Weekly blog by Philip King, CEO of the ICM -'Maintaining forward momentum'

 

I've received some criticism of my comment about payment terms quoted in the Telegraph last Sunday. Coverage of the Prompt Payment Code (PPC) included my assertion that the drive by many for a prescriptive maximum 30 days credit terms is misguided. 

I make no apology for my comments and stand by them; my position is clear. Payment terms are one aspect of a trading relationship and, as such, should be open to negotiation in the same way as other factors such as price, quality, service levels, delivery arrangements etc already are. If maximum payment terms are stipulated, then one differentiator is removed. 

I remember in a previous role as Credit Manager of a computer manufacturer using very long payment terms as a carrot to persuade retailers to take obsolete printers that would otherwise have been discarded and destroyed. Offering longer payment terms can be a way of gaining business or obtaining a better price, while shorter terms can help mitigate against higher risk or compensate where competitive pressure demands lower prices.

By way of example, the Sunday Times last weekend reported that Canon and Nikon had offered favourable credit terms to Jessops in their attempts to keep it in business and maintain their vital shop window into the British retail market. I concede that their efforts spectacularly failed but, if maximum payment terms were introduced, they would not even have been able to try.

The day payment terms can't be negotiated between a supplier and customer is the day that a nail is hammered into the coffin of free market trading. I'm not for a minute suggesting that it is acceptable for large customers to exploit their suppliers, and especially smaller ones, by imposing unreasonable payment terms. That is unacceptable, just as refusing to pay a reasonable price for the products being purchased would be unacceptable.

The Prompt Payment Code was intended to drive a change in culture where good practice and paying on time, and to the agreed terms, becomes the norm rather than the exception. It is intended to get us to the point where suppliers have certainty about when to expect payment. It's great to see the increased momentum and visibility, and the increasing number of organisations signing up to the Code, but let's make sure that the debate continues to move us forwards and not back.

To become a signatory visit http://promptpaymentcode.org.uk

To read previous blogs visit http://www.icm.org.uk/home/ceos-blog
 

Weekly Blog by Philip King, CEO of the ICM - 'A reason for good cheer'

As we enter the Christmas break, it's good to pause and reflect on the last 12 months.  Our Regional Roadshow programme, for example, has been really successful and it was great to end the year with a superb event at the premises of Schuco in Milton Keynes.  It was an excellent venue with great speakers, and proved to be a fantastic example of the ICM credit community at its best.

 

Looking at our wider activity, we've had some notable success too.  By the end of the 2012 there will have been 125,000 downloads in the year, over 50,000 more than in 2011, and almost 400,000 downloads in total of the Managing Cashflow Guides that were written and launched in 2008.  The Prompt Payment Code (PPC), which we host and administer for BIS, featured in a November House of Commons debate when the ICM received no less than eight mentions, and we've seen a surge in sign-ups in the last few weeks - particularly from large organisations - with signatories now standing at over 1,240.

 

Even more encouraging however is recent research by Experian showing that the PPC has had a positive effect on payment times.  It found that on average those who had signed up to the Code paid five days earlier than those who had not.  Furthermore, there has been a sizeable improvement over the period amongst PPC signatories who now pay 12 days quicker than in December 2008.

 

The Code was launched late on Christmas Eve, 2008 and, while I accept that there is much much more to be done, it's great to see independent evidence that it is has made some progress in changing the culture it was designed to achieve.

 

I'm looking forward to an exciting 2013.  In the meantime, may I wish you a very happy Christmas and a peaceful, prosperous and productive New Year.

 

Weekly Blog by Philip King, CEO of the ICM - 'Putting the lifeblood back into business'

The highly regarded Ernst & Young Item Club came out at the weekend with a forecast growth for the year of a dismal 0.4%. Although Item Club uses the same economic models as the Treasury, its forecast was much worse than the Treasury's a few weeks ago. Speaking on Radio 4 earlier in the week, its commentator attributed this largely to timing and the dynamic nature of economic factors. The Club says Britain's economic growth will remain anaemic because companies are hoarding their cash, and it will stay on the "critical list" until companies start spending again.

I talk to many businesses of all shapes and sizes and the vast majority tell me that they are struggling to find customers who are willing to spend or make significant investments. This is a feeling particularly prevalent among the SME community whose fundamental priority seems to be one of survival rather than planning for growth or expansion. We're all waiting for real signs of recovery before we can start to feel confident, and until confidence returns we won't want to spend or invest. Until we do, however, "Britain's economic growth will remain anaemic because companies are hording their cash, and it will stay on the "critical list"......" (see above). It seems like the classic vicious circle to me!

There is one thing that companies could do though that would generate cash-flow for the whole business community and would definitely aid economic recovery. Pay their bills on time! Some do, and there are examples of really good practice, but many - big and small - don't, and because of that their suppliers struggle for healthy cash-flow and in some cases fail to survive. The Prompt Payment Code hosted by the ICM for BIS was launched to help change the culture to one where paying on time and to the agreed payment terms was the norm rather than the exception. Well in excess of a thousand organisations have signed up to the Code but many more could do so.

