Credit Management September 2019

More documents

Recommendations

Info

EDUCATION AND MEMBERSHIP As a Board Director are you sufficiently financially savvy? CICM Trainer, Jean Pousson, poses that question to directors and gives some pointers for them to consider. RECENT accounting scandals in the UK (Tesco, Carillion, Conviviality, and more recently Patisserie Valerie) have put the roles of external auditors, regulators, banks and naturally Boards into the spotlight again. While there are numerous ongoing enquiries, it is still timely for directors to ask themselves if they are personally comfortable with their financial capabilities, or do they rely on the finance director or CFO with blind faith? External auditors can provide false comfort. It is not their remit to spot fraud and very few frauds are uncovered by external auditors. Of course, there have been cases where the external auditors have been proven to be negligent, but they cannot be blamed for everything as it is logistically and commercially impossible for them to inspect every transaction within a business. This was reinforced in April 2018 by Michelle Hinchcliffe, KPMG Head of Audit, who said: ‘saying that the audit is a true and fair account is not the same as giving a clean bill of health’. However, should you feel uneasy about any matter you should ask the auditors to dig deep into that particular area of concern. The relationship between the auditors and your FD/CFO also merits some attention. Watch out for snippets like ‘we need to manage the auditors’ or ‘we need to be careful and not disclose too much’. This suggests that the finance function is trying to hide something. Ask yourself why? Conversely, a relationship that is too friendly may suggest that the auditors place too much trust in the FD/CFO. Keep an eye on the tenure of the relationship to ensure that trust has not morphed into comfort resulting in a weaker audit. ACCOUNTING POLICIES Do you fully understand the accounting policies that you have chosen and approved? Could you explain them to a junior member of staff? There have been instances (Tesco, Carillion) where the accounting policies were described as ‘aggressive’, (chosen to improved profits). Be mindful of what I call ‘loophole talk’, this is where the conversation focuses on accepting obscure definitions and sections of accounting standards to justify a decision. I accept that business is complex and sometimes these conversations need to take place. I also accept that sometimes auditors may not agree with management. This is quite legitimate, but when it seems that loopholes are sought to improve financial performance, be wary. A powering share price or a very high valuation (or even a very good offer to buy the business) does not necessarily mean that the business is in great financial shape. History teaches us that many acquisitions can often be overpriced and carried out for the wrong reason. This should not distract the Board, and directors should not see this as recompense for their financial stewardship. Professionals, like private equity investors, banks, rating agencies, do not always get it right. Recently, a banking client of mine took a decision to increase its lending exposure to an existing client, and a key factor in that call was that Private Equity investors, who had a good reputation with an extensive due diligence process, had just invested. The whole thing went wrong resulting not only in a loss but also in many lost hours to manage the distressed situation. BOARD DASHBOARD Do you fully understand all the items on the dashboard? Are the KPIs aligned to the strategic Key Success Factors? Does it appear busy or unnecessarily complicated? Is the finance division unable to present figures in real time, or very quickly? If not, why not? Are there non-financial metrics as well? Do you track new customers? A business that is unable to attract new customers worries me and it should worry you too. CONNECTIONS IN FINANCIAL STATEMENTS This is the subject of another article altogether, but it’s the ability to establish connections between items in the major financial statements and sometimes reality. Here are some to watch out for: ● Increase in Debtors/Trade Receivables not in line with increase in sales. ● Presence of large accrued