Credit Management APRIL 2019




As simple as ABC

Assume nothing. Believe nobody.

Challenge everything.


Philip King FCICM

THE world of credit is rarely

dull, and even leaving

aside the machinations of

Government and The Opposition

regarding Brexit,

there has been enough

news in recent months to fill an entire

issue of this magazine!

One of the biggest announcements was

news that Patisserie Holdings PLC had

finally entered administration. This was

no real surprise given the story that has

unfolded since October of last year, and I

sense that the story still has a little way to


How does a business that had reported

holding cash of almost £30 million earlier

in the year suddenly have to reveal two

undisclosed overdrafts totalling c£10

million and a black hole of £40 million? It

had auditors, it had an audit committee,

the Financial Reporting Council approved

the quality of the audit, and yet nobody

noticed? Nor did anyone apparently

notice the thousands of false entries that

were made to company ledgers.

If you look at the accounts signed off

on 24 November 2017, there is nothing

that would cause alarm. On the contrary,

there are words and charts showing

an expanding business in rude health.

They will even assure you that the Audit

Committee monitors the quality of

internal controls and ensures that the

financial performance of the Group is

properly measured and reported on.

I’ve chaired two audit committees in

my time, as a Trustee of a charity and

as a non-executive director. I’m not a

qualified accountant but we took our

responsibilities very seriously and I like

to think were diligent and thorough in

our oversight of both the organisation’s

finances and its auditors. The question

of culpability will rumble on as serious

questions are asked, and rightly so, but

I’m interested in the lessons for suppliers.

Credit risk decisions need to be made

using the full range of tools available:

company accounts, credit reference

agency information, personal knowledge

and/or investigation, industry reputation,

media and web coverage, directors’

history and record, product strategy and

potential, information gleaned by sales

force and other internal contacts, and so

much more.

We know ‘they’re too big to fail’ and

‘they’ve been around for years’ don’t hold

water, and the business environment

is more challenging with every passing

week. Good credit decisions are vital to

allowing businesses to survive and thrive.

What’s the advice then? I would refer to

two sets of initials: KYC and ABC.

KYC, or know your customer,

means using every available source of

information and data to ensure you

have the fullest possible picture of who

you’re investing money, goods or services

in. This has to be proportionate to the

level of business, of course, but more

is always better. Credit professionals

have to be inherently cynical, suspicious

and discerning, and ABC sums it up

nicely: Assume nothing; Believe nobody;

Challenge everything.


Amid the ‘bad’ news from the High Street

there is better news from within our

own Chartered Institute, not least the

launch of the new ‘Fellows of the Future’

initiative. One of the key objectives of the

CICM is to support people throughout

their careers and this is a great example of

us doing exactly that. We were inundated

with nominations, and we will bring you

further news in a future edition.

I was reminded recently of a comment

from Chris Sanders, our Head of

Accreditation for the CICM’s CICMQ. He

spoke about the objectives of the Institute

as defined in our Royal Charter and the

objective of the CICMQ programme. The

first is to advance the education of the

public concerning credit management,

and to encourage the study and practice

thereof. The latter is to improve standards

in credit management. One of the ways in

which these objectives are met is through

our extended credit ‘community’ and

especially via our branch network.

I was privileged to host an event

organised by our South Wales branch,

supported by one of the CICM’s Corporate

Partners, Atradius in Cardiff last month.

The event was titled ‘Are the robots

coming or are they here already? What

will you do?’ It featured two expert

speakers, Gideon Jones and Tanya Giles,

and a far less expert contribution from

me. It was a great breakfast event, with

the opportunity for extensive networking

among those attending.

More recently I attended another

breakfast event in Marlow, organised

this time by our Thames Valley branch

and hosted by another of our Corporate

Partners, Dun & Bradstreet. We heard

some fascinating insights on the state

of the economy and where it might be

heading, focusing on aspects of particular

interest to credit professionals, the current

UK political context and turmoil, and the

impact of Brexit on credit insurance.

Both of these events were organised

by dedicated CICM branch volunteers

for their colleagues in the CICM credit

management community. Afterwards I

felt enriched with more knowledge than

I had when I arrived, and I know other

attendees did similarly. Chris was right

when he said that if you are in credit

management at any level, get involved in

the CICM, and encourage others also to

engage. Become a member, go to branch

meetings, attend conferences and events…

go to It really is the recognised

standard in credit management.

Philip King FCICM, the Chief Executive

of the Chartered Institute of Credit


The Recognised Standard / / April 2019 / PAGE 13

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