Small businesses: getting help with late payments

published 1 May 2019

944_MW_P30_Small-Biz — More than half of small companies have suffered cash flow problems

The Small Business Commissioner has recovered £3.1m for companies.

The small-business ombudsman scheme launched by the government 18 months ago finally seems to be hitting its stride. Paul Uppal, the Small Business Commissioner appointed in December 2017 to help small enterprises tackle late payments, has presided over a near-tenfold increase in recoveries over the past six months.

Research published by Funding Options, the online funding advice platform, suggests the Small Business Commissioner has recovered £3.1m in unpaid invoices for small businesses over the past half-year. That compares with just £380,000 in the previous six-month period.

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Unlike statutory schemes such as the Financial Ombudsman Service, the Small Business Commissioner's recommendations are non-binding. Still, the service provides small businesses with a potentially influential source of support when they are unable to resolve late payment problems for themselves. Research published last month by accounting software provider QuickBooks shows more than half of small businesses have suffered cash flow problems.

To use the service, a business must usually have fewer than 50 employees and be in dispute with a large UK-based business, defined as a firm with more than 50 employees. The payment in question must have been due in the past 12 months and the small business must be able to show it has already tried to sort out the situation of its own accord.

An impartial service

While the commissioner's powers to force large companies to accept its recommendations are limited, the increase in cash recovered suggests it can play a useful role in representing vulnerable businesses. Meanwhile, the government is consulting on what further measures are necessary to help get on top of late payments.

Making tax digital

Time is certainly tight. The new system requires almost all businesses with sales above the VAT threshold, currently £85,000, to file their quarterly VAT returns electronically through a compliant software package. This means you must have software up and running in time for your next quarterly filing deadline.

However, while the Federation of Small Businesses says the average small firm will incur costs of £564 preparing for the new system, there are ways to keep the bill down. HMRC's list of 200 compliant software providers, available on its website, includes 11 free options, plus dozens more that cost between £10 and £20 a month. You can search for software based on your firm's needs.

The cheapest options are typically "bridging" solutions, which will suit many small businesses well. These allow you to continue accounting for VAT using a spreadsheet such as Excel; the software then extracts the data from this sheet and submits it to HMRC in the form required.

More complex packages offer additional features that will suit some businesses. In the meantime, however, the cheap options will enable you to beat the deadline without too much stress.

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.