Paul Uppal has been named as the new Small Business Commissioner and he will have is work cut out for him. We wish him every success.

 

 

Mr Uppal, once a small business owner himself, will have some first hand knowledge of the difficulties faced by small businesses in the UK. In his role as the Small Business Commissioner one of his primary tasks will be to help tackle the endemic problem of late payment within the UK business community.

Paul Uppal

Paul Uppal, the New Small Business Commissioner has experience as a small business owner

The scale of the problem is variously estimated to be between £45bn and as much as £255bn in outstanding beyond terms debt. As Small Business Commissioner Mr Uppal will have three problems in relation to late payment that he will need to resolve:

  1. Reduce the amount of outstanding debt
  2. Change the culture within in the UK business community in a way that tackles the problem at its root
  3. Gain the confidence of the UK business community

 

Taking the last first, as cited in an article on Businessadvice.co.uk 76% of the UK’s small businesses, when asked in a survey by the website, said that they did not think the office of the SBC would make the slightest bit of difference to their payments situation while 21% thought it might have a little impact.

Research conducted by accounting software supplier FreeAgent revealed that 57% of respondents didn’t know at the time that there was even such a position to be filled.

The SBC will have some powers to name and shame in extreme circumstances but in many cases it will act as either a mediator or more likely a signpost to other services that creditors may use to recover money owed to them. Given the scale of the issue in the UK it seems hard to imagine how the SBC will not be inundated with requests for help the minute it is up and running.

Mr Uppal will need a few very quick high-profile wins in order to establish credibility and confidence among the small business community.

 

Owing to the sheer the scale of the outstanding debt the SBC has a long way to go and Mr Uppal will need all the tools he has at his disposal. However it’s uncertain just how effective those powers will be given the main role of the SBC will be that of an advisory / signposting nature and in a few cases a mediator. While some serious offenders may be “named and shamed” these are unlikely to be many and possibly not enough to cause the larger beasts of UK industry to take fright.

 

Perhaps his hardest task will be to change the culture in the UK. The Prompt Payment Code, a voluntary scheme managed by Chartered Institute of Credit Management (CICM), has largely proven to be ineffective. The scale of the unpaid debt has vacillated year on year as new data is released but overall the trend has been an upwards one.

The media are fond of portraying the problem as a David and Goliath situation, with David playing the part of the small business creditor and Goliath playing the part of the large multinational debtor.

In truth while some large organisations are wilfully using their suppliers as free banking services to help massage their stock price, small businesses are just as likely to pay their suppliers late (it must be said, partly due to the supply chain cascade effect) and indeed some small business suppliers are as likely to be the architects of their own misery due to lax credit Department for Business Innovation and Skillscontrol and invoicing practices.

 

All of this means that Mr Uppal’s office will have to walk on egg shells while finding a path which strikes a balance that is tough on genuine offenders, supportive of smaller businesses and creditors, effective in delivering results and does not drive large organisations from these shores just as Brexit bites.

In a few months time he may well need a drink.

change3

It’s time for a change, small and medium sized business must stop being made to feel as though they are the victims of an institutionalised culture of late payment.

There can be no doubt that in sectors such as the Scottish construction industry the blight of late payment is both prolific and negative but it shouldn’t be a situation in which suppliers are powerless onlookers.

By acting as a group and not out of individual self interest is should be possible to tip the balance back towards the supplier.

 

Fresh minds, same old thinking

In 2015 there was a flurry of government initiatives such as the creation of a Minister for Small Business, Industry and Enterprise (@Anna_Soubry), the announcement of the search for a Small Business Commissioner to arbitrate over late payment (and other) disputes, the announcement of an initiative to require large organisations to publish details of late paid invoices and the constant calls for a mandatory standard terms of 30 days settlement of invoices most of which are positive steps towards tackling the problem in a practical way.

Other voices are calling for a culture shift away from late payment as an accepted aspect of doing business to one in which it is seen as bad business practice.

However, in spite of all those largely positive efforts the general focus remains on debtor organisations to see the error of their ways and mend them or, failing that, for them to be forced to comply in some way.

 

Paradigm shift

At The Late Payment Directory we would like to see a fundamental shift away from viewing the debtor as the only starting point for a solution to the problem to one in which suppliers are the also one of the key starting points in a broader solution, and in doing so wrest control of the situation back towards the supplier community.

We would like to see a shift in the mindset of suppliers away from an almost enforced acceptance of late payment as a fact of business life to one in which the business-to-business supplier community takes an active long term role in addressing the problem for their own benefit.

In many areas of life where a problem exists prevention is often considered to be better than cure. Regarding the late payment of  commercial debts, knowing if a potential new customer or even an existing one is likely to start settling invoices late, and crucially the reasons why,  can help suppliers mitigate the problems caused by late payment.

Those problems can sometimes result in nothing less than redundancies or even insolvency, so the stakes are high.

To have to make redundancies or close a business because of a potentially preventable set of circumstances is a bitter pill to swallow for business managers and especially for entrepreneurs. A needless sense of powerlessness can only make it harder but it shouldn’t and doesn’t have to be like this.

 

Fresh minds, fresh thinking

Crowdsourcing is a democratic solution for addressing situations like this and it has already been used to dramatic and positive effect in dozens of other areas of commerce from travel to the workplace and even to policing.

By sharing anonymised experiences of late payment for the benefit of the whole business community there are several good outcomes:

  1. The problem of late payment stops being a one-way reality and becomes a two-way process.
  2. The more anonymised data that the community shares and maintains, the more level the playing field becomes.
  3. By being able to review payment histories and the vital context around them, suppliers can make more informed judgments about the level of risk involved in delivering goods or services to a given business. At the very least it should be easier to more effectively prepare for the possibility of being paid beyond terms and as a result mitigate the effects.
  4. For those businesses where late payment of incoming invoices is an unfortunate consequence of the same occurring to them, greater transparency and context should mean they do not become grouped with businesses where late payment of supplier invoices is more of an institutionalised policy.
  5. The process is ultimately a positive one for all businesses not just suppliers. While suppliers are able to make more informed assessments regarding the risk of doing businesses with customers, greater transparency around context will also help improve understanding and breakdown barriers between suppliers and customers.

Towards the end of 2014 the government carried out a consultation on the issues around late payment, it was published in March 2015. One of the key findings was that the business community wanted greater transparency around the whole issue. At The Late Payment Directory this is exactly what we’re working towards. To learn more, click here.