“Complain about poor payment” urges new Commissioner

24/02/2020

The new Small Business Commissioner is urging small businesses to complain to his team when they experience poor payment practices. But what will this achieve?

In January, Phillip King, who was previously Chief Executive of the Chartered Institute of Credit Management (CICM), was appointed the interim Small Business Commissioner (SBC) with immediate effect.

Since his appointment he has been actively encouraging small businesses to complain to his team when they experience poor payment practices.

In his first Commissioner’s Update earlier this month he said: “We want to push out the message that it’s okay for small businesses to ask for help, and it’s right for small businesses to complain when they’re being exploited by their large customers.”

More recently he commented on the “disappointing” findings of research published by the Federation of Small Businesses, which showed that almost 40% of small businesses that made successful loan applications in Q4 2019 used the money to fund cash flow.

He said: “This is why it’s so important to #MakePaymentPrompt, and why small businesses should seek help from the team at the Small Business Commissioner’s office when they’re struggling with late payment and complain when they experience poor payment practice.”

What will complaining to the Small Business Commissioner achieve?

The Office of the SBC was launched in December 2017 to ensure fair payment practices for Britain’s small businesses and support them in resolving their payment disputes with larger businesses and bring about culture change.

Whilst uptake has been slow and many have questioned the effectiveness of the initiative, to date it has contributed to the recovery of over £6.7 million owed to small businesses.

Small businesses with 50 employees or less can complain to the Office of the SBC about payment-related issues with large UK-based businesses.

If the complaint is in scope a caseworker will then gather and analyse relevant evidence from both sides before making non-binding recommendations on how the parties should resolve their disputes.

If the Commissioner believes the case is an example that could help change payment practices, it might be included in a public report.

The Enterprise Act 2016 gives the SBC power to publish public reports of the enquiry into any complaint under the SBC complaints scheme.

Earlier this month the SBC reported on the poor payment practices of Bombardier Transportation UK after a small business complaint revealed evidence of poor practice dating back two years:

The government has said they will shortly recruit for a permanent SBC and has committed to strengthening their powers to hold to account larger businesses who fail to make payments on time.

New powers could include imposing financial penalties or binding payment plans.

Is this enough?

Whilst this is a step in the right direction and we hope that it will encourage larger businesses to clean up their acts, this complaints process alone is unlikely to solve the nation’s late payment problem for a number of reasons.

Firstly, many small businesses rely so heavily on larger companies that they feel forced to put up with poor payment practices and may not have the courage to make a formal complaint.

As well as this, in order to make a complaint to the SBC the business must have already attempted to resolve the payment issue with the customer. By this point their cash flow may have already been significantly damaged.

But most importantly, late payment is not just limited to large businesses exploiting smaller ones. It’s endemic across the UK and a culture that businesses of all sizes are both adopting and falling victim to.

We’re not sure what the solution is, or even if there is a single solution. But, whilst late payment continues to be an issue, it’s vital that all businesses, regardless of their size, do all that they can to protect themselves.

Whilst this includes taking action on late payments through methods such as complaining to the SBC, using a debt collection agency and charging late payment interest, it’s just as important to take proactive steps to prevent late payment from occurring in the first place.

For some ideas on how you could improve your credit management take a look at these 101 tips.

What do you think? Will the Small Business Commissioner succeed in tackling late payment? We’d love to hear your thoughts in the comments below.