Weekly Blog by Philip King, CEO of the ICM - A positive step for debt management'

The OFT published its Debt Management (and Credit Repair Services) Guidance last week, following consultation last year, and this represents a positive step in improving compliance across the debt management sector. The guidance can be found here and will also be signposted in the ICM Briefing due to be issued to members shortly after Easter. Three things have struck me as worthy of note from an ICM perspective.

Firstly, credit professionals should be aware of the creditors' responsibilities highlighted in the guidance. For example, in paragraph 3.48, it says "the OFT expects creditors to have appropriate regard to this guidance when dealing with third parties acting on the client's behalf. Creditors should not refuse to deal with a debt management business or other third party unless the debt management business or third party failed to comply with relevant consumer protection legislation and/or have appropriate regard to this guidance. Under such circumstances, the creditor should be able to satisfy the OFT that it has an objectively justifiable basis for refusing to deal with the other party if asked to do so. Creditors who provide advice to customers who are behind with their payments should have regard to the spirit of this guidance". This, together with the following paragraph 3.49, is particularly relevant to many credit professionals and we should be mindful of it.

Secondly, I am pleased that our contribution to the training within the sector has been recognised. The guidance says that "licensees should have adequate training in place for staff, agents (such as self-employed debt advisers) and franchisees acting on their behalf, to ensure they are sufficiently skilled and knowledgeable to carry out their role", and the ICM is included in the list of examples of accredited training.

Finally, the example of unfair or improper business practice have been modified with the reference to dividing available income between debts in proportion to their size being removed. The Institute argued that the requirement to introduce what, in some cases, would be subjective judgment could be unhelpful to creditors and work to their detriment. I'm pleased our voice was heard and is reflected in the final version.

P.S: I'm on holiday next week and have been reliably informed I will be having a week free of Twitter, blogs and email so I'm delighted my good friend Josef Busuttil (my counterpart at the Maltese Association of Credit Management) has agreed to write a guest blog.

Weekly Blog by Philip King, CEO of the ICM - 'Never underestimate the value of good credit management'

The Bank of England published its Credit Conditions Survey for quarter 4 of 2011 last week. In summary, it said that although lenders expected a small increase in overall credit availability in the coming three months, it will be impacted negatively by factors such as the economic outlook and tighter wholesale funding conditions. Furthermore, a key determinant of credit availability will be developments in the euro area and their impact on banks' funding conditions. It noted that demand was down across all areas but most significantly from small businesses where it fell sharply. I guess a succinct way of distilling the 17-page report down to a few words would be: a stagnant economy where lack of confidence is stifling demand to spend or invest, and where external factors could have a major effect!

I'm often reminded by our members - and I in turn remind government in meetings - that trade creditors lend more to businesses than the banks and - just as bank lending decisions impact on the ability of the economy to grow - so do the credit decisions of credit professionals. When they decline or accept an order or contract, they impact on the whole trade cycle for themselves, their customer, their customer's customer and so on either negatively or positively. That in turn impacts on the economy and its capacity to grow. In isolation of course, an individual transaction is probably not material, but cumulatively the impact is immense.

In my blog last week, I talked about showing and being proud of our professionalism - that professionalism is manifested in the decisions we reach throughout all credit management activity. Getting them right, whether we're dealing with multi-national corporations or individual consumers, is vitally important and we shouldn't underestimate the impact we have, not only on our own organisations but on the wider economic well-being.

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If you haven't already signed up to participate in the ICM UK Credit Managers' Index, please join the panel that commits to complete it quarterly and contribute to this influential and important industry benchmark. The results are widely publicised in the trade and financial press, and on the ICM website, and all participants will automatically receive access to the results and summary prior to general release.

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

A slightly unusual topic for me this week prompted by recent personal experience. I was involved with a police force at the weekend about a missing person. The details and circumstances aren't important but the police wanted to know everything I knew about the missing person who has gone AWOL many miles from home and may need help.

My wife and I shared all we knew (which wasn't much to be honest) and my wife referred the police to Facebook which included a number of friends in the area where they were looking, and had comments that might give clues as to their whereabouts. We were asked if we had a picture of the individual and we confirmed we had but pointed out that a more recent and clearer one was on Facebook.

