Three tasks for the new small-business tsar

published 13 October 2017

Welcome Paul Uppal, appointed last week to the new post of small-business commissioner. More than two years after the government first announced it would create the role, ministers promise the former Conservative MP and property-business owner will be up and running in the commissioner's office by the end of the year. And not before time.

Now that Uppal has the job, the priority must be to ensure he works on the right issues. This should begin with a focus on late payments, where larger organisations are routinely exploiting their purchasing power to take advantage of small and medium-sized enterprises (SMEs), often with devastating consequences. Some 30% of payments to SMEs arrived late last year, according to the Federation of Small Businesses, compared with 28% in 2011. To reverse this trend, Uppal should push the government to strengthen the Prompt Payment Code, perhaps by making it compulsory for all organisations over a certain size to sign up, and by introducing penalties for non-compliance. But in the short term, he has to name and shame organisations that persist in supply-chain bullying, and develop processes for intervening quickly in disputes.

Priority number two must be boosting funding at the scale-up stage. Six per cent of UK companies high-growth SMEs account for half of all the new jobs created in the UK economy, yet by international comparisons we're remarkably poor at building and supporting these ventures. Uppal can help. The commissioner's role should be to build on the work of initiatives such as the appeals scheme, now in operation in the banking sector, where SMEs turned down for finance are entitled to an independent review of the decision. But Uppal will also need to build stronger links with potential funding providers, from crowdfunding platforms to the venture-capital sector, to build a more coherent framework on which high-growth SMEs can build their funding strategies.

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One further suggestion for the new commissioner's in-tray: he needs to act as an advocate in government for SMEs concerned about their rising costs. It's ironic that while successive governments have talked up their small-business credentials, it is the state that must take responsibility for pushing up the costs of these enterprises. Initiatives such as the national living wage and the auto-enrolment pensions system, admirable public-policy ideas though they may be, have directly hit SMEs' bottom lines. Add in the effects of the increasingly outdated business rates system, and SMEs have really suffered at the hands of government. Uppal may not be able to relieve these specific pressures, but he will be in a position to lobby for mitigation and compensation.

Fight back on late payments

While the new small-business commissioner has said he will target the late-payments problem (see left), there is some scepticism that Paul Uppal will have the powers necessary to make a real dent in the £26bn owed to SMEs by larger companies. He should get a chance to prove the critics wrong, of course, but small businesses must also seize the initiative themselves, acting more aggressively to combat the late-payments problem. Make sure you are taking the following steps:

Carry out credit checks on new customers before offering credit. Credit-reference companies such as Experian can help, and you can make some checks free of charge via Companies House.

Be clear about your payment terms include your terms on all invoices, and always talk them through with new customers. Make it clear that you will take action to enforce your right to claim financial compensation when bills are paid late.

Don't let the problem escalate. Start chasing unpaid bills on the day they fall late, and if your efforts to secure payments for goods or services supplied are frustrated, do not offer further credit to the customer until the outstanding amounts have been settled.

In some situations, you might have to secure professional help ask debt-recovery agencies and similar organisations to act on your behalf. The Credit Services Association (CSA.co.uk) has details of reputable firms.

Finally, consider using cash-flow finance products. Invoice discount facilities allow you to borrow money against a proportion of the value of your unpaid bills, with the debt settled once your customers pay up. This is different to invoice factoring, where you sell outstanding invoices on to a lender.

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.