income under current assets, i.e. work done but not yet invoiced ● Intangibles make up a disproportionate percentage of total assets and are not being amortised properly. ● Little or no investment in tangible assets. Every business needs to invest non-discretionary capital expenditure (i.e. when things need to be replaced). ● Exceptional items in the Profit and Loss/ Income Statement that keep re-appearing each year. ● Profit margins in excess of typical businesses of that type. ● Increases in borrowings that cannot be explained properly, or that are attributed to cashflow problems. ● And when all else fails, refer to the cash analysis and position from the banking records. That doesn’t lie. Cash is a reality check. Jean Pousson is a CICM Trainer and Director and founding shareholder of Board Evaluation, a specialised consultancy practice that provides board evaluation, strategic health checks and various training and consultancy services. CICM FINANCIAL TRAINING INCLUDES: • Financial Analysis • Advanced Financial Analysis • Understanding Business Strategy and Risk • Introduction to Company Accounts • Working with Company Accounts • Invoicing and Receipting Programmes can be tailored or bespoke to ensure they are relevant to current needs and support business objectives. Expert trainers share their knowledge and experiences to help improve effectiveness of the team. Training is designed to be a cost effective way to upskill, motivate and develop knowledge, skills and performance for a maximum of 15 delegates per day. CPD hours are attributed to all training programmes Contact Julie Dalton, In-company Training Adviser, to discuss your requirements. E: training@cicm.com T: +44 (0)1780 722907 The Recognised Standard / www.cicm.com / <strong>September</strong> <strong>2019</strong> / PAGE 48
ITSWISETOSTAYALERT! SANCTION &PEP DAILY MONITORING How often do you check for new sanctions &PEP’s? Over 1,100 worldwide watch lists changing daily! We provide Daily Monitoring on all ofyour customers, email alert any new match status, automate most of your Enhanced Due Diligence cases and this isall included in your basic AML cost. With over 1,100worldwide Sanction &PEP watch lists changing all the time, Daily Monitoring is the only practical solution. Call us now to book afree demonstration on: 0113 333 9835 Or visit us online: SMARTSEARCHUK.COM POWEREDBY SmartSearch delivers UK and International Business checks in the UK and International Markets with inclusive Worldwide Sanction &PEP screening, Daily Monitoring, Email Alerts and Automated Enhanced Due Diligence.
Page 1 and 2: CREDIT MANAGEMENT CM SEPTEMBER 2019
Page 3 and 4: SEPTEMBER 2019 www.cicm.com 26 OPIN
Page 5 and 6: Fast, fair and effective enforcemen
Page 7 and 8: Open banking 'transformational' for
Page 9 and 10: FCA launches consultation on vulner
Page 11 and 12: 3 YEARS IN 2018 Portfolio Credit Co
Page 13 and 14: OPINION Doing the right thing Poor
Page 15 and 16: presents
Page 17 and 18: I rather fell into the civil servic
Page 19 and 20: THE RECOGNISED STANDARD Wednesday 5
Page 21 and 22: OPINION AUTHOR - Jo Kettner on boar
Page 23 and 24: As the Winners of the Legal Team of
Page 25 and 26: OPINION AUTHOR - Peter Wallwork MCI
Page 27 and 28: OPINION AUTHOR - Heather Greig-Smit
Page 29 and 30: The Recognised Standard / www.cicm.
Page 31: OPINION AUTHOR - Simon Blackwell gr
Page 35 and 36: OPINION AUTHOR - David Sheridan FCI
Page 37 and 38: PAYMENT TRENDS Top Five Prompter Pa
Page 39 and 40: Cooling off down under AUSTRALIA ha
Page 41 and 42: The Future of Credit Management 10
Page 43 and 44: Each of our Corporate Partners is c
Page 45 and 46: NEW AND UPGRADED MEMBERS Do you kno
Page 47: Would you like to be CICM qualified
Page 51 and 52: CICM MEMBER EXCLUSIVE Your CICM lap
Page 53 and 54: www.cicm.com ‘‘ CICM offered th
Page 55 and 56: The UK’s Open Banking initiative
Page 57 and 58: BRANCH NEWS Credit Circuit Training
Page 59 and 60: BRANCH NEWS High tech tour Thames V
Page 61 and 62: More reasons to be a member Make co
Page 63 and 64: SENIOR CREDIT CONTROLLER PROGRESS Y
Page 65 and 66: FOR ADVERTISING INFORMATION OPTIONS
Page 67 and 68: Testimonial We have been regular ad

Credit Management September 2019

Create successful ePaper yourself

Delete template?

Save as template?