Thursday, 28 March 2013

Post-Budget Blues for Businesses


Another budget goes by and commentators are still picking over the bones of the Chancellor’s announcement. As it is to be expected, spin and hubris emerges from all the expected channels but cutting to the heart of the message, it looks like 2013 will be seen as a good budget for small businesses, with the cuts in corporation tax and National Insurance being nearly universally welcomed.

Taking the budget in isolation, not many would disagree with John Walker from the FSB that this helps ‘businesses grow and create jobs’ but is this really enough to resolve the years of apathy, neglect and mistreatment many small businesses have suffered over the last five years? Who is to blame for this malaise can – and will – be hotly debated right into the next election and is certainly a complex picture. Looking at things from within the Financial Services industry, a clear and uncomfortable hypothesis has emerged:

The Global Financial Crisis and the subsequent Financial Services ‘overhaul’ may ensure that the big banks are more resilient BUT it has only made life more difficult for the average UK small business. 

Think about it. The payment issues faced by SMEs – late payments, increased fees and unavailability of credit - are getting worse whilst many sectors are facing a collapse in demand as their customers tighten their belts. In parallel, banks have begun divesting many of their business units to third parties, either for commercial reasons or because the government has their foot firmly on their throats!

To give just one example of what this means for a UK SME - you’d have thought that a business deciding to accept credit and debit cards via a merchant account from their website would require a single call to their bank who would arrange to set up this facility within a couple of days. Not so. All but one bank has sold off their card processing arms.

This means a call to a completely new company, a lengthy application process of 4-6 weeks and once you have the merchant account and it bears nothing in common with their business current account they already have. Double the number of accounts the business has to manage, double the reconciliation, double the hassle and – more likely than not – double the costs!

Throw in other financial services that a an SME may require like loans, corporate card programmes, currency services and the network of suppliers quickly becomes unmanageable. There’s a clue in our name but we believe that cash flow truly is the most important (two) words for any business and yet the status quo only serves as blocks to businesses accessing their money.

Over the next few issues, we will be investigating the payments issues facing British SMEs and how the market is shaping up to help ... or hinder ... them in their quest to make their businesses grow. In the meantime, we’d love to hear your opinions and suggestions on what businesses like ours should be doing to help SMEs. Join the debate at @cashflows_news

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