Weekly Blog by Philip King, CEO of the ICM - 'Towards a better future'

This will be my last blog for 2011 so I'm pleased to focus on a couple of real positives.

First, congratulations to Martin Lewis for passing the 100,000 signatories threshold with his petition to make financial education a compulsory part of the school curriculum. The milestone is significant because it means the subject must now be discussed by Parliament, and it's an important subject well worth debating.

The report generated by the All Party Parliamentary Group on Financial Education for Young People says that "two-thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don't have the right skills to properly manage their cash". If we allow children to leave school without the necessary skills to manage their money we are going to reap the deserved harvest in years to come. As credit professionals we know only too well the impact of over-indebtedness and that is why the ICM has encouraged its members to engage in the DebtCred project delivering financial education to 14-19 year-olds.

DebtCred is just one initiative and there are numerous similar projects, materials and voluntary activities all with a similar aim and many accredited by pfeg (Personal Finance Education Group) that exists to help schools plan and teach financial capability. A huge amount of good work goes on but it is all ad-hoc and dependent upon the willingness and appetite of individual schools and indeed teachers to engage. When financial education is a compulsory part of the curriculum, all children will receive training in what is a vital skill. I've heard the argument that there is little point in addressing financial education until basic numeracy and literacy skills are adequately addressed. Of course that is true, but the two are not mutually exclusive; even someone who can't read or write has to manage their money, and both should have focus within the curriculum.

Secondly, the Forum of Private Business has been engaging many organisations in preparing a letter to Mark Prisk, the Business Minister urging government to have a clear and detailed plan to address the issue of late payment which can, and all too often does, cripple a small business. The Institute is a co-signatory to the letter and it suggests a number of specific actions that might be taken.

Government has done some good things with its Prompt Payment Code (hosted and administered by the ICM), and its current Finance Fitness campaign but more needs to be done and it needs to be done more cohesively. I'm writing these words shortly after being interviewed on BBC Radio 5Live Wake up to Money and my message is clear. Government needs to recognise late payment for the issue it is and formulate a plan to address it. The business culture needs to change such that paying on time is the norm rather than the exception. But businesses themselves have to be smarter at getting the basics of credit management right, and we credit professionals need to be willing to share our skill and expertise so that our customers can deliver cash for their businesses just as we deliver cash for ours.

The recently launched ICM Online Services (icmOS) SME Collection Toolkit is an attempt to provide a practical tool to achieve that aim.

The ICM press release can be found here, the FPB release here, our Managing Cashflow Guides here, and the icmOS SME Collection Toolkit here.

If you would like to listen to Philp's interview on BBC Radio 5Live click here.

I hope 2011 has been a good year for you and - after some relaxation time at Christmas - I hope 2012 will be even better. See you next year!

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

A slightly unusual topic for me this week prompted by recent personal experience. I was involved with a police force at the weekend about a missing person. The details and circumstances aren't important but the police wanted to know everything I knew about the missing person who has gone AWOL many miles from home and may need help.

My wife and I shared all we knew (which wasn't much to be honest) and my wife referred the police to Facebook which included a number of friends in the area where they were looking, and had comments that might give clues as to their whereabouts. We were asked if we had a picture of the individual and we confirmed we had but pointed out that a more recent and clearer one was on Facebook.

Extraordinarily, a few minutes later we received a phone call asking if we could download the picture and email it, along with any other relevant information, because the police didn't have access to Facebook and so couldn't use that source of information! I don't know if this is common to all police forces and I don't know the detailed reasons why access is denied but - in today's age - I was incredulous that such a productive source of information couldn't be used!

I discussed the use of Facebook in tracing debtors following the release of the OFT's Debt Collection Guidance a few weeks ago and shared my view that the content of the guidance was being misrepresented by the media. We've also recently heard the ongoing debate about how social media was insufficiently monitored during the riots across the UK in the summer.

Social media is a powerful tool that can be used for good - as well as bad - but it strikes me that the potential 'dangers' of Facebook et al and sensitivities over privacy, while understandable, are getting in the way of progress. It certainly seems absurd that the police could not pursue what to me would have been a blindingly obvious line of enquiry.

Whether we like it or not, social media is here to stay and we can't just ignore it. The ICM has heavily embraced Twitter, LinkedIn and Facebook because we know a proportion of our members are using them and we see many benefits.

I fear, however, that in certain cases bureaucracy is winning and the loser is someone who could really need help!

Weekly Blog by Philip King, CEO of the ICM - 'Keep calm and carry on'

Not much good news from George Osborne yesterday then: six more years of austerity, even more public sector jobs to go, falling household disposable incomes, earnings growing slower than inflation until 2014, only 0.7 percent growth in the economy for the whole of next year, and potentially even worse if the Eurozone can't sort itself out. And I'm writing this in a London coffee bar with hoards of police outside in anticipation of a planned march and the biggest strike action for years.

Yet despite there being plenty of reasons to be depressed there was a moment that tickled me during the Chancellor's statement in the House yesterday when the Speaker stopped him mid-stream and said: "The House needs to calm down; one Honourable Member has probably already shouted enough for one day"! The antics of our politicians never cease to amaze me with behaviour that you'd see nowhere else, except perhaps a playground!

