The Department for Business, Energy & Industrial Strategy recently published the terms of reference for a Small Business Payment and Cash Flow Review. Small businesses play a vital role in the economy, from local grocers to favourite restaurants or coffee shops. However, they are usually the first struggle in an economic crisis.

Small businesses rely heavily on cash flow and may not hold or have access to reserves that larger businesses can call upon in hard times. It is crucial that they are paid on time from their customers. If a small business is not paid on time, it can cause insolvency issues and greatly affect their growth and performance.

The introduction of the Payment & Cash Flow Review will play set out the issues from the point of view of the small business. It will gather information in the following areas:

• Transparency and Advocacy – it will make recommendations on the role of the Small Business Commissioner
• Progress by business sectors – to help identify which sectors performed best
• The culture and impact of late payment – to make recommendations regarding the role of the Government and the impact late payment has on the small business
• Existing Government levers – the effect of the current policy and what recommendations can be made to improve these
• Finance – how banks can help small businesses manage cash flow when it comes to lending
• Technology – how the advancement of technology has an impact
• Awareness – providing more support and guidance on the various stages of a business

Two products will launch as part of the review which will be a consultation on the payment reporting regulations. This is a document on the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (the Regulations). It will follow on from the review of the Regulations and will launch a 12-week consultation and set out guidelines for improvements and will review whether any amendments need to be made to the Regulations.

The second product that will be launched is a Statutory Review of the Effectiveness of the Small Business Commissioner. This review is to look at the Small Business Commissioner’s effectiveness in improving payment practices within transactions and the Commissioner’s awareness of the use by small business of dispute resolutions. The revisions of the Small Business Commissioner’s powers will be considered following the conclusion of the wider payment and cash flow review. This is following a consultation had in 2020, but there has yet to be any conclusion drawn from this.

The Minister for Enterprise, Markets and Small Business will lead the Payment & Cash Flow review. The aim is to summarise findings and set out the Government’s response to help regulate these. It is anticipated that the conclusions will be drawn and delivered in a document in 2023 with the help of engagement with stakeholders to draw conclusions, refine any themes and questions asked and to give them the opportunity to discuss certain matters and submit any written evidence they wish.

Given the current economic crisis that the UK is currently experiencing, it is up to the Government to place a strong focus on delivering the review, to help small businesses combat the financial strain they may be under which could in turn save their business.

If you or your business require assistance recovering your debts or improving your cashflow, please contact our Debt Recovery & Insolvency team who will be happy to discuss the processes available and how to recover any specific debts owed to you.