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 - 'Making the headlines'

Notwithstanding the Chancellor’s Autumn statement, and the undoubted noise that will follow, I’d instead like to reflect on a couple of reports I've read recently.

 

The first is the SME Finance Monitor (Q3 – 2012) produced for BIS that was published last week. I was struck by a couple of things. Only 46% of SMEs were aware of any of the Business Finance Taskforce initiatives with 22% aware of the Enterprise Finance Guarantee Scheme, 18% aware of the National Loan Guarantee Scheme, and 21% aware of the network of business mentors. Given the amount of publicity and airtime generated during their launch in 2010, these statistics are disappointing.  Even more interesting was the lack of confidence SMEs have in availability of finance.  Overall, only 33% were confident that their bank would agree to their request for finance (the lowest level seen in the six surveys to date), and yet the outcomes are markedly better.  The success rates for renewal applications are c90%, compared to 53% who were confident ahead of the application and, for new applications, the success rates are c56% against a confidence level of 21%.  Both of these aspects show how much more needs to be done in raising awareness.

 

The second is a report written by Duncan Cheatle, who I've met through my involvement on the Board of the Start-Up Loans Company.  Duncan is CEO of Prelude Group and has authored; 'The Unsung Heroes of Business'.  This report tells the story of seven entrepreneurial businesses and analyses their tax accounts.  It shares the views of their owners about taxation, their attitude to it, and their recognition of the value they add to the economy and society through the contributions of their businesses.  The foreword talks about ‘the perpetuated myth that successful business owners are the sole and selfish beneficiaries of the fruits of their business's output’ and delivers the message ‘that we need to do all that we can to encourage and support the relatively small cohort of business innovators who drive value into our economy and make such a significant and mostly overlooked contribution to public finances in the UK.

 

It's a refreshing read at a time when Starbucks, Amazon, Google and others are in the headlines for all the wrong tax reasons.

Weekly Blog by Philip King, CEO of the ICM - 'Re-arranging the deckchairs'

The report from Lord Heseltine released this week - No stone unturned in pursuit of growth - contains some interesting proposals. I'm writing these words within hours of publication so I won't pretend for a minute to have read and digested all 89 recommendations but I have scanned the chapter focusing on localism, and building on our strengths.

 

The report says we must 'reverse the long trend to centralism' and goes on to propose we should 'empower local places by letting them take the initiative to generate local growth, in partnership with central government', and 'we must ensure that the incentives and structures of local places are organised in such a way as to secure the greatest possible economic contribution, with each area able to play to its natural strengths.’

 

It's difficult to argue with this - local people should be more aware of the needs and opportunities in their area - and this should therefore be more effective than funding being handled, and activity controlled, from the centre. However, if the 29 current Local Enterprise Partnerships, and their predecessor Regional Development Agencies have demonstrated one thing, it is that some local organisations are better than others.

 

Lord Heseltine says ‘...growth is everyone's business. Government can set national policies and create an environment where business can flourish, but success depends on businesses and individuals working together. As we prepare for growth we must - each and every one of us - do all in our power to advance it. It is not someone else's problem.’

 

Good true words but if a local infrastructure is going to work as we all want, then it needs to deliver consistently well and effectively across all regions. If it doesn't, we're in danger of just rearranging the deck chairs under a new name.

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

Weekly Blog by Philip King, CEO of the ICM - 'feeding the sausage machine'

Rachel Bridge, the Enterprise Editor of The Sunday Times, wrote a really interesting article at the weekend about credit insurance. It talked about a sausage maker in Devon which took out credit insurance a few years ago after suffering a bad debt of £22,000. The finance director was quoted as saying that "if our credit insurer will provide cover up to a certain limit, then we will trade. If not, we will think again. We either do not do business with that customer, or we trade on different terms, perhaps asking for money upfront".

The article went on to outline how the amount of cover provided by the big three insurers has increased over the past year, and how some have introduced new measures and more user-friendly policies. Fabrice Desnos, Xavier Denecker, and Marc Jones from Euler Hermes, Coface, and Atradius respectively were all quoted and - since all three are good friends of the ICM - it made me read the article more carefully.

It was a useful and practical guide to what is a difficult product for many SMEs to understand and, indeed, for government ministers to get their heads around. I remember many conversations a couple of years ago trying to explain how credit insurance works without ever feeling I was making much progress. Credit insurers were coming in for some pretty bad press at that time, some of it deserved, but the sector has moved on, and so too its products. Credit insurance in the right circumstances can be a really useful tool for business, including small ones, and I'm pleased to see it being explained by a respected journalist to whom SMEs will listen.

There's been a recent interesting debate on the ICM Credit Community LinkedIn group about whether credit managers who have no bad debt are the good ones. My view is that good credit professionals understand the balance of risk and reward and accept bad debts as a price of profitable sales activity, but that doesn't alter the fact that the impact of a bad debt - particularly to small businesses and especially if it is relatively disproportionate - can be devastating. Anything that helps SMEs to understand better how to manage credit and risk is to be welcomed.

LinkedIn ICM Credit Community

Weekly Blog by Philip King, CEO of the ICM - 'It's not a black art'

I don't wish particularly to add to the clamour of voices commenting on the budget statement but news of the creation of more than the expected number of Enterprise Zones and action on fuel prices must be worthy of mention, and will surely be welcomed by the small business community who are so desperate for support.

Even more welcome, perhaps, is the news that the Export Credit Guarantees Department (ECGD) is to sell export credit insurance to small businesses for the first time in 20 years to tackle business concerns that private sector provision is failing, rather than simply provide cover for capital goods exports http://bit.ly/gt8lev. Whether the private sector is failing or not is a moot point, and the ECGD is quick to point out that it will only act in circumstances where insurance has already been refused. But whatever the rationale or the mechanic, exporting by small businesses is a vital part of the road to recovery and anything that helps increase export activity must be applauded.

Let's hope the initiative is better supported than previous Government initiatives in this space. Let us hope too that it is sufficiently well publicised and that the process is simple enough for SMEs to understand and use. We need to remove some of the mystique around exporting and dispel the perception that it's a black art!

5th Weekly Blog by Philip King, CEO of the ICM - Musings from China

I am currently attending, and presenting at, the 7th China International Credit & Risk Management Conference in Nanjing, and it is interesting to note how the topics of debate have shifted since my last visit 12 months ago. There is much more discussion, for example, around the move to open account payment terms rather than letters of credit for international trade, and the move towards alternative sources of finance such as factoring - a conversation that mirrors our own experiences back in the UK.

It is noticeable, also, that there is increased availability of credit ratings within China on Chinese companies, and a clear desire for skills to support selling into the West rather than skills and knowledge simply for use in the domestic market.

We know that there is a rapidly expanding middle class in China, and this is placing increased demand on the trade and availability of expensive consumer goods. What is interesting, however, is that there are no personal insolvency rules or procedures in China, leading me to think about the OFT's recent warning to 129 debt management firms in the UK: http://oft.gov.uk/news-and-updates/press/2010/101-10

The report makes salutary reading and the paid advice sector evidently needs to do considerably more to clean up its act. We have ourselves spoken to the Debt Resolution Forum which is working hard to drive improvement. I sit on its Complaints Committee and there have been very few complaints. It is important that bad practice is highlighted, so remedial action can be taken.

Some ICM Members are asking me why the firms shouldn't be publicly named and shamed. The reason is simple: they can't, under part 9 of Enterprise Act 2002. That does not mean that we will never know their identity, however. If they fail to improve, and the OFT decided to take formal licensing action, then their names will be published for all to see.

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