So what can we do about it and is bemoaning our lot going to improve things? I think not. I was struck by a tweet by Richard Tyler, Enterprise Editor at the Telegraph. Richard and I don't always agree but I couldn't argue with the sentiment he expressed when he suggested - in response to the expected grim statements in the House and the OECD saying Britain may have another recession - that we should all decide 'not to say it and it won't become true'.

We're surrounded by economists forecasting gloom; most of our businesses are probably struggling, and yet if we keep reminding ourselves how bad things are, we're in danger of talking ourselves into a depressing vortex.

As credit professionals we make a valuable contribution to our businesses in maximising cash-flow and mitigating risk. It's time for us to raise our professionalism further by actively looking for opportunities that the sales team can exploit, by finding ways of doing business that we might otherwise have to reject, and by being seen as the bright corner of the organisation where people can think - and act - in a more positive light.

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

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 - 'Wake up and smell the coffee'

When I stay in London, I often use a hotel near Swiss Cottage. It's on the Finchley Road, located in a typical suburb of the capital, its street lined with shops. Over the last few years, I've noticed something that was brought home to me on Monday.

Within about half a mile, there are a number of fast food establishments, some long established cafes and restaurants and a couple of Costa Coffee shops. There are also a couple of independent coffee shops with the usual comforts. One of these closed down a few months ago and was emptied; it has now been replaced by another one that - if you hadn't seen the empty shop in the interim - you could mistake for what was there before.

Further down towards Swiss Cottage Station, it happened again - a new shop replacing one that has closed down. Then more recently, I noticed that that too has now closed down, having been open for no more than a handful of weeks.

Now I know nothing about these businesses or their owners but, from using them, I get the impression there is an individual who has fulfilled a dream by opening the premises and is clearly intent on giving customers a good experience. They work hard and want their enterprise to succeed. But, in all but one case so far, they've failed.

The obvious question that occurs to me is why - when a coffee shop has failed on a particular site - you would think it a good idea to open another? It's not just about location, but also about the clientele, the volume of turnover that can be generated, and the business model of competing operations. And this is obviously not a problem unique to Finchley Road; how often do we see businesses opening where the owners clearly haven't given enough thought to whether they've chosen the right place for them?

I said at an event hosted by Vince Cable, Mark Prisk, and Francis Maude over a year ago that one of the issues arising from the rationalisation of the Civil Service (and, indeed the private sector) would be people receiving a large redundancy payment and using it to fulfil their lifetime dream of starting a business, only to see that dream turn into a nightmare. This is one of the reasons why I believe we have still to see the peak of insolvencies and why business education is so vital. Scenarios like this can be heart-wrenchingly sad and avoiding them would be good for all of us and for the economy.

We are pleased, therefore, to be actively engaged in the BIS Finance Fitness Event and Campaign being launched in London today with the aim of making new businesses and existing ones better equipped and able to survive. We will be continuing to provide advice through our Credit Management Helpline and Managing Cashflow Guides (www.creditmanagement.org.uk) and we're also launching an SME Collections Toolkit as part of ICM Online Services that will provide very practical advice and tools with templates, video role-plays and more.

Those of us supplying and talking to small and start-up businesses could do worse than point people to advice like this; after all, if they get paid, we're more likely to get paid too!

Weekly Blog by Philip King, CEO of the ICM - 'Men behaving badly'

The ITV 'Exposure' programme aired on Monday night used covert recording of a bailiff behaving very badly indeed. Shocking revelations that - in many respects - beggared belief. What was even more surprising was the assertion that no complaints had been received by his employers during the three years he had worked for them. Was this because the people he called upon didn't know their rights or what standards of behaviour they could expect? Or was it because they felt that any complaints they did raise would simply fall on deaf ears?

If the Tribunal, Courts and Enforcement 2007 had been fully implemented, the bailiff concerned would have been subject to an enhanced certification process that would have included aspects such as diversity awareness and conflict management; both would clearly have been useful, and complaints would have been dealt with by the Courts. As events have unfolded, the Act was only partially implemented and a parallel consultation proposing regulation instead by an independent body was never taken forward either, even though the enforcement industry would have welcomed such an additional regulation (my thanks to Chris Bell of Shergroup for his validation of the facts here).

I've been involved in meetings with various bodies and the Government for several years discussing the proposals and alternatives interminably but - as has frequently been highlighted in the credit press - no progress has been made and the issues remain. I don't believe the problems are endemic, but it only takes one bad apple to spoil the whole barrel and damage the reputation of the entire industry. The reality is that bailiffs are only acting to recover money that is the subject of a warrant issued by the court and is rightfully due, yet that fact gets lost in the noise of behaviour and attitudes that can't be condoned. They also get confused with the world of 'Lock, Stock and Two Smoking Barrel's' that is as far away from professional enforcement as it is possible to be, but make for a good photo-caption!

Self-regulation is not a viable option unless and until it is carried out in a much more rigorous way. I've been encouraged by recent initiatives like the 'video recording badges' being piloted by some Marston High Court Enforcement Officers. I don't know how feasible such measures would be on a widespread scale but technology like this would allow for closer monitoring of activity and would help rebuild confidence. The last thing we need is a belief that enforcement of warrants is unfair.