Extraordinarily, a few minutes later we received a phone call asking if we could download the picture and email it, along with any other relevant information, because the police didn't have access to Facebook and so couldn't use that source of information! I don't know if this is common to all police forces and I don't know the detailed reasons why access is denied but - in today's age - I was incredulous that such a productive source of information couldn't be used!

I discussed the use of Facebook in tracing debtors following the release of the OFT's Debt Collection Guidance a few weeks ago and shared my view that the content of the guidance was being misrepresented by the media. We've also recently heard the ongoing debate about how social media was insufficiently monitored during the riots across the UK in the summer.

Social media is a powerful tool that can be used for good - as well as bad - but it strikes me that the potential 'dangers' of Facebook et al and sensitivities over privacy, while understandable, are getting in the way of progress. It certainly seems absurd that the police could not pursue what to me would have been a blindingly obvious line of enquiry.

Whether we like it or not, social media is here to stay and we can't just ignore it. The ICM has heavily embraced Twitter, LinkedIn and Facebook because we know a proportion of our members are using them and we see many benefits.

I fear, however, that in certain cases bureaucracy is winning and the loser is someone who could really need help!

Weekly Blog by Philip King, CEO of the ICM - 'Late Payment thinking that is back to front'

I spoke at a conference organised by the AFDCC (the French equivalent of the ICM) last Friday in Paris. It was a good event held in a very impressive venue and about 150 delegates assembled to hear about and debate, amongst other things, the new EU Directive on Late Payment. One of the keynote speakers was Barbara Weiler MEP, an architect and key driver of the new Directive. Her passion for the benefits on business of improving payment terms is not in doubt and her energy has clearly been instrumental in getting the Directive adopted.

The recent survey of ICM members conducted by Equifax showed that 65% of respondents believe the Government should do more to protect small businesses from the negative impact of late payments, and there can be no argument that the existing legislation has not worked in the way intended. Businesses, and particularly small ones, are either ignorant of the law, don't know how to use it, or are afraid to do so for fear of losing a customer. There are exceptions of course; I know credit professionals who use it very successfully and mitigate the cost of financing extended credit by so doing, and I know others who generate a late payment 'charges and interest' invoice to accompany the first collection letter very effectively.

Primarily, the real financial benefit comes when legal action is taken and the late payment charges and interest are added to the principal debt and can significantly increase the amount recovered. But that was never the point of legislation - it wasn't intended to make for better recovery at the end of the food chain; the idea was to improve payment behaviour from the start!

Unfortunately, politicians often seem to miss the point of what happens in the real business world and this is no exception. The Directive states that, if payment terms are not agreed in the contract, then the assumed terms shall be 30 days and - if payment terms are set out in the contract - they cannot be 'grossly unfair'. The definition of 'grossly unfair' is unclear but, in any event, how many small companies would be willing or able to take legal action to argue the case and get remedy? The inclusion of a clause allowing a supplier to recover reasonable actual debt recovery costs (in addition to interest) rather than just the current standard late payment charge is positive but is again a back-end benefit, not a front-end incentive to change payment behaviour.

For me, the most encouraging thing in the whole conference was Barbara Weiler saying that the Directive is as much about changing the culture of payment through soft issues as it is about introducing hard legislative measures. The UK has been lauded for its Prompt Payment Code (administered for BIS by the ICM of course) and educational activity like our Managing Cashflow Guides are also recognised as leading the field. As credit professionals we have more opportunity than most - and should use it - to influence that change of culture by adopting credit management best practice. We can and should be more powerful and effective than a Directive and if the Directive gets more attention and visibility for the importance of cash-flow management and the value we add to businesses, then - for that reason alone - I welcome it.

The Prompt Payment Code

Institute of Credit Management Press Releases

Weekly Blog by Philip King, CEO of the ICM - 'Being proud to be a professional'

I was at the fifth CCRi Conference this week and what an excellent event it was. With more than 400 credit professionals gathered at the Guoman Tower Hotel in London, it proved a great opportunity to network with colleagues, and provided plenty of learning to take away. I shared a quote I'd seen the night before in my brief comments at the beginning of the day that 'Leadership and learning are indispensable to each other'. How true those words are. Standing still is not an option because, if we don't grow and develop, the world moves on and leaves us behind!

