Weekly Blog by Philip King, CEO of the ICM - 'Sound bites aren't enough'

Amid the hype around Project Merlin and the banks last week, the announcement from BIS of four new schemes http://bit.ly/gglodF specifically to help exporters seems to have got somewhat lost in the noise.

On the face of it, all four of the schemes have merit. They are designed, in simple terms, to enable businesses greater access to trade finance and insurance against credit risk where such help may not be available from the private sector.

As always with such initiatives, the devil is in the detail which I fear the headline announcement masks. It seems the circumstances in which the schemes will be available are limited, and the benefits will - in turn - also be restricted to a few rather than the many. Previous forays by government to support exporters have not been spectacularly successful; they have tended to be overcomplicated, and as a result, under-subscribed.

Export growth is crucial in the recovery we so desperately need, and schemes like these need to be visible, understood, and used; they need to be simple and easy to apply for; and they need to be flexible so their impact is maximised. The intention is laudable, and I don't want to write these off just yet. But there is a tendency for government to fail in its follow-through, and this time they need to listen and respond positively and quickly to feedback so the objectives of driving exports and aiding economic recovery in the UK can be met.

Businesses don't grow through sound bites. Behind the rhetoric, there need to be real and tangible measures of support.

Weekly Blog by Philip King, CEO of the ICM - 'Forced lending - no, no, no!'

So Britain's largest banks have finally signed up to a series of pay and lending reforms http://tiny.cc/sbhgo, and whilst I don't especially want to add to the exhaustive comments made before and since the announcement, I was rather captivated by the interview with Vince Cable on Radio 4's PM.

The interviewer, Eddie Mair, was making the point forcibly that the Government has no real power as a result of the agreement and still won't be able to 'force' the banks to lend to small businesses. We know ourselves that the banks' record at supporting businesses is not as good as it is claimed to be, and getting the top level thinking down to local management is similarly not as effective as it might be. We know also that SMEs are not as good at producing credible business plans to support requests for funding as they should be, nor as good at collecting cash due to their businesses as they need to be.

But more than this: we know that the Government doesn't deliver initiatives in a way that makes them easily understood by business, and its follow-through is usually poor; and there is a disconnect between the views of the small business organisations and the views of the banks about the reasons and causes of the funding availability issues.

And yet despite all this, please don't tell me that the banks should be forced to lend to small businesses.

Yes, encourage them to understand their small business customers better and provide them with best advice. Yes also be supportive and imaginative in the help they can provide. But force them to lend? NO, NO, NO

I have seen several examples where a bank's refusal to lend appears to lack logic, and they have made unreasonable and unacceptable demands of their customers. But I have also seen small businesses that are clearly in terminal decline, blaming the banks for their woes when it's obvious that lending more money would only have delayed the inevitable insolvency.

Please let's make sure we don't forget the basic principles of good credit management - you don't lend more than a customer can afford to repay and you drive profitable sales while protecting your business against unnecessary and avoidable risk.

Weekly Blog by Philip King, CEO of the ICM - 'Debt management - we need disclosure'

The OFT made an announcement last week that followed its warning to 129 debt management firms in September last year that highlighted serious issues over compliance.

It confirmed that 35 firms have surrendered their consumer credit licences and at least 15 are facing licensing action as a result of the OFT's compliance review. In detail, since the warning was issued: 35 firms have surrendered their licences; 8 firms have been informed that the OFT intends to revoke their licences; a further 7 companies who did not respond are currently being investigated; and 79 firms have submitted evidence, which the OFT will now review.

One of the footnotes to the official news release says that: 'the OFT is not able to name the companies subject to the announcement because of disclosure restrictions under Part 9 of the Enterprise Act 2002. Where the OFT uses its formal powers under the Consumer Credit Act 1974 to refuse or revoke a credit licence, decisions are made public on the Public Register'.

I understand the principles of disclosure but it seems to me perverse that the public cannot know the names of the companies involved so that they - and their advisers - can be wary of dealing with them, particularly where the OFT plans to revoke a licence. It has now been four months since the initial announcement, which means at best there are still many debt management companies behaving unethically or worse. (By the way, I thought I'd look at Part 9 of the Enterprise Act to see what the restrictions were and I'm still ploughing through the 18 pages of guidance notes!)

To more positive news, I am delighted to see our Managing Cashflow Guides passed 200,000 downloads in January. I appreciate there are an estimated 4.7 million businesses in the UK but at least a proportion of them are downloading good advice that can help them manage cashflow more effectively.

Weekly Blog by Philip King, CEO of the ICM - 'Should you say yes?'

I recently started a discussion 'Teaching teenagers about personal financial management' on the LinkedIn ICM Credit Community http://linkd.in/dd1hHF. I was not quite sure what type of response, if any, I would receive. As it happens, the response was superb, and the comments made were useful, insightful and most thought provoking. The clear consensus is that there is plenty to teach and much practical advice to be shared.

This is a subject that we, as credit professionals, feel very strongly about. If children leave school with an understanding of how to manage money and finance, budget expenditure, and be discriminatory in their use of credit, then there will be less need for the advice sector, which is already stretched.

There are many good and worthy initiatives already under way, particularly those supported by pfeg (the Personal Finance Education Group) on whose Forum the ICM sits. But in the absence of personal finance being a serious and compulsory part of the national curriculum (which looks increasingly unlikely), it is clear that still more needs to be done.

