With 2020, and the start of a new decade, just days away, we wanted to reflect on what 2019 meant for small businesses. From Brexit dominating the business landscape to Making Tax Digital finally being implemented, it’s been a challenging year for small businesses.
In 2019, there were 5.9 million businesses in the UK, that’s 200,000 than in 2018. The vast majority of these – 99% – were small or medium sized businesses, and 5.6 million were micro businesses (employing 0 – 9 people).
However challenging this year may have been though, what we continue to hear from small business owners is optimism about how technology can change their prospects and help them meet the obstacles that lie ahead.
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Productivity stats continued to disappoint
The UK has been in a productivity puzzle for several years now, and while a break in the political impasse may see businesses start to invest again, it will still take a long time for these numbers to improve.
While this has affected businesses across all sectors of the economy and of all sizes, embracing automation, their agile advantage and a clever use of technology see help SMEs see a marked difference in their performance and give them an edge over bigger rivals.
“Technology should, by definition, make us work smarter and faster, so how do we solve this productivity puzzle and leverage technology to get small business booming again” comments Duncan Stockdill, CEO at CRM software specialists Capsule. “The last five years has seen a boom in the launch of business apps – there are currently around 200k available in the app store – second only to the games category. Systems that offer one version of the truth – one big picture of relationships, sales pipelines, daily tasks and monthly reports – are integral to delivering growth, improving outcomes in less time.”
The fight against late payments and shaky business confidence continues
Earlier this year Paul Uppal, a former MP who took up the role of Small Business Commissioner, left the post amid controversy around a potential conflict of interest due to his involvement with another small business body. This will have been glum reading for small businesses chasing down late payments and hoping for some swift action from the top of government.
In the meantime, however, technology could offer some respite to owners looking to tackle late payments to their small business.
Analysis from Previse, of over £24 billion worth of invoices revealed that businesses pay their smallest suppliers 30 days later than their biggest suppliers. In addition to this, suppliers invoicing for a value less than £10,000 p.a. are not processed by buyers until 35 days after being received, on average.
“The push to prevent slow payments has been evident in the Government’s agenda. The Spring Statement, for example, brought in regulation for large corporates to audit their payment practices,” explains Paul Christensen, CEO at Previse “however, as the year comes to an end, there is no discernible improvement in the speed of B2B payments, with many businesses being suspended from the Prompt Payment Code.
“With the results from the data analysis and the continuing removal of businesses from the PPC, what is needed is a realisation that technology exists which can easily solve the problem.”
The Conservative Party committed to ending the late payment crisis during the December election, with its manifesto introducing a reform package put on pause by the election, so small business owners will be keeping a close eye on whether these promises materialise.
Just before the year clocks out, the FSB reported today that its Small Business Index was negative (-21.6) for the sixth quarter in a row. 46% expect their performance to worsen over the next three months, and reports of declining profits reached a five-year high.
Confidence was particularly low among retailers, who had a bumpy year with ONS data showing they entered the year off a sales slump, and which continued to report disappointing figures throughout the year.
The shifting sands of marketing and customer service never stop
New trends, technologies and changing customer preferences continued to challenge small businesses to stay ahead of the game in 2019.
According to stats from We Are Social, there were 45 million active social media users in the UK at the start of the year, split across a wide range of devices. 81% of people in the UK shop online, and 91% visit online stores. This data shows that no matter the business or target customer, small businesses needed to be more diverse than ever in their marketing efforts to win in 2019.
On Small Business Saturday, we heard from a wide range of small business about how they use technology in their marketing efforts, from launching websites to using AI to better target customers.
Emma Kowalski, events & marketing operator for Xtreme Events, felt the biggest factor was a technical change from Google in November. “The update was around the proximity of the user to the business listed, becoming an ever increasingly important factor, which was first initiated in 2016 and has completely changed the way small businesses are tackling local SEO. