New small business commissioner to target late payment culture amongst the UK’s larger companies

Do you run a small business? Do you often find that you always seem to be at the bottom of the pile when payment time comes around? Well, there could be some good news on the horizon for you and the many of the other thousands of small businesses which face this problem on a monthly basis. As accountants we wholeheartedly welcome the news.

The government has announced that it will appoint a small business commissioner, whose job will be to help small firms tackle the issue of the billions of pounds in late payments for goods and services. Why is the government pressing ahead with this plan? Well, research suggests that small firms are owed £26bn in late payments: what’s more, chasing these debts costs them millions of pounds more. The purpose of the new role, according to business minister, Anna Soubry, is to help tackle the power “imbalance” between small and large UK businesses. The culture of late payments to small firms was, she claimed, “simply unacceptable, as it “limits their growth and productivity, and can put an otherwise successful business at risk.

In a consultation paper published online, Ms Soubry said small firms were responsible for 48 per cent of UK private sector employment and were vital to economic growth. She added that she wanted the commissioner to bring about a “long-lasting culture change”, helping to settle disputes quickly and cheaply. Ministers have called on businesses of all sizes to share their experiences with late payments and have asked for their views on its proposals.

Why choose a small business commissioner?

Well, a similar role in Australia was having a real impact, Ms Soubry said, adding she hoped for the same “effective and fair solution here”. The consultation cited data suggesting more than half of cases handled by Victoria’s small business commissioner were successfully resolved, at 30 per cent or less of the cost of taking legal action. More than half of complaints were resolved within one week, and 80 per cent within 12 weeks.

Is the appointment of a small business commissioner a new departure for this Conservative government? Well, not really: it had already announced plans for a new small business conciliation service to help settle disputes – specifically over late payment – in the Queen’s Speech. The new service would, it believes, help to deal with problems without the need for court action.

As part of the new Enterprise Bill, the government also announced that it wants to create a commissioner role to deal with outstanding payments and supply-chain bullying, where suppliers are forced to cut their prices in order to retain the custom of much bigger firms.

So, once appointed, what role would the new small business commissioner play? Well, they would:

  • Be a point of first contact for small businesses and provide advice and support on how to avoid disputes and how to resolve them
  • Offer access to mediation services to sort out issues quickly and affordably, “at a fraction of the cost of going to court”
  • Investigate complaints over unfair business practices and regularly report its findings.

Naturally the Federation of Small Businesses has welcomed the move, but said it must be properly funded and be of a high enough profile to be truly effective. The Federation, which represents small and medium-sized businesses and has more than 200,000 members, carried out a survey of members last year that suggested that 51 per cent had experienced late payment in the previous 12 months. The federation said the move was encouraging but a culture of late payments had developed at board level in big companies. It also said the new commissioner should have the power to refer large debtors to the Competition and Markets Authority.

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