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 - 'Leading by example'

There's been much talk in recent months about mentoring as a tool to increase the survival and growth rate for businesses, and I make no apology if this week's blog reads a bit like a commercial!

In July 2011, the mentorsme web portal http://www.mentorsme.co.uk/ was launched as an online gateway to mentoring services for SMEs. It was one of the 17 initiatives coming out of the British Bankers' Association's Business Finance Taskforce, and this was followed in November 2011 by an announcement by BIS that new grant funding of £1.2m was being made available to recruit and train 10,000 volunteer business mentors through the Get Mentoring project run by the Small Firms Enterprise Development Initiative (SFEDI).

Over 3,000 volunteers have already signed up for training and, as the BIS funding is only available until the end of March, the ICM was asked last week to promote SFEDI's new online training which is now available at http://www.getmentoring.org/. This online platform will make it easier for business people to get involved and benefit from training that will help them develop the skills to become effective business mentors.

In the recent press release, Mark Prisk said: "Get mentoring is about businesses helping each other to succeed." The release went on to say that mentoring has been shown to increase the survival and growth rate for businesses, and can be a great way of boosting capability and capacity within a sector or supply chain. It can aid the professional development of both parties, enhancing leadership and management skills and improving soft skills (eg business confidence and aspiration) and business performance (eg turnover and profit). Mentors must be willing to offer at least one hour per month free to their mentee(s).

As credit professionals, many of us deal regularly with SMEs, and getting involved in this way could enhance our outlook and understanding of business generally, and especially the challenges faced by smaller businesses.

If you think you might have the necessary skills and experience to become a mentor, why not sign up today at http://www.getmentoring.org/ and start making a difference. I have.

Weekly Blog by Philip King, CEO of the ICM - 'A positive route to growth'

So the latest Project Merlin figures have been released and they show that, in the third quarter, new lending to business was £57.4bn, of which £18.8bn was to SME's. Let's remember that the full-year targets are £190bn and £76bn respectively with £157.7bn and £56.1bn being achieved so far. Simple arithmetic tells me, assuming nothing much changes, that the total lending target will be achieved and the SME target will probably fall a trifle short. Not surprisingly, the data has generated the usual and expected clamour for banks to be forced to lend more to small businesses.

Regular readers will not want me to reiterate my view with regards the fallacy of 'forcing' banks to lend, and they will have seen my blog last week talking about some basic errors made by start-up businesses. I believe my observations then support my contention that lending decisions should be based on rational - rather than political or emotional - criteria.

I was privileged to be a contributor to the BIS/UKTI-organised UK Growth and Finance Fitness event in London last Thursday, and the subject of SME growth and finance was a recurring theme in Lord Green and David Cameron's opening speeches. Vince Cable also took up the theme in his address, as did Doug Richard, and early Dragons Den guru and an angel investor, who expressed his views clearly and articulately.

The reality of course is that not all SMEs want or need to borrow; indeed a recent SME Finance Monitor report showed that 47 percent never use external funding ('never' defined as neither now nor in the past five years). What we need, therefore, is an environment in which SMEs want - and feel confident - to grow, and one way to achieve that would be through a growth in exporting.

Two statistics in David Cameron's speech struck me in particular: firstly, only one in five SMEs export but if that figure was increased to one in four, Britain's trade deficit would be wiped out; secondly, Britain exports more to Ireland than to Brazil, Russia, India and China combined; the BRIC countries therefore represent a huge potential market.

So why don't more SMEs export, and, perhaps connected, why don't more SMEs want to obtain external funding? I've said in a number of forums with government and others that the key to SME growth is less about obtaining funding, and more about building confidence. Increased confidence would deliver more willingness to introduce new products and services, more willingness to enter new markets either at home or overseas, and more willingness to take on additional staff.

I've also expressed my view that many SMEs don't consider exporting because they see it as a 'dark art' and are afraid of the unknown. I'm delighted ECGD announced at the event that it is changing its name from 'Export Credits Guarantee Department' to 'UK Export Finance' and is going to work much more closely with UKTI. I believe that even such a cosmetic change will make SME's less apprehensive or uncertain as regards what the former ECGD does - and the help it can provide.

A recurring theme also came from the panel of small businesses who are successfully exporting. They started exporting because they were in a desperate situation and it was their last hope of keeping the business alive...and it worked. What we need is more businesses embracing exporting as a positive route to growth rather than a last resort and act of desperation.

Weekly Blog by Philip King, CEO of the ICM - 'Merlin loses its sparkle'

Vince Cable has apparently, and allegedly, admitted that Project Merlin has failed. The Merlin agreement with the major banks guaranteed that lending to small businesses would increase to £76bn in 2011 but his acknowledgement that 'new mechanisms' would have to be considered is a tacit recognition that Merlin hasn't worked. The Chancellor's announcement last week of his 'credit easing' plan of a new credit line for business is further evidence.

As I said at the time, the idea that commercial banks could be 'forced' (as some commentators described it) to lend seemed farfetched at best. Commercial banks have a responsibility to ensure that their lending risks are justified and their lending policies are sound. We've all seen spectator examples in the press of where they may have got it wrong but receiving much less publicity are the numerous cases where they've declined to lend and have been right to do so.

