Weekly Blog by Philip King, CEO of the ICM - 'Why I am not Prime Minister'

This is going to be a shorter blog than I often write and it's more of a question based on my confusion than an exposition of my views! The ministerial reshuffle announced this week includes a move that leaves me perplexed, as did an earlier decision.

In September 2012, Michael Fallon was appointed Business and Enterprise Minister replacing Mark Prisk who'd held the role for a while before that, and was moving to a housing portfolio. So far so good, and Michael Fallon made a good early impression and has been instrumental in successfully driving the prompt payment debate. Then, inexplicably to me, in March 2013 the role of Minister of State for Energy was added to his portfolio meaning he was a minister in two departments: BIS (Department for Business Innovation & Skills) and DECC (Department for Energy & Climate Change). I couldn't work out then why a minister would be given a role across two separate departments given the workload and demands of one but that's probably why I'm not Prime Minister!

In this week's reshuffle, Michael Fallon has been made Industry & Energy Minister, I presume straddling the same two departments (BIS and DECC), and Matt Hancock has been appointed Minister for Skills & Enterprise working in BIS and the Department for Education. I understand such areas as late payment will be moving to Matt Hancock's remit. I've enjoyed working with Michael Fallon and his team. I think he's been effective, and I'm sure Matt Hancock will be similarly so but my question is this: why is attention to such an issue as late payment being potentially diluted through its responsibility being added to such a diverse portfolio? An issue which affects all businesses, particularly small ones, and impacts massively on the wider economy surely deserves better.

 

Weekly Blog by Philip King, CEO of the ICM - 'Shuffling the pack'

 

I'm always fascinated by arguments about correct usage of words and I was amused by a debate on the Radio 4 Today programme on Tuesday about whether, since the bulk movement of Ministerial appointments was the first by David Cameron, it should actually be called a shuffle rather than a reshuffle. A complete irrelevance but nevertheless quite fun!

 

More interesting has been the debate about the real reasons for the changes and whether they are to achieve policy shifts, to recognise good or poor performance, to change the political spin brought to specific areas of government activity, or simply to change the shape or style of the ministerial team. There are many and diverse views about this, and I suspect the reality is that it is a combination of all four and some more besides.

 

Speaking personally, I'm sorry to see Mark Prisk move from his role as Minister of State for Business and Enterprise. Although I haven't always agreed with him, he is tuned into business and seems to understand well the challenges they face. It will be interesting to see whether Michael Fallon maintains the momentum started by Mark but the inactivity caused by ministerial transition is always frustrating even though it's nothing new and expected.

 

Whatever the motivations for the changes, many issues remain and require resolution, one of which is the amount of debt owed to central government estimated to cost the public purse £7-8billion per year. Earlier this year, the interim report 'Tackling Debt owed to Government' was issued by the Cabinet Office's Fraud, Error and Debt Taskforce and since then the Institute has continued its engagement with the task force and the Debt Expert Panel in identifying how professionalism in debt management across government can be enhanced and improved. As part of that work, we are pleased to be working in association with Dods who are delivering a conference in London on 15 October considering the issues raised by the report, reviewing the activity underway, and looking to the future. If you're involved in working in, or with, the public sector in any way and want to attend, please register here, and I'm pleased to say ICM members can gain a £200 discount from the standard conference fee.

 

 

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 - 'Help and helping oneself'

I attended a Prompt Payment workshop last week, organised by BIS and hosted by Mark Prisk. There was clear consensus among the attendees, representing government and business organisations, that late payment continues to be an issue impacting negatively on business. No surprise there then; every week we see the results of one survey or another reinforcing the message that businesses suffer when they don't get paid promptly.

The EU Late Payment Directive coming into force in March 2013 might help but if anyone really believes it's going to fundamentally change things then they are deluded. Guidance and advice issued by numerous organisations, including the ICM whose Managing Cashflow Guides will shortly reach the 300,000 download milestone, is valuable and helpful but many small business owners are too busy trying to survive to commit time looking for advice about late paying customers even though doing so might resolve many, or even all, of their cash-flow problems. Making 30 day payment terms mandatory for all transactions (as has been proposed by one organisation) would remove one of the key negotiable elements of business transactions and would be tantamount to insisting that all goods must be sold, and services provided, at exactly the same price; that seems a bit perverse and self defeating to me, in a fee economy.

