a vital element if we are going to be successful and if we're going to make the contribution to our businesses that we can, and should!

http://twitter.com/philipkingicm http://twitter.com/icmorg

1st Weekly Blog from Philip King, CEO of the ICM

There were two announcements in the last few days that especially caught my attention. The first was by the Forum for Private Business (FPB) who had submitted a freedom of information (FOI) request asking police forces how quickly they processed payments in the 2009/10 financial year.

It revealed companies in some parts of the country had to wait more than two months for payment from their local force. Companies doing business with the police in other areas, however, were paid in a matter of days.

Now there is nothing new or surprising in this. Across all industries and sectors, there are differences in practice and experience and I bet even those paying promptly end up paying some suppliers quicker than others.

The reason those suppliers get paid more quickly than others is similarly no secret. It comes down to having good credit management practices. Getting the basics right, such as ensuring the invoice details are correct and building personal relationships between departments is key to getting paid on time. Some practice is ingrained and part of the business culture, but other skills can be taught, and this is our role.

The second piece of news I read was in the Independent. It announced that one in 10 northerners 'will be jobless in the next 5 years'. A leading economics think-tank predicted that unemployment is set to breach the psychologically important 10 percent level over the next five years - but only in the north of the country.

Unemployment is bound to grow and - while it may be worse in the North - it's going to affect all areas, particularly as the public sector cuts bite. One impact will be the emergence of more sole traders who see redundancy as an opportunity to leave the world of PAYE and strike out on their own with their redundancy cheque firmly in hand. As suppliers, we should be prepared to give them good advice that will help their business survive the first critical 12 months. We could do worse than point them to the Managing Cashflow Guides at www.creditmanagement.org.uk

Meanwhile closer to home, the ICM exam results came out last weekend. As with the 'A' level students, some learners will be delighted with their performance and others devastated and disappointed. Studying while maintaining a career is never easy and they deserve our congratulations for their commitment (whatever the result) and our support. They are the credit professionals of tomorrow and will help raise the standards of what we do.