Paying on time has many advantages: it releases money tied up in unpaid debtors; it allows business owners to focus on selling and providing a better service rather than chasing payment from tardy customers; and ultimately it helps more businesses to survive and prosper. The Prompt Payment Code can be found at http://www.promptpaymentcode.org.uk/.

Weekly Blog by Philip King, CEO of the ICM - 'Recent days have held mixed emotions - first driven by our government and, secondly, by my family'

Francis Maude announced a few days ago that the Government would name and shame prime contractors who fail to pay suppliers within a 30-day limit. The Prompt Payment Code was established by BIS to encourage best payment practice and by definition expose those whose behaviours might be open to question, and here is a classic opportunity to promote its existence by insisting that suppliers sign up to it. It certainly needs more publicity and this would have built on the work we're doing with BIS; instead an initiative is launched that demonstrates a seemingly lamentable absence of joined-up thinking across government departments.

A day or two later, I attended a stakeholder meeting with the Insolvency Service looking at proposed changes to the rules surrounding pre-pack administrations. Having held a number of forums, the policy team had decided to meet with stakeholders again in smaller groups to inform a 'period of reflection' before deciding on the best way forward for the detailed implementation. I was greatly encouraged by what is a rational and sensible approach that will - I hope - lead to a better outcome than would have resulted from rushing ahead regardless.

On the personal front, I recently attended a family funeral that was both poignant and sad reminding me of the uncertainty of life and the future, and bringing things into perspective. On Saturday, my daughter is getting married and this will surely be a day of pride, happiness and, yes, some tears too I suspect!

After the weekend, I'm off for a few days post-wedding recovery in the North West so I've asked Rob Beddington, the ICM's Director of Commercial Relationships, to share some thoughts with you next week, and I'll be blogging again on 18 August which, coincidentally, is the day of the next ICM Regional Roadshow at Cutlers' Hall in Sheffield. If you're in the area, I hope I'll see you there.

www.icm.org.uk

Weekly Blog by Philip King, CEO of the ICM - 'A week of contrasts'

It's been a mixed week with some very contrasting news and eperiences.

Being invited to speak to a Policy Specialist at No 10 and walking through 'that' famous front door was exciting and, I believe, a real watershed moment for our Institute. I felt proud that we are recognised as true experts in our field whose voice and opinion is valued. The ways of government are never easy to understand but I'm hopeful that the discussions will lead to more engagement and real activity that will raise awareness of the impact on business of late payment, and raise the profile of credit management and the critical importance of cashflow. Time will tell but if future activity levels are determined by volume of emails exchanged since the meeting, then we can expect plenty to happen!

A few days earlier we'd received good coverage in the Financial Times (third Saturday in a row!) about the Prompt Payment Code (http://www.promptpaymentcode.org.uk/) that we host and administer for BIS. The debate had been started in the FT a couple of weeks earlier in a piece that extensively quoted Martin Williams from Graydon. I'm sure most reading this will have heard of the tragic and untimely death of Martin last week. He was one of the best known and most likeable people in the credit industry - a thoroughly good guy - and, since I came to my current role five years ago, has been one of my strongest supporters (though often with useful and constructive criticism attached), always a staunch supporter of the ICM and a real expert in anything and everything 'credit'.

I came out of Downing Street last Friday and reflected that, if it had happened a week earlier, I would have shared it with Martin and thanked him for his contribution to the debate that led to the meeting being set up. The petition we have just launched - urging government to rethink its plans to exempt micro-businesses from filing accounts - came about as a result of a conversation between Martin and I after the last ICM Think Tank meeting. He was passionate about credit and business and, when we created the Think Tank a couple of years ago, he was one of the first names on my invitee list.

RIP Martin Williams, we thank you for everything you've done for the credit industry and profession, and we commit to continuing the work to which you so effectively contributed. Please go to http://www.surveymonkey.com/s/8KGN5BH to sign the petition refereed to above.

Weekly Blog by Philip King, CEO of the ICM - 'Missing the point'

So the Prompt Payment Code received some negative press at the weekend - described as 'nothing more than window dressing' and 'complete nonsense'. The ICM administers the Code on behalf of BIS and so you'd expect me to react to such comments.

Firstly, I wish the FT had asked the ICM for a view. Since we administer it, we are better placed to comment than people who have never even heard of it.

Secondly, I find it frustrating when the point is so obviously missed. The Code aims to ensure that the terms and conditions agreed between two parties are adhered to. It is NOT about whether the agreed payment terms are 30, 60 or 90 days; that is a complete red herring. What is critical to small businesses, and indeed any business, is the certainty of payment. It is this certainty that allows businesses to manage their cashflow accordingly.

I agree that the Code needs to be better promoted, and lack of compulsion is a real issue, but it should be remembered that the PPC was one of a range of initiatives launched by BERR (now BIS) in partnership with the ICM including a series of Managing Cashflow Guides of which there have now been more than 225,000 downloads.

What's equally frustrating is the lack of recognition that the real requirement is for good credit management across the whole sales life cycle from beginning to end. The challenges we have received about Code signatories almost without exception display an element of basic credit management practice being missed - order number not being quoted or terms not being agreed in advance for example. Large businesses exploiting smaller suppliers is abhorrent but those smaller businesses need to recognise their own complicity in creating the very circumstances about which they complain.

Managing Cashflow Guides