Late payment is a scourge that has a disproportionate effect on small businesses and, according to the FSB, is responsible for the failure of approximately 50,000 small businesses a year. Cashflow is the lifeblood of businesses and, when it runs out, they fail. It’s as simple as that. When employees, a key supplier, or a landlord can’t be paid then the inevitable outcome is failure of the business unless alternative additional funds can be found, and quickly.
As the Small Business Commissioner, my team and I speak to countless businesses that are struggling to get paid by a larger customer. We intervene or signpost to help them resolve the situation and get the monies they’re owed. To date, we’ve directly recouped almost £7.5m, and more than £680k since we entered lockdown. We will also, unknowingly, have supported the collection of far more where our name has been used as a means of encouraging a business to pay.
But the impact of late payment is not just financial, it’s also emotional. I’ve talked to thousands of small businesses through lockdown on webinars and virtual forums and I’ve heard many harrowing stories from business owners: people who are living their passion and dream through running a business but who can be incredibly vulnerable.
As a result of worrying whether a payment is going to arrive or not, they suffer from mental health issues which can cause relationship difficulties, breakdowns, sleeplessness, mood swings and anxiety. Their employees are often personal long-standing friends and they feel a responsibility towards them. At the same time, they are worried about clothing and feeding their own families and know that they will have to make difficult decisions. They’re often caught between a rock and a hard place and frequently feel they have nowhere to turn for help or meaningful advice.
And not every small business owner is tech-savvy. The move to technological solutions is great for some of us but makes others feel excluded and even more vulnerable. That is why the work of the Financial Inclusion Commission (FIC) is so important and why the SBC is eager to collaborate with it. The SBC can help small businesses get paid, and the FIC wants to make sure that financial services are accessible to all, and that everyone has the skills and motivation needed to use them.
If, together, we can help ease the cashflow pressures for small businesses and ensure people can access the services that most of us take for granted, it will be a noble partnership.
The Financial Inclusion Commission is delighted that Philip will be speaking at our Small Business Roundtable event on Thursday 26 November.