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

As we enter the Christmas break, it's good to pause and reflect on the last 12 months.  Our Regional Roadshow programme, for example, has been really successful and it was great to end the year with a superb event at the premises of Schuco in Milton Keynes.  It was an excellent venue with great speakers, and proved to be a fantastic example of the ICM credit community at its best.

 

Looking at our wider activity, we've had some notable success too.  By the end of the 2012 there will have been 125,000 downloads in the year, over 50,000 more than in 2011, and almost 400,000 downloads in total of the Managing Cashflow Guides that were written and launched in 2008.  The Prompt Payment Code (PPC), which we host and administer for BIS, featured in a November House of Commons debate when the ICM received no less than eight mentions, and we've seen a surge in sign-ups in the last few weeks - particularly from large organisations - with signatories now standing at over 1,240.

 

Even more encouraging however is recent research by Experian showing that the PPC has had a positive effect on payment times.  It found that on average those who had signed up to the Code paid five days earlier than those who had not.  Furthermore, there has been a sizeable improvement over the period amongst PPC signatories who now pay 12 days quicker than in December 2008.

 

The Code was launched late on Christmas Eve, 2008 and, while I accept that there is much much more to be done, it's great to see independent evidence that it is has made some progress in changing the culture it was designed to achieve.

 

I'm looking forward to an exciting 2013.  In the meantime, may I wish you a very happy Christmas and a peaceful, prosperous and productive New Year.

 

Weekly Blog by Philip King, CEO of the ICM - 'Setting the agenda for credit management'

Last week we saw late payment and the Prompt Payment Code, hosted by the ICM for BIS, rise rapidly up the political agenda.  Business Minister Michael Fallon wrote to the Chief Executives of all FTSE100 and 250 companies that have not signed up to the Prompt Payment Code, urging them to do so and advising that he plans to publicly name those who don't.

 

Then, last Thursday, there was a debate in the House of Commons on 'Stimulating growth through better use of the Prompt Payment Code' where the impact of late payment was discussed in detail.  The ICM's press release following the debate can be found here.

 

This recent activity coupled with the implementation of the revised EU Late Payment Directive by March 2013 means that credit management, as one of the most effective ways to avoid and deal with late payment, is also firmly on the agenda.  Credit management is key to ensuring healthy cashflow and there have now been over 370,000 downloads of our Managing Cashflow Guides aimed at helping small businesses to get the basics right.

 

Let's make sure we make the most of this opportunity to demonstrate and promote the value that credit professionals bring to their businesses and ultimately to the economy as a whole.  Now is the time to stand up and be counted, be noticed, and be proud.

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 - 'Supporting the Business in You'

A campaign was launched by David Cameron in Leeds on Monday. 'Business in You' is a partnership between private enterprise and Government to highlight support for start-ups and growing businesses and encourage entrepreneurial spirit in 2012. It will run throughout the year and I'm delighted to say the ICM is actively engaged as one of the initial supporting organisations.

The campaign aims to highlight the fact that many people are sitting on an idea that could become a business, and many businesses have the potential to grow whether that's by launching new products, entering new markets, exporting for the first time or more widely, or by accepting the challenge and going for growth despite the negative malaise that surrounds us. The campaign website can be viewed at: http://businessinyou.bis.gov.uk/

I was at a meeting at BIS with many other of the supporting organisations on Tuesday and there are some really inspiring case studies being shared, and some innovative support solutions being offered by organisations as diverse as the Forum of Private Business, CBI, Institute of Directors, British Bankers' Association, ACCA, ICAEW, Intuit, Microsoft, Paypal, and Mitie to name but a few. Interestingly this is less about a government campaign with private sector support, and more about a collaboration that brings together the best from both the public and private sectors. And encouragingly, this isn't a government short-term soundbite-style gimmick but a long-term activity lasting for the whole year with links into many events and propositions. So how does the Institute of Credit management fit into this?

One of the challenges for all businesses, and particularly for start-ups and growing organisations, is making sure they have enough cash to sustain the business and its requirements. Managing cash-flow is vital, and the over 275,000 downloads of the ICM's Managing Cashflow Guides are testament to how relevant the subject is, and what an appetite there is to gain the necessary skills to manage it better. I hope the 'Business in You' campaign succeeds in encouraging more entrepreneurs to create a start-up, and more businesses to successfully expand but if it also helps businesses to manage their finances better and therefore survive longer, then it will have delivered something really worthwhile. I am proud that the ICM is among its supporters.

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