ICAEW.com works better with JavaScript enabled.

Small firms will grow fast - If only they are paid on time

From the recent Pan accountancy Lunch, read our chief guest Small Business Commissioner, Liz Barclay's address.

December 2021

I’m a business journalist, a freelancer, a small business owner and an enthusiast and advocate for the 5.7 million small and micro businesses, freelancers and sole traders who employ 60% of the UK workforce and are the backbone of the UK’s economy.

We’re different. We have a different mindset from employees. We carry the risks and love the flexibility. We can lie awake at 3 am and worry if we want to. We love what we do and fail to attend to the business admin. We have ideas, innovate, and create jobs.

We could do a lot better, and help the economy grow much faster if we paid more attention to the cash flow and the business planning, and could persuade lenders to back us and fund growth. Instead, we max out the credit card and blow up the overdraft. We need you, the accountants to keep us on the straight and narrow path to success. But we think you cost too much. (And if my accountant is here – I will get my paperwork to you soon). 

My Grandfather was a builder. No banks or accountants for him…..cash was king. My parents were farmers. I thought the stock market was cattle, sheep and pigs.  I heard the stock prices every morning on Farming Today. My great aunt ran a local convenience store. I worked in a local department store for 3 lots of school holidays before university and by the end had run a department. 
I grew up in small businesses, became a small business journalist and now I’m the Small Business Commissioner for the UK, and I couldn’t be prouder of a role or more determined to make a difference.  

I made 60 small business programmes for BBC2 and we were number one on Auntie’s Bloomers for weeks - when one interviewee told me earnestly that the most important thing in business is the 3 P’s: people, products and, and, and LOCATION. 

Philip Green told me it’s the responsibility of big businesses to nurture their smaller suppliers and protect the supply chain. That’s never been more true than now. 

And in all that time sole traders and freelancers, micro businesses and those with up to 50 employees, have been fighting to be heard and get the support they need. The most important thing they need is to get paid quickly by their bigger customers, for what they do. 

Why are they still waiting 2, 3, 4 even 12 months to get paid? We need that money in the accounts of the 5.7 million small businesses within 30 days. 

Late payments, poor payments practices and extended payment terms are existential.  I need your help to grow confident small firms. They are the talent of the UK. They need the confidence to negotiate better payment terms and get paid fairly so they can invest and grow. The European Commission found that in the UK, 30 per cent of businesses indicated that late payment had links to subsequent redundancies, and outstanding invoices could pay for businesses to hire more than two million people.

The longer companies wait for payment, the lower the level of investment they make. Research shows a month delay in being paid reduces capital spend by 1.2 per cent, and could lead to reduced profitability for as long as five years thereafter. There is clear evidence that late payment is linked to an inability to access affordable finance. More than half think they’d be able to grow faster if they spent less time on the financial side of the business.

I need your help to get big businesses to commit to paying their small suppliers within 30 days. It’s the right thing to do; it is ethical business practice, and investors and talented and skilled employees will want to work with them. I need your help to make payment practices a priority for Boards, and perhaps even persuade your clients to sign up to the voluntary Prompt Payment Code.

The economic recovery is being held back by poor payments. We’ll all benefit if we can increase the velocity of cash. Please Go forth and spread the word. Thank you. 

Liz Barclay

Small Business Commissioner