Small business commissioner: scourge of late payers or toothless PR exercise?

The announcement or a new role names small business commissioner was greeted with cautious optimism this week: but what powers will this new office bring with it and will it have any real clout to effect change around late payments and beyond?

The announcement or a new role names small business commissioner was greeted with cautious optimism this week: but what powers will this new office bring with it and will it have any real clout to effect change around late payments and beyond?

The Department of Business, Innovation and Skills (BIS) has, to great fanfare, announced the creation of a new service to tackle late payment under the name of the small business commissioner.

The name is slightly misleading as it looks likely this will be an umbrella name for a whole department and small business service. But it will be headed by one specially-selected member of the SME and/or political community.

But beyond a promise to tackle poor payment practices and “level the playing filed” for small businesses, precious little is yet known about the specific powers this new office will hold. A consultation is currently underway with business owners and we may know a little more when it’s complete.

But for now we’re left to speculate on what remit the small business commissioner will be given and, crucially, how effective the office will be at solving the problem of late payments. We asked some top names in the field for their views.

What powers will, or should, the commissioner have?

The absolute key to the effectiveness of the commissioner will be what powers they are given. We know that conciliation in disputes will be a big part of the proposal, but will they be able to apply legal pressure if a large organisation isn’t playing ball with a supplier?

RIFT Accounting MD Jane Ollis doesn’t believe the commissioner will have any legal powers; or at least “no significant ones”. And she is worried this lack of power could lead to something all small businesses fear – red tape.

“It’s always good to see a focus on helping small businesses and late payments is of course a huge issue,” she says. “But my concern is that without genuine legal powers there is a danger that this may create another layer of bureaucracy that may not save an SME owner too much time over existing methods.”

David Vine, MD of UK SMB at Concur, says that a key purpose of the new office “must be to help educate SMEs on difficult issues”. The two he singles out are negotiating contracts and managing joint initiatives.

“Smaller businesses also need someone on their side when dealing with red tape – so having a commissioner that can help defend them on T&Cs and other legal issues will be important,” he explains. “An extension of this might be a network of lawyers to help ensure deals are sustainable and that SMEs are able to decipher the small print.”

The consensus is that the small business commissioner will be much more a carrot for small businesses rather than a stick for those who cause them pain. But access to information is a serious issue for those starting out, so this could end up being very useful.

But will a lack of legal power prove to be costly when dealing with late payments?

Late payments – finally a cure?

Late payments are the single issue that cause small businesses more strife than any other. For years they have been complaining about being bullied by larger organisations who use their services and insist on increasingly painful payment terms. The government has hinted at, but not yet made any solid commitment to, the fact that this will be the main focus of the new commissioner.

But how far will it go? FreeAgent CEO and founder Ed Molyneux fears that the commissioner will not have “particularly sharp teeth”. Although he welcomes the proposed “naming and shaming” of big businesses who treat suppliers shoddily, he feels this will only be enough to “dial down the worst excesses”.

“To draw a parallel, the Fair Tax Mark was introduced to allow businesses to advertise and benefit their adoption of responsible tax policies,” he says.

>Related: Women owners ‘real-models’ for entrepreneurs

And the parallel does seem to make sense. Tax avoidance among large corporates was a huge issues for a while. But, as with an public outrage, soon the next big thing comes along and the big businesses are able to slink away into the night largely untouched.

“Apart from isolated cases like Vodafone and Starbucks, ‘naming and shaming’ to drive customer activism – which the only apparent punishment available to the new commissioner – has not yet proved itself to have any kind of widespread effect on tax avoidance,” continues Molyneux.

So – will it make any difference?

This is the big question. For all the bluster that comes from BIS about levelling the playing field for SMEs are preventing large corporates from having things entirely their way, in truth close to nothing has been done over the past five years.

It’s a little too early to tell how effective this newest initiative will be, and we’ll know more at the end of the consultation, but some experts and small business owners are hopeful this will finally signal some real change.

Funbird co-founder Noa Wolfson is of the view that “ultimately bigger companies are always going to be able to dominate SMEs”. But she does carry some hope that the commissioner will be able to effect some change.

“The small business commissioner does have the potential to be an effective voice for small businesses, given the right powers,” she says. “It is about creating a fairer business landscape in the UK and the bigger companies would do well to demonstrate their integrity and play fair.”

And Wolfson sees the commissioner’s role evolving over time; moving from only late payments to a wider remit.

“Once we tackle late payments then the commissioner can hopefully help with business rate disputes with councils, disputes with energy suppliers over extortionate rates and more,” she continues.

FCSA chief executive Julia Kermode draws hope from the situation in Australia, where the introduction of a similar post has brought some pretty impressive results.

“Australia has been successful, with more than half of cases handled by Victoria’s small business commissioner being resolved at 30% or less of the cost of legal action and more than half of complaints resolved with one week and 80% within 12 weeks,” she says.

“If something similar can be achieved in the UK this has got to be a good positive move, enabling businesses to resolve disputes without going to court, whilst also preserving commercial relationships.”

To mirror this antipodean success story, she has urged the government to give the commissioner “real powers similar to an ombudsman”.

It appears that the type of powers, if any, the commissioner is given will be the issue on which the post will succeed or fail. And Ashridge Business School SME expert Hari Mann accepts that large corporates have has the upper hand over SMEs for some time because they know “that they are unable to challenge the unfair practices in court”.

The right support

But he is cautiously optimistic that “a commissioner with the right support from government can be effective in making these changes happen”. He hopes that any powers will eventually go beyond late payments and help to improve the small business landscape as a whole.

“It would be great for helping to build a more entrepreneurial culture in the UK if the commissioner had more powers to support the removal of on red tape for small businesses, helping to build support networks for small business and helping to develop a new generation of entrepreneurs,” he concludes.

So there’s still plenty to play for here. You feel small business owners will be disappointed if the legal and regulatory powers are not awarded to the commissioner; as seems likely.

There’s a sense that this will not solve the late payment issue to anywhere near the extent that the small business community would like. But mediation services, useful advice and training will all be of real value.

Of course this could all be moot and the commissioner could be given all the powers to ride into town like the macho gun-toting stranger in a classic Western – protecting the good townsfolk against their malignant oppressors. But SMEs looking for their great white knight will almost definitely be left to wait at least a little longer.

Further reading: Six tips to develop a high-growth mindset

Related Topics

Late Payments