Very little in life surprises these days. Yesterday’s Cabinet reshuffle was a case in point. A few short weeks from the Budget and we have a new chancellor, Rishi Sunak. Really?
Rather than being shocked, instead I wondered more about what this means – in keeping with my company’s core way of thinking, “So what, now what?”.
So, does Sajid Javid’s resignation signal reforms more likely to favour businesses like mine and yours? As the news broke, the pound rose significantly with growing belief in the City a radical spending programme would ensue, less constrained by a chancellor keen to establish his fiscally prudent credentials.
It’s about time small businesses felt protected and valued by a government that has relied heavily on them and the self-employed to ensure years of austerity measures didn’t result in mass unemployment.
There are clearly areas where the Budget next month could move to allay concerns held by restaurateurs, recruiters, retailers and every other real business owner. Fail to do so and I fear the mental health, wellbeing and future financial security of business owners will be at risk.
As someone who started my first business aged 21 in 2000 with no prior experience, I know full well the impact it can have. I ran payroll, ordered equipment and kept an eye on the company’s finances while hiring and managing a growing workforce.
Believe me, I had some sleepless nights. Chasing late payments, laboriously building cash flow forecasts and securing loans to bridge gaps are par for the course. I remember one year, I spent hours in the reception of a client as, months after we had completed the work, they hadn’t paid up. I refused to leave until they signed the cheque. As a fellow business owner, you’ll know exactly what that’s like.
Experiences like that were my inspiration for starting Fluidly – a cash flow planning and management app designed to help business owners sleep better at night, giving them confidence in their financial future by ensuring they have cash in the bank when it’s needed.
Having seen these challenges first-hand, it’s something I’m deeply passionate about as business owners should be able to look ahead with confidence and anticipate when they might need funding.
Action on late payments
Only last month it was reported that SMEs are owed more than £50bn of late payments, with bigger customers sitting on invoices. It is honestly one of the banes of every business owner’s life.
This affects virtually everyone. Research showed that around two million people are then not paid on time as one in seven small business owners were left unable to pay staff due to cash flow issues.
The concept of making payroll each month is taken for granted by employees, but the reality is far starker. Countless friends in business have had to resort to putting this on their credit card to keep staff happy and prevent them leaving due to fears for the business’s future.
Being a business owner is an enormous responsibility when you’re relied upon for somebody’s livelihood and ability to pay their rent or mortgage each month. Your staff are the people you sit with every day and care for. No wonder more than two-thirds lose sleep over it, according to research. But what has been done about it?
The government created the role of Small Business Commissioner to tackle late payments in 2017. But when Paul Uppal, who took the newly created role and is now Conservative MP for Wolverhampton South West, resigned late last year, it wasn’t long before he had his say.
He said his office was met with “radio silence” from servants and ministers and claims his £1.3m budget and 10 members of staff was far too small to make a dent on the issue of tackling the scourge of late payments. And I’ve no doubt he’s right when you consider he was often taking on some of the world’s biggest companies.
The Federation of Small Businesses estimates 50,000 small businesses go under each year due to late payment, which costs the economy £2.5bn. It was suggested Sajid Javid, had he remained, would have given the role more teeth.
Uppal’s interim successor Philip King was quick on “Brexit Day” last month to put out a release stating Brexit should be no excuse for late payment. But in practical terms, what can we expect?
Lord Mendelsohn’s Small Business Commissioner and Late Payments etc Bill started its journey through the House of Lords late last month, calling for a statutory time limit for resolving payment disputes, amending interest for late payment and penalties for persistent late payments and non-compliance.
Furthermore, it called for greater powers for the Small Business Commissioner role. It is imperative more is done. Beyond that, the former chancellor had been under pressure from business groups calling for changes to business rates to save our high streets.
The CBI called for a comprehensive review to dramatically reduce these bills, which could ultimately cost the Treasury £800m annually. Will new chancellor Rishi Sunak act?
>See also: Small businesses spend hour and a half each day chasing late payments
Keeping Entrepreneurs’ Relief?
Finally, there remains a question around what the government will do to Entrepreneurs’ Relief. Some might agree with the prime minister’s assertion that it exists to help the already “staggeringly rich” become even richer.
As it stands, business owners pay 10 per cent capital gains tax (CGT) on selling their business rather than 20 per cent. They can do this for gains of up to £10m. Such a sum sounds enormous.
But most won’t sell their business for that much and what it doesn’t acknowledge is all the years of toil and personal investment to ensure their businesses stayed afloat, were able to invest in growth, and delivered vast sums of tax payments to support the economy.
Many business owners see their company as their nest egg, more like their family home than an investment in the stock market that would carry the same CGT rate. They don’t have spare cash to make provision for their futures. Entrepreneurs’ Relief plays an important role in delivering economic prosperity. With the prime minister taking greater control of the Treasury is the relief doomed? I for one would hope not and will monitor announcements next month with interest.
Caroline Plumb OBE is founder of cashflow management app Fluidly. Caroline is also a member of the Growth Business Venturers Club. To find out more about becoming a venturer, see here