Trevor Williams, Chief Economist at Lloyds Bank ended his keynote speech by observing that the future is impossible to predict because there are 'so many imponderables'. If that's true, and I believe it is, then all the more reason why credit professionals must build their skills and knowledge so they can continue to add value to their businesses and help them survive and prosper. What might have worked well a year or two ago won't necessarily work now and, if we assume it will, we could get seriously caught out. The new ICM CPD scheme currently being piloted, ahead of its formal launch for 2012, is well timed, and so is the continuing progress of our learning and development programme. We're demonstrating our commitment to providing the tools to equip people and make them truly effective, and feedback from our members and potential members attending CCRi on Tuesday was universally positive.

Credit management is a profession in just the same way as accounting or law are professions, and those of us working in it must not be afraid to make that point to our colleagues, peers and bosses. Credit management sits at the centre of the business and touches every aspect of the organisation; now is the time for us to stand up, be counted and show pride in our professionalism.

Weekly Blog by Philip King, CEO of the ICM - 'The majority are micro'

Ed Davey issued a discussion paper last week - "simpler reporting for the smallest businesses" and I make no apology for using my blog this week to readdress some of the issues raised in the press release we issued immediately after the discussion paper was received.

The paper considers whether micro businesses should be allowed to file a simplified trading statement, statement of position, and annual return in place of the current profit and loss account, balance sheet, and annual return. So far so good; making reporting easier will surely reduce the burden on smaller businesses.

But wait. What has the EU defined as a micro business? Micro businesses are those who do not exceed two of the following criteria; a net turnover of Euro 500,000 (£440,000) a balance sheet of Euro 250,000 (£220,000), and an average of ten employees during the financial year. 60% of companies registered at Companies House meet these criteria so it isn't a 'small minority' by any measure.

The paper raises a number of interesting questions and I am looking forward to receiving feedback from ICM members when we launch a survey seeking their views. The move to a trading statement prepared on a cash accounting basis which would remove the need to account for, among other things, stock, changes in working capital, and changes in the value of fixed assets raises a number of questions in my mind (although I'm always prepared to admit that I might be out of date).

My biggest gripe, however, is with the definition of users of accounts which, among the six categories, doesn't even mention creditors except under the quaint term of "other trading counter parties". It is this that suggests to me a complete lack of understanding of the role of credit. A business turning over £440,000 is typically going to make sizeable purchases and, for the majority, these will be on credit terms. Credit professionals provide by far the biggest proportion of cash flow funding to business and, to make good decisions, they need good information.

The discussion paper and survey will be with you shortly; please look out for it and give us your feedback. We need to make sure our ability to support economic recovery is not undermined.

Weekly Blog by Philip King, CEO of the ICM - 'Pride in Professionalism!'

A couple of weeks out of the office and I'm back raring to go. I looked at only a few emails, turned off Twitter and was generally very well behaved - I think even Mrs K was surprised! While I was absent, I gave away my daughter on her wedding day which was as perfect as we could have hoped for, spent a few days in the North West of England, and watched the world going mad. Riots in London and elsewhere, the US economy being downgraded, and a possible European financial meltdown as just a few examples. So back to reality and I've decided not to join in the bigger debates that have been going on while I've been away since all the arguments have already been expressed and in better words than I can use.

I do want to share some thoughts on professionalism though. The Institute of Credit Management (ICM) delivers cash for business by empowering credit professionals working in those businesses to be more effective, and a couple of emails received from ICM members during my holiday reminded me of just how important the credit management role is. Members of the ICM are professionals working in the field of credit management who recognise the importance of what they do and are keen to develop their own knowledge and careers, whether that is through qualifications, training courses, keeping up-to-date through reading Credit Management magazine and ICM Briefings, attending regional networking events, participating in online forums, or engaging in other ways. In short, they are showing pride in being professional by belonging to an organisation that supports them, works for them, and encourages them.

And yet I meet many people working in credit management who, although they recognise the value they add, don't see it as a profession in its own right. Many of us would argue rightly that it is a challenging, rewarding and worthwhile profession, and needs to be seen as such. We have made significant strides in recent years in gaining recognition but we need to do more. The new Continuing Professional Development scheme the ICM is piloting is an example. More important though is getting those of us who do the job to make sure our peers and business colleagues (above and below) understand that we're working in a profession we're proud of and is vital to the sustaining and growth of business and the economy.

If you know someone who's working in credit management and hasn't yet got round to joining the ICM, give them a nudge or send me their details and I'll nudge them. The more members we have, the louder our voice will be and I'm on a mission to raise the volume - let's get all credit professionals to show Pride in Professionalism!