Small Talk: 'Scrap cheques' call to help SMEs fight late payments

When consumer groups forced the banking industry to abandon its plans to abolish cheques in 2018, it was celebrated as a populist victory. But it turns out that not all customers are so pleased. The British Chambers of Commerce says getting rid of cheques would be one way to tackle the late payments problem that continues to dog so many small and medium enterprises (SMEs).

The BCC is now lobbying for a rethink on cheques – a U-turn on a U-turn if you like – which it says can introduce further delays in a payment process that is already damaging many SMEs. Just a fifth of small businesses want to be paid by cheque, its research shows, yet two-thirds are regularly paid this way.

Who represents the greater good – struggling SMEs or those individuals who feel uncomfortable with alternative payment methods? There's no easy answer, but SMEs do need more help with late payments – the statistics are getting worse rather than a better. At a time when many businesses are struggling with the wider economic environment and a difficult relationship with banks no longer always prepared to offer overdraft finance to cover pending invoices, that's a real cause for concern.

The BCC's research shows that 94 per cent of SMEs now have to put up with some customers paying late. Significantly, one in four small businesses says at least 40 per cent of payments arrive late.

That level of late payment is too endemic for SMEs to manage, and the BCC has several ideas for reducing it. In addition to the argument about cheques, it would like to see a kitemark scheme so that businesses with a good record for paying on time can shout about it. Electronic invoicing in the public sector would help too, it adds, alongside a business bank to help with cashflow issues where the private banking industry falls short.

This is all worthy stuff that needs doing, but will it make a difference other than at the margin? Probably not, in truth. For example, the BCC suggests the kitemark scheme could build on the Prompt Payments Code, but this has hardly been an unqualified success, with too few large businesses signing up for it. Electronic invoicing is a good idea, but even the BCC admits the public sector's record on paying time has already improved dramatically.

Nor should SMEs expect much help from legislators. The British government is currently consulting on how to implement a new European Commission directive on late payments, but our existing regulation already goes further, in most areas, than what Brussels requires.

The reality is that SMEs are also going to have to fight harder for themselves. It is crucial, for example that they step up credit control policies so that late payments are identified as quickly as possible – and then chased hard. They also need to make it clear to customers that they will enforce their rights to claim compensation in the event of late payment – and to consistently follow through on the threat.

In addition, SMEs have to up their own game on paying on time. The BCC says more than a third of small business admit to being late payers themselves. That number may be understandable given their cashflow constraints, but it has to fall. Businesses that don't pay promptly can hardly take the moral high ground with others doing the same. And not settling bills on time contributes to a vicious circle in which other members of the supply chain are less likely to be able to do so either.

Intercede remuneration row rumbles on

The long-running sniping between a group of shareholders and company management continues at Alternative Investment Market-listed software company Intercede.

Roger Lawson, the chairman of ShareSoc, a group that represents private investors, is a long-time critic of remuneration policy at Intercede – particularly the long-term incentive plan that is enjoyed by executive chairman Richard Parris.

Mr Lawson took up the cudgels once more at Intercede's annual general meeting last week, demanding that the company appoint an independent non-executive chairman rather than combining the office with that of the chief executive role under Mr Parris.

Intercede points out that it does have other non-executive directors, although ShareSoc has concerns about these roles too. Shareholders, however, have not yet been persuaded to rebel in the numbers seen at larger businesses this year. About 9 per cent of votes cast went against the reappointment of the non-executives, investors' main chance to take a stand because Mr Parris is not up for re-election this year.

Aim market looking 'leaner and fitter' as the exodus abates

Is the Alternative Investment Market’s incredible shrinking act finally beginning to come to an end?

Just 102 businesses left the junior market over the year to the end of September, fewer than in any year since 2005-06, reports accountant UHY Hacker Young.

By comparison, 278 businesses left Aim in 2008-09, at the peak of the recession.

Only a fifth of the companies that have departed over the past 12 months have done so because of insolvency.

Although activity remains relatively muted, M&A has been the primary driver of departures, accounting for half of them.

From a peak of almost 1,700 companies in 2007, the Alternative Investment Market is now down to about 1,100 listings, but some believe that is in its favour. “The market seems to have come through the worst of the financial crisis, and emerged leaner and fitter on the other side,” argues UHY Hacker Young partner Laurence Sacker.

Certainly those companies that are being bought are attracting decent prices.

Broker Allenby Capital points out that of the 37 companies leaving Aim this year after being acquired, the average take-out price was 48 per cent higher than the closing price of the shares on the day before the deal was announced.

Small businessman of the week: Paul Finch, co-founder, Orega

I founded Orega in 2001 with my business partner Zach Douglas – we both worked in the serviced-office sector and it was obvious there was a real opportunity to build a premium provider in the market. It wasn't great timing – the collapse of the dot-com boom meant all those new businesses that had been in need of office accommodation suddenly disappeared.

One option would have been to strip out costs but we chose to focus on quality in a way that wasn't possible for rival businesses that had overstretched themselves. It was a tough three years but we survived and we resolved to learn the lessons.

We've become known for partnering with landlords. Developers develop, and then sell on to landlords such as investment funds – our expertise is in helping those landlords distinguish their real estate so that their serviced offices stand out.

The downturn has brought opportunities too, with many businesses reluctant to sign up to lengthy office leases or make significant capital expenditure. We're also benefiting from globalisation and the growth of the mobile workforce. The days of the giant corporate headquarters are over. We operate from 11 centres around the UK and we're looking at Paris, Brussels and Amsterdam.

davidprosser1972@gmail.com

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