I won't pretend to fully understand the concept of 'credit easing', the detail of which has yet to be made clear, but Phil Orford, the Chief executive of the Forum of Private Business asked three very sensible questions in a recent blog about a scheme which it would appear would require Treasury officials, or officials of an agency specifically appointed for the task, to have a start making judgments on lending taxpayers' money to private sector firms:

• How will they decide which companies deserve a loan from the taxpayer?


• How will the money be channeled to the businesses that need it?


• If these businesses are safe bets, why aren't private lenders already lending to them?

All will become clear in due course and I'll be fascinated to see exactly how it will work.

The other issue that needs to be addressed is how to encourage those business with outstanding debtors to use best practice in credit management to release that money and therefore reduce their external cash requirements. It might even save them having to look for working capital funding at all, but more of that next week by which time I'll have met with two MPs - one Conservative and one Labour - and discussed such matters.

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 - 'Missing the point'

So the Prompt Payment Code received some negative press at the weekend - described as 'nothing more than window dressing' and 'complete nonsense'. The ICM administers the Code on behalf of BIS and so you'd expect me to react to such comments.

Firstly, I wish the FT had asked the ICM for a view. Since we administer it, we are better placed to comment than people who have never even heard of it.

Secondly, I find it frustrating when the point is so obviously missed. The Code aims to ensure that the terms and conditions agreed between two parties are adhered to. It is NOT about whether the agreed payment terms are 30, 60 or 90 days; that is a complete red herring. What is critical to small businesses, and indeed any business, is the certainty of payment. It is this certainty that allows businesses to manage their cashflow accordingly.

I agree that the Code needs to be better promoted, and lack of compulsion is a real issue, but it should be remembered that the PPC was one of a range of initiatives launched by BERR (now BIS) in partnership with the ICM including a series of Managing Cashflow Guides of which there have now been more than 225,000 downloads.

What's equally frustrating is the lack of recognition that the real requirement is for good credit management across the whole sales life cycle from beginning to end. The challenges we have received about Code signatories almost without exception display an element of basic credit management practice being missed - order number not being quoted or terms not being agreed in advance for example. Large businesses exploiting smaller suppliers is abhorrent but those smaller businesses need to recognise their own complicity in creating the very circumstances about which they complain.

Managing Cashflow Guides

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

As I mentioned last week, the momentum over the Doing Business Together initiative is gathering pace. The Business Secretary, Vince Cable, has clearly thrown his support behind DBT and the meeting last week in Richmond brought some real heavyweights to the table from the world of business and credit. But there are some issues.

There are, for example, some mixed messages coming out, especially from the politicians. On the one hand, the Government support EU moves to cut red tape for SMEs by reducing their obligations over the detail of financial reporting, while on the other they believe that financial data is essential for granting credit and therefore facilitiating growth.

Businesses need to be educated about the importance of producing, using and sharing information: they need to produce accounts, because in doing so they will be able to manage their businesses better; they need to use the information they have, and so identify how and where they can free up cash in their business; and they need to share that information to access finance or negotiate better terms with their suppliers.

I was also invited this week to the ABFA (Asset Based Finance Association) Conference, sharing the platform with my colleagues from the FSB and FPB among others in an event chaired by Fiona Bruce. The conference created a vigorous debate about late payment legislation. I disagreed entirely with the FSB position: legislation really won't change anything even though we might all wish it would.

Finally, I note an interesting thread on the ICM Bulletin Board this week about alternative approaches to cash collection. It touched on one of my soapbox themes: good credit management adds value across the entire business - creating profitable sales, improving the quality of the organisation at all levels, retaining customers AND maintaining vital cashflow; knowing - and understanding - our customers is a vital element if we are going to be successful and if we're going to make the contribution to our businesses that we can, and should!

http://twitter.com/philipkingicm http://twitter.com/icmorg

Weekly Blog by Philip King, CEO of the ICM - 'Information leads to finance'

Although you might not believe it, there has been quite a bit going on this week, apart from the weather. Perhaps the biggest news is around the progress of Doing Business Together, an initiative in which the ICM played an important role as part of the steering group that drafted and agreed the Operating Principles prior to their launch at the CBI in October. An event tomorrow will add to the momentum already created http://bit.ly/eTz8lO.

The aim of the Doing Business Together group is to help SMEs manage their own businesses better and obtain the finance and credit they require for a successful trading relationship.

The operating principles (http://www.doingbusinesstogether.org/) are designed to ensure that the relationship between SMEs and their finance and trade credit providers, is one of profitable partnership through a shared commitment to the principles of honesty and transparency. Put simply, they are designed to help get Britain back on its feet.

Trade credit supplies more finance to business than bank loans and overdrafts, and credit professionals are therefore key to the recovery that we all so desperately want and the country needs. In order to make informed decisions, we need information that is timely, relevant and accurate.

Credit professionals have a major part to play in encouraging businesses to produce, use and share information that will support their business, keep supply channels open, and aid the provision of finance. Getting management accounts from our customers can no longer be the exception. If we are really going to know our customers as we should, and be able to manage the relationship and risk effectively, access to such critical material must become the rule.