Weekly Blog by Philip King, CEO of the ICM - 'Better Late than Never'

There's been a late payment furore this week, in my world at least. I was interviewed on 5Live Investigates on Sunday and then on Monday the Prime Minister announced that BIS is going to launch a consultation on the subject.

In the midst of Cameron's announcement he repeated the suggestion made by Vince Cable in August that there might be penalties or fines for late payment. Quite apart from the debate about the practicalities of implementing such a step, the point missed is that the Late Payment legislation introduced in 1998 and strengthened by subsequent Statutory Instruments, most recently in March this year, allows for a fixed fee to be charged and supplemented by additional recovery costs for invoices paid late. The Institute's press release issued on Monday makes the point that the late payment charges are, by definition, a fine or levy for late payment.

Lord Digby Jones entered the fray stating that the Prompt Payment Code wasn't effective. He said it was merely a nice statement of intent. But that's exactly what it is: a voluntary commitment to treat suppliers fairly and pay them according to the terms agreed! If it had the teeth that he is demanding, it would cease to be a voluntary code. Now I'm not saying it couldn't be improved nor am I disagreeing with the sentiment for other or more stringent measures but I do get frustrated when people say something isn't working when it's doing what it says on the tin!

Some critics have suggested that I'm personally responsible for the Code and its defender-in-chief. I'm not, the ICM simply hosts and administers it for government but let's not dismiss the benefits out of hand: nearly 1,500 organisations have signed up, including 72 of the FTSE100; many have made fundamental changes to improve their internal systems and processes; and a dialogue has started where conversations didn't previously exist. If the Code didn't exist, by the way, the debate wouldn't be taking place and the issue wouldn't be getting airtime in the way it is. These are tangible benefits and should neither be ignored nor trivialised.

The fact is that the Prompt Payment Code was introduced as a measure to drive a change in culture complementing other measures such as the late payment legislation, naming and shaming by business organisations, and good credit management practice which - all too often - is missing from business relationships. This last point was driven home to me at an ICM Regional Roadshow in London yesterday when attendees heard about the breadth of influence credit management has, and the value it adds, across the entire business.

Credit management isn't just about collecting cash from recalcitrant customers. Good credit management starts before an order is even received by assessing the risk of a potential customer, establishing its identity and status, ensuring that it is good for the sums of credit likely to be incurred, submitting invoices correctly and promptly, understanding its invoice processing and approval systems so that they can be met, and taking swift action if payment isn't going to arrive when it's expected.

I'm capturing a huge amount of activity in a single sentence and not doing it justice but my point is this: we have to change the culture to one where treating suppliers fairly is part of the corporate responsibility agenda and we have to stamp out exploitation of small businesses by organisations that wilfully take advantage of their supplier base but that's not the whole story. We also have to help businesses to help themselves by getting the basics right. Unless we do that, we'll never see the improvement we all seek.

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 - 'Selective Hearing'

I listened to a speech by a politician recently that was genuinely disappointing. It would be unfair and inappropriate to name him, and pointless because my observations are more about the general principles than the detail in this case. He was talking about a subject that I know well and have been closely involved in for some time so I know for certain that at least three of the statistics and statements presented and quoted were totally incorrect but they served to underline the failings of a current policy.

 

So why did the content of this speech lack credibility. Was it because researchers weren’t thorough enough, was it because the speech wasn’t adequately proof-read, or was it – more cynically – because the inaccurate data better supported the case being made? I may be naive, but I think it rare for politicians to deliberately set out to mislead. However, I also believe that expediency often leads to the use of selective and convenient use of data to ensure a particular point is made or argument justified.

 

Two thoughts. First, I really wish politicians could learn to resist the urge to spend their time looking for negatives that will allow them to score political points. I want to hear positive constructive messages that will benefit business and the economy. Second, I want to be able to trust what I hear and believe it to be credible. I’d rather be convinced by an objective argument considering the pros and cons of a proposal than feel I am being manoeuvred into a position that is unconvincing, where only one side of the debate is aired and where the underlying intention seems to be to undermine existing or previous policy rather than present serious alternatives.

 

I’ve missed attending the party conferences this year but I certainly haven’t missed the less savoury elements of point scoring, sound-byte grabbing, and economy with the truth!

Weekly Blog by Philip King, CEO of the ICM - 'Second time lucky?'

I had the pleasure of attending the ExPP e-invoicing Summit in Warsaw earlier this week to present on the EU Late Payment Directive that came into force earlier this year. The lack of awareness of the Directive was no surprise, given that only 9 EU member states met the transposition deadline of 16 March this year and – six months on – I understand Belgium and Germany have still not done so.

 

The Directive is intended to drive a change in culture encouraging organisations to pay promptly and to discourage them from looking to demand excessive payment terms. I’ve expressed previously my view that it is unlikely to have the desired effect because the 2000 Directive had little impact and the new one isn’t that different, and because it tends to benefit organisations who take legal action and recover additional sums on top of the original debt. That’s all well and good but it comes after the event and is little comfort to a small business that’s failed due to a cashflow crisis when what it needed was the original invoices settled on time.

 

Fundamentally, small businesses tend not to know about the legislation, those that know about it aren’t sure how to use it, and those that know how to use it are reluctant to do so for fear of upsetting their customer. Nevertheless, as a tool in the armoury against late payment it has its place and it contains some measures that may yet prove to be of real benefit. That’s for another day though.

So what’s the connection between late payment and e-invoicing? I often preach about the need for small businesses to get the basics right, and the basics include invoicing promptly and correctly. One of the benefits of e-invoicing is that the system can instil a level of discipline into the process such that the correct fields are populated, and it is submitted in a format fit for processing. Also, many systems will provide confirmation of receipt and allow the supplier to monitor process through the payment system and have visibility of when funds can be expected.

