According to the Government estimates, a third of payments to small businesses are late, with a fifth of UK SMEs having experienced serious cash-flow issues caused by late payments. If small firms were paid on time, the Government believes it could boost the economy by some £2.5bn a year.
So, what is the Government doing to help solve the problem? We spoke to Paul Uppal, MP for Wolverhampton South West for five years until 2015, who was appointed to the role of Commissioner for Small Business in October 2017.
Congratulations on becoming the UK’s first Small Business Commissioner…
Paul Uppal (PU): “Thanks very much – I feel very honoured. I see it as my opportunity to give something back to UK SMEs and show them they’re not alone. I want to be a voice for small businesses and help to create an environment in which they can prosper and grow.”
Tell us about your experience of running small businesses?
PU: “Before becoming an MP, I ran a small construction company for 20 years. While it was hugely rewarding, often I felt lonely. The daily pressure and sole responsibility for my company’s success weighed heavily. The hours were long, cash flow was unpredictable and maintaining growth was a key challenge, but I was very attached emotionally to my business.”
What is the Office of the Small Business Commissioner and why was it launched?
PU: “Launched in December 2017, the Office of the Small Business Commissioner (SBC) is a Birmingham-based, independent public body set up by government under the Enterprise Act 2016 to tackle late payment and unfavourable payment practices in the private sector.”
What do you want to achieve in this role?
PU: “Business is in my blood, that’s why I took this role. I also believe that this office can help to tackle the long-standing problem of late payment. Successful businesses are built on integrity, entrepreneurial spirit and trusting relationships, and Britain can be the best place to start and grow a business. SMEs are vital to our economy. I want them to feel more confident. I want to help to create a fairer business culture when it comes to payment, because that can fuel greater SME prosperity and growth.”
How big a problem is late payment for UK small businesses?
PU: “It remains a huge problem. About a third of payments to small businesses are late, with the average value of each payment estimated to be £6,142. Some £14bn is owed to small businesses. About 20% of SMEs experience cash flow problems because of late payments, resulting in some joining the 50,000 business deaths that occur in the UK every year.”
What is your organisation doing to bring about change?
PU: “Since launch, we’ve gained invaluable insight and intelligence on the payment practices of larger businesses. My office and I have been busy building relationships and working closely with bodies, federations, business groups and their representatives, local authorities and national government to support small businesses who are experiencing difficulties getting paid.”
Small businesses can now make an official complaint against a large UK-based late-payer?
PU: “They can – by calling our dedicated complaint helpline on 0121 695 7770 [Monday to Friday, from 9am to 5pm] or by emailing us. The late-payer must have more than 50 employees. One of our caseworkers will consider evidence from both sides, before making non-binding recommendations on how resolution can be achieved. Ideally, this would be immediate payment, but if a complaint is beyond our scope, we’ll signpost to other support services. If the large business is uncooperative and unwilling to improve their payment practices, I can publicly name and shame them.”
What practical things can small businesses do to reduce risk of late payment?
PU: “They should check that all the necessary information, including a purchase order number, is included in the invoice and that all other information is correct. It should be sent to the right person as soon as possible. Customers should be politely reminded shortly before payment is due. Small things can make a big difference.”
Can small businesses charge interest on unpaid invoices?
PU: “Yes, they have a legal right to charge ‘statutory interest’ [ie 8% plus the Bank of England base rate] for business-to-business transactions. Our website features a calculator that enables users to find out how much interest they can charge on unpaid invoices.”
What else is on your website?
PU: “Recently, we’ve re-launched it, after receiving feedback from small businesses, who thought there was too much information on our launch site. Our site is now more like a one-stop shop for late-payment advice. Small businesses can find out everything from getting their invoices right to dealing with unpaid invoices and the process of mediation. We also signpost to other sources of advice. We want small businesses experiencing late-payment issues to consider our website as a starting point, which can hopefully save them a lot of time.”