If you've been following the Global Entrepreneurship Congress 2012 in Liverpool this week (I have, but I confess only on Twitter!) you might have seen Richard Branson quoted as saying: "Cashflow is everything when getting a business started..." He is right. One of our challenges is to get advice to business before they're suffering from late payment so that they get the basics right from the beginning of any new trading relationship - basics such as knowing who your customer is, agreeing payment terms before supplying, invoicing promptly and accurately, and so on. I was speaking to a small business owner recently who was complaining he hadn't been paid on time. I asked how he advised the customer what the payment terms were. His answer: "I didn't, because he needed the material urgently". We don't always help ourselves, do we?

The workshop last week was productive and I'm delighted the Institute is going to be even more involved in helping BIS take actions forward. In the meantime, those of us who deal with SMEs could do worse than signpost them to good advice such as the Managing Cashflow Guides available at http://www.creditmanagement.org.uk/ and to encourage them to do the things that we take for granted.

Weekly Blog by Philip King, CEO of the ICM - 'Leading by example'

There's been much talk in recent months about mentoring as a tool to increase the survival and growth rate for businesses, and I make no apology if this week's blog reads a bit like a commercial!

In July 2011, the mentorsme web portal http://www.mentorsme.co.uk/ was launched as an online gateway to mentoring services for SMEs. It was one of the 17 initiatives coming out of the British Bankers' Association's Business Finance Taskforce, and this was followed in November 2011 by an announcement by BIS that new grant funding of £1.2m was being made available to recruit and train 10,000 volunteer business mentors through the Get Mentoring project run by the Small Firms Enterprise Development Initiative (SFEDI).

Over 3,000 volunteers have already signed up for training and, as the BIS funding is only available until the end of March, the ICM was asked last week to promote SFEDI's new online training which is now available at http://www.getmentoring.org/. This online platform will make it easier for business people to get involved and benefit from training that will help them develop the skills to become effective business mentors.

In the recent press release, Mark Prisk said: "Get mentoring is about businesses helping each other to succeed." The release went on to say that mentoring has been shown to increase the survival and growth rate for businesses, and can be a great way of boosting capability and capacity within a sector or supply chain. It can aid the professional development of both parties, enhancing leadership and management skills and improving soft skills (eg business confidence and aspiration) and business performance (eg turnover and profit). Mentors must be willing to offer at least one hour per month free to their mentee(s).

As credit professionals, many of us deal regularly with SMEs, and getting involved in this way could enhance our outlook and understanding of business generally, and especially the challenges faced by smaller businesses.

If you think you might have the necessary skills and experience to become a mentor, why not sign up today at http://www.getmentoring.org/ and start making a difference. I have.

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 - 'Wake up and smell the coffee'

When I stay in London, I often use a hotel near Swiss Cottage. It's on the Finchley Road, located in a typical suburb of the capital, its street lined with shops. Over the last few years, I've noticed something that was brought home to me on Monday.

Within about half a mile, there are a number of fast food establishments, some long established cafes and restaurants and a couple of Costa Coffee shops. There are also a couple of independent coffee shops with the usual comforts. One of these closed down a few months ago and was emptied; it has now been replaced by another one that - if you hadn't seen the empty shop in the interim - you could mistake for what was there before.

Further down towards Swiss Cottage Station, it happened again - a new shop replacing one that has closed down. Then more recently, I noticed that that too has now closed down, having been open for no more than a handful of weeks.

Now I know nothing about these businesses or their owners but, from using them, I get the impression there is an individual who has fulfilled a dream by opening the premises and is clearly intent on giving customers a good experience. They work hard and want their enterprise to succeed. But, in all but one case so far, they've failed.

The obvious question that occurs to me is why - when a coffee shop has failed on a particular site - you would think it a good idea to open another? It's not just about location, but also about the clientele, the volume of turnover that can be generated, and the business model of competing operations. And this is obviously not a problem unique to Finchley Road; how often do we see businesses opening where the owners clearly haven't given enough thought to whether they've chosen the right place for them?