 

I sometimes hear criticism when a large organisation issues an edict to its supplier base insisting that it adopts a particular system for submission of invoices. It’s accused of arrogance and abusing its power by forcing small suppliers to adopt a system they might prefer not to. Possibly so but, given that inaccurate and late invoicing is one of the biggest obstacles to getting prompt payment, let’s not dismiss the benefits out of hand.

 

Seems to me there are two sides to every argument!

Weekly blog by Philip King, CEO of the ICM - 'Sharing the golden nuggets!'

I spent a day this week at the ICM's Quality in Credit Management Best Practice Conference in London. The event was for organisations that have achieved, are on the journey towards achieving, or aspire to achieve the Quality in Credit Management accreditation award. What a great day.

 

I'm not going to bang on about the benefits of the Quality in Credit Management Award accreditation scheme (though clearly I could) but rather I'm keen to talk about the benefits of sharing best practice. When you get a group of people in a room who are at the top of their game - either personally or from an organisational perspective - it's amazing what comes out.

 

At the conference, we heard a series of speakers sharing their experiences and giving examples of best practice. Of course, what works for one organisation might not work for another, but hearing and filtering ideas is a great opportunity to improve, and helps meet one of the objectives of QICM, that of facilitating continuous improvement for people and organisations.

 

Some of the ideas were incredibly simple and others far more sophisticated. For example, we heard about the huge impact of introducing very simple and cheap 'music on hold' which made a great positive impression on both customers and the internal organisation.

 

More than one presenter talked about their plans to educate customers to improve their own credit management processes and procedures on the basis that, if they were more effective at collecting cash, they'd be better able to settle invoices promptly. A good example of sharing best practice with the wider business community and particularly with SMEs and micro-businesses who may lack relevant experience and expertise.

 

We saw some impressive dashboards and an explanation of how they can be used to best effect. Letting commercial people understand the value of overdue debt in terms of a number of new salesmen or replacement delivery vehicles, for example, is not a new idea but is very powerful.

 

Afternoon presentations addressed how to energise and motivate teams through periods of change and how to make step changes in performance. Some innovative and invigorating ideas on how to create a culture that is focused, cohesive and driven. The case studies came from large organisations but contained concepts that could be adopted in a variety of environments.

 

What's even more interesting about events like this is that people can contribute more than they realise. Participants turn up expecting to learn from the wisdom and experience of the presenters without realising how good they are themselves, and what nuggets they also have to share. Whether we call it networking or by some other grand name, sharing what we know, what we do, and what we've learnt is one of the most powerful business tools, and we should do more of it.

Weekly Blog by Philip King, CEO of the ICM - ‘Making a Difference’

This week has seen the quarterly meetings of the ICM's Advisory Council and Executive Board, and the regular forum of our Regional Representatives. We're into the second year of our governance cycle and that fact, together with a recent conversation with the editor of our Credit Management Journal, have made me think about the need for people to get involved in things.

 

Sean was telling me he'd decided to stand for election to a committee of his professional association (within the world of public relations) and questioning whether he'd be able to make a difference. My response was that he'd certainly make more difference if he stood than if he didn't, assuming of course that he was successful in the election! Stating the obvious I know but true nonetheless.

 

The reality of course is that organisations like the ICM depend on volunteers for effective governance and so much more. The willingness of individuals to give up their time and brain power is both valuable and vital. Seeing our governance in action this week has reminded me of how big a contribution they make. At times our members who get involved locally and/or nationally must question whether they make a difference but trust me they do, and their contribution and commitment are invaluable. Locally they run our network of regional branches and nationally they influence and shape our direction and strategy. In both cases they are enriching the ICM credit community and making it more powerful.

 

The countdown to next year's elections is some months away yet but let me plant a thought in the minds of those who might want to make a difference. My message is simple: when you see the invitation to stand for election to our Advisory Council early next year, please don't assume it's directed at someone else. It could just be your chance to make a difference!

Weekly blog by Philip King, CEO of the ICM - 'The price of success'

I've written several blogs about the payday loan industry in recent months saying, in summary, that I don't believe the concept of short term loans is fundamentally wrong and that emotion sometimes over-rides objectivity. But that does not mean that poor practice is ever acceptable. In particular I've ranted about the absence of evidence that affordability tests were being carried out and said the OFT should, in its final year, focus on this particular element.

Wonga's announcement that its pre-tax profits were up by 35% and bad debts were up by 89% has brought the sector back into sharp focus and - reading reports and commentaries - two things have struck me.

The first is Ian King, the Times Business Editor, observing that Wonga is one of the good guys in an industry that has appalling practices; by way of example he cites that it will not allow its customers to "roll" their loans more than three times and observes that the interest rates they charge are, for example, far lower than those incurred by running up an unauthorised bank overdraft. In my view, being cheaper than someone else isn't necessarily justification but it's certainly true and mitigates against some of the more emotional headlines we see. Indeed, elsewhere in the paper it's reported that loans cannot be rolled over more than twice and that Wonga stops racking up interest after 60 days to prevent debts spiralling too far out of control.

More worrying though is the quote from Wonga's Chief Executive, Errol Damelin, who is reported as saying Wonga loans were too small to be a significant problem and "it's very unlikely that a £200 or a £400 loan is what gets people into a financial mess". Perhaps by itself such a loan value won't, but as part of a vulnerable financial situation it can play a key role especially if it's taken out in desperation and as a last resort. I'd like to think Wonga is an exemplar in carrying out adequate and effective affordability checks but come on, Mr Damelin, get real - £400 MIGHT NOT be a problem for you but it could well be for some of your customers and potential customers!