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 - 'Keep calm and carry on'

Not much good news from George Osborne yesterday then: six more years of austerity, even more public sector jobs to go, falling household disposable incomes, earnings growing slower than inflation until 2014, only 0.7 percent growth in the economy for the whole of next year, and potentially even worse if the Eurozone can't sort itself out. And I'm writing this in a London coffee bar with hoards of police outside in anticipation of a planned march and the biggest strike action for years.

Yet despite there being plenty of reasons to be depressed there was a moment that tickled me during the Chancellor's statement in the House yesterday when the Speaker stopped him mid-stream and said: "The House needs to calm down; one Honourable Member has probably already shouted enough for one day"! The antics of our politicians never cease to amaze me with behaviour that you'd see nowhere else, except perhaps a playground!

So what can we do about it and is bemoaning our lot going to improve things? I think not. I was struck by a tweet by Richard Tyler, Enterprise Editor at the Telegraph. Richard and I don't always agree but I couldn't argue with the sentiment he expressed when he suggested - in response to the expected grim statements in the House and the OECD saying Britain may have another recession - that we should all decide 'not to say it and it won't become true'.

We're surrounded by economists forecasting gloom; most of our businesses are probably struggling, and yet if we keep reminding ourselves how bad things are, we're in danger of talking ourselves into a depressing vortex.

As credit professionals we make a valuable contribution to our businesses in maximising cash-flow and mitigating risk. It's time for us to raise our professionalism further by actively looking for opportunities that the sales team can exploit, by finding ways of doing business that we might otherwise have to reject, and by being seen as the bright corner of the organisation where people can think - and act - in a more positive light.

Weekly Blog by Philip King, CEO of the ICM - 'The two 'faces' of Twitter and social media'

During the summer riots, there was much talk of the influence of Facebook, Twitter and other social media sites and their role in helping to organise and promote illegal activity. Last week I was reminded at a much more mundane and practical level of the power of Twitter in my working life.

I woke up last Wednesday morning to see a tweet from Chuka Umunna, the Shadow Business Minister, saying he was going to be speaking at a private members debate on late payment. He included a link to the parliment website and, as I was in the office on Wednesday, I was able to watch much of the debate live. I must confess that I had not realised that such debates took place in Westminster, other than in the main debating chamber itself. This one on late payment had been called by Debbie Abrahams, the Labour MP for Oldham East and Saddleworth, who was clearly passionate - and knowledgeable - about the subject.

The contributions from several MP's we know including Lorely Burt, and others we didn't previously, presented some strong arguments supported by background knowledge that was - in many cases - impressive. What was particularly encouraging was their knowledge of the work being undertaken by the ICM and it was gratifying to receive many mentions.*

Afterwards, I exchanged tweets with Debbie and we are planning to meet to discuss how she and her parlimentary colleagues, along with the ICM, can drive more engagement with the Prompt Payment Code and point SMEs towards the practical advice we can offer through, for example, the Managing Cashflow Guides.

I've also recently had some interesting conversations via twitter with Richard Tyler, Enterprise Editor at the Daily Telegraph, and I'm conscious that - without it - I would have been blissfully unaware of last week's debate and missed a real opportunity to engage with people who can be influential. I know there are downsides to social networking but, for me, the upsides can be pretty impressive too.

*For those interested, our press release following the debate can be found here, the transcript here, and the video recording here.

To follow me and the Institute of Credit Management on Twitter go to http://twitter.com/philipkingicm and http://twitter.com/ICMorg

The Prompt Payment Code

Managing Cashflow Guides

4th Weekly Blog by Philip King, CEO of the ICM: EU - support or overkill?

The European Union agreed new rules last week to update the existing EU Late Payments Directive. The agreement now needs to be approved by the full Parliament and is likely to be put to a plenary vote at the October session in Strasbourg.

Four key points were settled in the negotiations. The first placed a 60-day cap for public authorities; only in exceptional circumstances can the payment period be longer than 30 days and never beyond 60. The second fixed the statutory interest rate for late payment as the reference rate plus 8% and fixed a sum of 40 Euros as compentation for recovery costs.

For public entities providing healthcare, it was agreed that Member States may choose a deadline of up to 60 days, and finally that the verification period for ascertaining that the goods or services comply with the contract terms is set at 30 days.

I have no argument with making things as simple as possible and I have always said that arbitrary imposition of extended payment terms on small suppliers by large organisations in unacceptable and unethical, particularly when retrospectively applied. But whilst the EU may be pleased with its negotiations, I find a number of questions appearing in my head. For example:

• What happens when I have some obsolete stock to clear and giving very extended terms would have persuaded a customer to take that stock and sell it over time?

• What happens when I'm negotiating particular contract details and either I or the other party has some specific requirements where longer - or shorter - payment terms might have been one of the areas on which flexibility would help deliver a solution?

• What happens when an invoice is disputed and remains unpaid either justly or as a means to avoid payment?

• Will businesses that fail to meet invoicing requirements - or delay invoicing - be any better off?

As always the devil will be in the detail but I've watched with interest the introduction in France of the Modernisation Law in the last year and - anecdotally at least - I don't get the sense that there has been a huge positive impact. Credit Managers I speak to seem to be spending an inordinate amount of time trying to manage through the bureaucracy and confusion about what terms apply when and to whom.

I'd be the first to agree that the current situation is poor but I need to be convinced that this will be the panacea that's being suggested by Barbara Weiler and others. Good credit management practice can resolve many of the issues that arise and I fear we might end up with overkill that - with the best of intentions - stifles free enterprise.

http://www.europarl.europa.eu/news/expert/infopress_page/052-82070-256-09-38-909-20100913IPR82069-13-09-2010-2010-false/default_en.htm