I said at an event hosted by Vince Cable, Mark Prisk, and Francis Maude over a year ago that one of the issues arising from the rationalisation of the Civil Service (and, indeed the private sector) would be people receiving a large redundancy payment and using it to fulfil their lifetime dream of starting a business, only to see that dream turn into a nightmare. This is one of the reasons why I believe we have still to see the peak of insolvencies and why business education is so vital. Scenarios like this can be heart-wrenchingly sad and avoiding them would be good for all of us and for the economy.

We are pleased, therefore, to be actively engaged in the BIS Finance Fitness Event and Campaign being launched in London today with the aim of making new businesses and existing ones better equipped and able to survive. We will be continuing to provide advice through our Credit Management Helpline and Managing Cashflow Guides (www.creditmanagement.org.uk) and we're also launching an SME Collections Toolkit as part of ICM Online Services that will provide very practical advice and tools with templates, video role-plays and more.

Those of us supplying and talking to small and start-up businesses could do worse than point people to advice like this; after all, if they get paid, we're more likely to get paid too!

Weekly Blog by Philip King, CEO of the ICM - 'Finding common cause...'

I said in my blog last week that I would be meeting a couple of MPs to discuss late payment. Since then, I've met with Debbie Abrahams, Labour MP for Oldham East and Saddleworth and Anne Marie Morris, Conservative MP for Newton Abbot. In addition, I attended the BIS Small Business Economic Forum chaired by Mark Prisk and have been talking to the BIS team about some future activity around late payment. I have also been starting to prepare for a presentation I'm giving to the AFDCC (the French equivalent of the ICM) in Paris next month about the new EU Late Payment Directive. It's fair to say that late payment has certainly been at the forefront of my mind in recent weeks!

Debbie Abrahams and Anne Marie Morris are both articulate and passionate about supporting small businesses and helping to protect them from the impact of late payment. Coming from different sides of the chamber, it is no surprise that their views on what can and should be done differ slightly but they certainly have common objectives. I was encouraged by the fact that both recognised the need for a change of culture across the whole business community, acknowledged that payment terms are part of the wider contractual and commercial negotiations between businesses, agreed that more emphasis should be placed on the positive aspects of prompt payment (see www.promptpaymentcode.org.uk), and endorsed the need for businesses to be educated in the basics of credit management that can help them to assist themselves.

There is work to be done and I will continue our dialogue, exploring various ideas and initiatives. This, together with the imminent BIS activity and the continuing demand for the ICM/BIS Managing Cashflow Guides (of which there have now been over a quarter of a million downloads), gives me grounds for optimism.

I'll return to the EU late payment directive on another occasion but, before then, I suspect I'll be addressing the new - and just published - OFT Debt Collection Guidance which I'll be reading in detail over the next day or three.

Weekly Blog by Philip King, CEO of the ICM - ' Smoke and mirrors'

The SME Finance Monitor has at last been published with the sub-title: 'To what extent do SMEs have issues accessing bank finance?'. This report, which will be undertaken quarterly, is said to be the largest and most detailed study of SME's views of bank finance ever undertaken in the UK. It stems from the Business Finance Taskforce, comprising the BBA, Barclays, HSBC, Lloyds, RBS and Santander. It is independent and the banks have no editorial control.

The report was on the agenda of the BIS Small Business Economic Forum that I attended on Monday, and which was chaired by Mark Prisk. Mike Young, the independent chair of the Survey Steering Group gave us a fascinating insight. What has been even more fascinating, however, is the variety of interpretations and responses since its publication.

The BBA said that: "most businesses are able to get the credit they need." The Labour party was quoted as saying that: "it showed that a significant minority of small businesses seeking loans are failing to get the credit they seek." Richard Tyler, from The Daily Telegraph, said: "that banks are much more selective about which firms they back and are unlikely to change their minds."

All of these are factual and - in a week when the integrity of newspapers is under scrutiny - I am not suggesting that there is anything misleading. However, few will read the full 126 page report (available here: http://www.bdrc.co.uk/business-issues/sme-finance-monitor/) so one's understanding of the report will be heavily influenced by the headlines they read.

