Ask any accountant what the biggest problem facing small businesses is, and they’ll tell you it’s the issue of late, or non- payments. Nothing can wreak havoc with cashflow like this issue. Accountants are already aware of the problem, and so, it seems, is the government. Being aware of the problem is one thing, but doing something about it, however, is another. So, it’s pleasing to see that the government is about to take action to remedy the situation.
The government announced last week that small businesses affected by problems with late- payments will be offered free mediation services to settle disputes as part of new legislation announced within the Enterprise Bill this week. A policy statement issued last week sets out a clear strategy for assisting the growth of UK SMEs.
But how serious is the late-payment problem? Well, according to Bacs statistics, as quoted by the Government, small firms are owed up to £26.8bn in late payments from clients, but additional data from accountancy firm Sage suggests the true figure could be as much as £55bn. So obviously the problem was serious enough for action.
Business Minister, Sajid Javid promised earlier in the year that the new bill would reduce the cost of red tape by £10bn, but he has now re-enforced that promise with plans to axe regulation and clamp down on independent regulators which he believes create extra, unnecessary bureaucracy. On the issue of late-payments Mr Javid has announced plans to use a small business commissioner to champion the cause.
Speaking about the role of the new small business commissioner, Small Business Minister, Anna Soubry, said:
“One of the things the small business commissioner will do is signpost people to the mediation services available when neither side wants to go to court over late payments.”
“Small businesses can contact the commissioner when they have a complaint and he or she will investigate.”
However, Ms Soubry reiterated that the Government would steer clear of any “name and shame” approach to the late payment problem, in a bid to avoid damaging customer relations for small firms:
“The commissioner will speak to the chief executives and it will be sorted out over the phone. The last thing I want is to name and shame a larger business and give out details of complaints but if people aren’t playing ball, that power will be available [to the commissioner],” she added.
The late payment issue will also be extended to the insurance industry, with insurers implored to pay out claims to SMEs within a reasonable time period.
The new Enterprise Bill also includes an update to the existing Industrial Development Act, supporting the roll-out of telecoms and broadband services across the UK.
The Federation of Small Businesses (FSB) has welcomed the new Enterprise Bill, but has warned the Government that it should also be looking closely at the threat of high business rates to ambitious small firms. John Allan, national chairman, FSB, said:
“The FSB welcomes the introduction of the Enterprise Bill and the continued focus on boosting enterprise. To make an impact, the bill should focus on a number of ongoing challenges facing businesses and ensure economic growth is supported.”
“Those areas include reform of business rates, tackling the UK’s poor payment culture which sees too many of our members being paid beyond terms, lightening the burden of regulation and improving broadband connectivity.”
“The initial measures in the bill look to tackle these areas and are therefore promising, and we look forward to working with the Government to see their successful implementation.”