Turning Rhetoric into Reality: How to Build Back Better for Small Businesses

‘Building Back Better’ has become the UK Government’s phrase of the year. There is constant talk of the need to make our post-pandemic society stronger and more sustainable, yet it remains unclear what this so-called ‘better’ future will look like.

Discussion surrounding the post-Covid world comes at a time of acute economic strain, with none feeling the pressure more than Britain’s small businesses. A ‘perfect storm’ of problems has wreaked havoc on global supply chains, pushing SMEs to the edge of their capacity. Ahead of the Autumn Budget, we need to rewrite the old rules of doing business if SMEs are to truly ‘build back better’ in the long run.

Sizing up the issue

Throughout the Covid-crisis, the British Government has turned to short-term loans and temporary measures such as furlough, CBILs and Restart Grants to help small businesses stay afloat. However, now that these measures are being withdrawn, an entirely new set of challenges has arisen.

The very support that helped SMEs get through the pandemic has created a whopping pile of debt, with a third of small businesses worried that they will not be able to repay their Covid loans. In a country that relies on SMEs for three-fifths of its employment and around half of its turnover in the private sector this is no small feat. This is on top of the financial pressure on small businesses being ramped up by the ongoing supply chain crisis. A critical shortage of labour and resources, combined with rising prices, is preventing suppliers from meeting demand. The combined result is that many healthy businesses risk being driven to the wall.

So, what is the UK doing to ensure that SMEs aren’t left behind?

A slogan without substance?

At the recent Conservative Party Conference, no point was emphasised more than the need to ‘build back better’. In the Autumn Budget, small businesses will be hoping to see the real-life implications of this rhetoric.

While it is likely that this will be more of a ‘technical’ budget due to the string of high-profile fiscal announcements already made, it is an important one nonetheless. It is expected that the Chancellor will reveal the details of the 'Help to Grow: Digital' scheme – a package that will provide a discount on productivity-enhancing software for small businesses. A £500 million 'Plan for Jobs' is also set to be announced.

Vouchers and incentives are a step in the right direction to kickstart the recovery of small businesses, but this is a token gesture for a community that is widely considered to be the lifeblood of the UK’s economy. Many will be questioning whether this is too small of a step to really move the needle for small business owners and their employees. To truly provide a sustainable solution to SMEs’ liquidity challenges, the government should be digging deeper into the pain points that they face. Principle among these is the issue of slow payments to suppliers, which pre-dates the pandemic.

How technology can help

It is estimated that 50,000 SMEs go bust each year due to late or slow payments. The problem has been worsened by Covid-19. Since the start of the pandemic, two-thirds of small businesses have received late or frozen payments with no clear idea of when, or if, they will be paid. The result is that SMEs are denied the cash they’re owed at a time when cracks in the supply chain are widening day by day.

The UK Government can tackle this issue by implementing regulatory changes which ensure that SMEs have access to cash in a way that is not detrimental to the rest of the supply chain. We need to create a culture of day one invoice payment and enable access to loans that are paid back in line with SMEs’ balance sheets and offer flat fees.

AI-driven solutions make this possible. Machine learning analyses past payment patterns to identify and flag the very few problematic invoices, so that the rest can be paid immediately. This technology allows suppliers to be paid instantly while large corporates pay on their normal terms. Suppliers unlock much-needed cash, while large corporates strengthen their supplier relationships at minimal cost. This technology can be embedded into accounting systems, offered by a large corporate to its suppliers or even used by SMEs to secure affordable loans that allow for sustainable growth. A win-win for all parties involved.

To truly ‘build back better’, solutions of the past need to be integrated with new innovations. When SMEs make up 99% of British businesses the stakes are simply too high not to think outside of the box and look to new ways of doing things. The Autumn Budget presents a valuable opportunity for change that should not be missed.