The Institute has recently announced a partnership with DebtCred, as detailed in the pages of CreditManagement magazine http://bit.ly/eJSb2K, and this provides a genuine opportunity for us to get involved and make a difference in a really practical way either personally or through our employers. If I was to challenge you to stop for a moment and consider: "could I and should I give a couple of days a year to make a difference and help youngsters cope better as they enter adult life?"

If the answer is yes, please drop me an email at governance@icm.org.uk.

Follow me and the ICM on:

http://twitter.com/philipkingicm, http://twitter.com/icmorg or http://linkd.in/dd1hHF

Weekly Blog by Philip King, CEO of the ICM - 'One economist agrees with me!'

An SME 'Access to Finance Research Report' published recently by the Institute of Chartered Accountants in England & Wales (ICAEW) held little in the way of surprises either in its findings or its recommendations. But it was nonetheless interesting.

One of the recommendations that particularly struck a chord with me, for example, was that 'SMEs need to display good financial management'. This is especially pertinent given the work that the Institute of Credit Management has been doing as part of the Doing Business Together initiative http://www.doingbusinesstogether.org/ and the need for greater transparency and clarity from all sides.

Whilst the report suggested that banks needed to do more to improve their relationship with the SME sector, it also concluded: '...well-managed, viable businesses with good track records have been able to obtain the finance they require........'. Such a statement will come as no surprise to those banks supplying the finance or credit professionals providing the trade credit!

I spent one afternoon this week with Roger Martin-Fagg, an economist, listening to his outlook for 2011 and beyond. Roger talks a great deal of sense and can support his arguments well. I was particularly pleased to find an economist who agrees with me that we're going to see a real surge in corporate insolvencies in the months ahead. I've been starting to feel I'm in a minority of one recently but perhaps not, after all!

His views on the difference between 'demand-pull' and 'cost-push' inflation are interesting too; we've got the latter in the UK and - for that reason - raising interest rates alone will not solve the problem. We watch with interest to see what happens next.

Feedback, positive or negative always welcome - use the response form or e-mail me at ceo@icm.org.uk.

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

The British Chambers of Commerce (BCC) released its latest Quarterly Economic Survey this week and at best the messages were mixed.

Business confidence, for example, remains high, with most expecting an upturn in their fortunes - and turnover - in the coming year. The manufacturing sector, specifically, is looking stronger but the performance of the service sector has weakened and there are concerns about the sustainability of the recovery. There are concerns also about the problems in the Eurozone, and the potential impact on UK exporters.

My take on this is that there is little consensus on where the economy is, or where it's heading, and the prospects for the year ahead are almost impossible to predict. Nevertheless, every piece of good news serves to build positive expectations and that can only be a good thing.

The BCC survey, of course, only focuses on the private sector. So what about the public sector?

I had a really interesting hour on Monday discussing public sector issues with an ICM Member who holds a senior position in one of the Inner London Boroughs. He confirmed much of what I already knew in terms of pressure on costs, more effective use of resources, and the need to drive efficiency savings. But he also raised some issues that I'd not previously considered in so much detail.

How each local borough decides to cut costs over the next four years, for example, will vary significantly depending on the colour of the party calling the shots. Then there is the impact of specific plans, such as the proposed caps on housing benefit. Some tenants will face a shortfall between their rent and the capped benefit levels, which means they will have to move to a property or borough where rent costs are within - or closer to - the cap. As a result, Private landlords who provide social housing will lose tenants and there will be an increase in empty housing stock and pressure on buy-to-let mortgage repayments, particularly at the small scale landlord sector. If this isn't bad enough, the effect will be exacerbated by the changes to calculation of the Local Housing Allowance (used to determine housing benefit payments) which in the future will be calculated on the basis of cheaper rents.

The inter-relationships between public and private sector are deep and complex; perhaps that explains exactly why it's so difficult to predict the short - and longer - term future. We're going to need our wits about us as reality unfolds throughout coming months!

Weekly Blog by Philip King, CEO of the ICM - 'New Year - more professionalism and greater recognition'

A warm welcome to the new year and may it prove to be successful, peaceful, and prosperous.

Two articles in The Times caught my eye over the new year:

1. Patrick Hosking shared ten good reasons to be cheerful, four of which I found particularly interesting:

• Business leaders are in relatively good cheer and boards are far from despondent - they're investing, they're hiring, they're spending.
• Interest rates are staying very low.
• The pound will cushion us from external blows.
• The private sector is capable of taking up the slack from a shrinking public sector.

2. The last point was echoed a day or two later in a piece about a Deloitte Report showing that confidence among Chief Financial Officers at some of the country's biggest businesses rose sharply in the last quarter of 2010, and their appetite for risk jumped to the highest level since before the credit crunch began in earnest. The report findings boost hopes that the private sector might be able to compensate for deep public sector cuts.

This makes heartening reading and let's hope it proves right although I still believe that many smaller businesses are under-estimating - or at least failing to recognise - the impact that public sector cuts will have on them.

Whatever the year holds in store there can be no doubt that cashflow will remain crucial to business survival and credit management needs to raise its game further. We have undoubtedly made progress in recent years but we need to do so much more in raising our professionalism, profile and the recognition we are afforded for the value we add to business. Organisations like the ICM have to play their part and we will continue to do so; and so do individual professionals who need to make sure their peers and Boards understand the significance of their contribution to profitable selling, risk mitigation and cash generation.

2011 is the year when we need to make sure members of our teams get better trained and qualified so they are recognised for their achievements, and when the quality of what we deliver gets recognised by the independent validation and accreditation available through the Institute's Quality in Credit Management scheme.

Feel free to ask me for more details of how we can support, motivate and strengthen credit professionals - ceo@icm.org.uk