The truth, of course, is that this is not a simple issue. Mike says in his introduction: "This report does not provide quick and easy answers to the claims and counter-claims swirling around in the debate about SMEs and banks. That is because it is an extremely complex issue, incaple of easy summary into 'guilty' or 'not guilty'. So, the report eschews glib answers and focuses on bringing out the evidence. It is for others to draw conclusions from it." The conclusions drawn by journalists and politicians will steer our thinking too, I suspect.

The one report I really liked though was in the Telegraphs piece on Tuesday quoting Manos Schizas, a senior policy advisor at the Association of Certified Accountants, who I know well and have worked with a number of times recently. It highlighted one key message of the report: "that it is vital for firms to produce accurate information." Businesses with a low external risk rating were far more likely to be offered an overdraft (93%) or loan (81%), than those with a worse than average risk rating where the 'offered what they wanted' category percentage was only 61% and 41% respectively. No surprise here and you will indulge me while I once again bang on about the 'information' debate.

In many cases, the categorisation as 'worse than average risk' will not be because the business's numbers are bad but because there aren't any numbers to go by at all!. Information facilitates the flow of credit and the current proposals to exempt micro businesses from filing accounts will simply make things worse, not better. Our petition on this subject is still open at http://bit.ly/mliWbY and I urge you to add your name to the growing list of signatories. This isn't just about credit professionals wanting more information available from Companies House or credit reference agencies so they can make better decisions more easily; it's also about helping the economy back on to its feet.



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Weekly Blog by Philip King, CEO of the ICM - 'Export, cheques and kids'

Mark Prisk's Small Business Economic Forum at BIS discussed how SMEs can be encouraged to export, and through Lord Stephen Green the Minister outlined the recent steps the Government has taken to support international trade, and specifically the work of the Export Credit Guarantees Department (ECGD).

Consensus among all those present was clear: a strong consistent message needs to be communicated and support must be provided by the banks, business organisations and the Government to dispel the myth that exporting is somehow a 'dark art' that is almost invariably 'high risk'. International trade is fundamental to growing the economy, and helping SMEs to find new markets for their goods and services is therefore key.

Elsewhere, the Payment Council used its Large Corporate User Forum to update members as to the progress of the Cheque Replacement Programme. While it is clear that behind the scenes there is much going on, there are signs that many consumers have yet to be persuaded to use online alternatives. The next big decision may not be due until 2016 but a real change in mindset and practice is going to be needed by then.

The Personal Finance Education Group (pfeg) Forum, meanwhile provided an opportunity to hear news of recent programmes including 'My Money Week' that will be running from 27 June to 3 July and includes competitions for schools to enter as part of a concerted drive to promote financial education to children. If you have any connection with a school, please point them to http://www.mymoneyonline.org/. And don't forget you can get involved with the DebtCred initiative through the ICM so to express an interest and learn more please just email governance@icm.org.uk

Weekly Blog by Philip King, CEO of the ICM - 'Things to look forward to.....'

It has been quite a bit calmer this week after the frantic round of meetings and conferences since the beginning of December, but then the world of credit management never stands still for long.

I was delighted on Monday to meet with Mark Prisk, the Minister for Business and Enterprise, who is already establishing himself as a champion of the SME cause. It was clear from our discussion that the Minister is keen to continue working with the ICM in promoting the importance of cashflow to a growing business.

There was acknowledgement that even with the good work that has been done before between BIS and the ICM, there is still much to do to change the payment culture in the UK and that the Government had a key role to play in supporting and reinforcing the delivery of specific key messages. It wasn't a case of trying to find new initiatives on which to hang our cashflow 'hat', but rather doing more to promote schemes that already exist such as the Prompt Payment Code. I certainly came away with the impression that Mark Prisk means business, and look forward to working with him and his team closely next year.

Yesterday I spent the morning signing off the final proofs for the next issue of Credit Management magazine, and this is probably one of the best issues yet. We lead with the ongoing bank lending saga and research that contradicts the story from the banking community that they have plenty to lend, but no demand. In terms of consumer credit, the editor also takes a detailed look at what lies ahead for the debt sale and purchase sector in 2011.

So unless anything especially momentous happens next week, this is probably me signing off for 2010. It remains only for us all at the ICM to wish you a Merry Christmas and let us all look forward to a prosperous New Year.

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