Small businesses: getting help with late payments

Frustrated businessman © Getty Images
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.

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

Assuming the business qualifies, the commissioner’s caseworkers will then try to resolve the dispute. The impartial service investigates the complaint before making recommendations for how to bring the case to a close. These might include calculations of how much interest should be paid on a later payment, for example, as well as suggestions for improvements in practices at the company investigated. In some cases the ombudsman scheme also makes details of the case public, “naming and shaming” large companies that have behaved badly. Recent high-profile cases include criticism of the health-food company Holland & Barrett and the consumer products group Jordans & Ryvita.

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

HM Revenue & Customs’ (HMRC) new “making tax digital” system went live for VAT returns on 1 April. But if you’ve yet to sign up and find a software provider, don’t despair.

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.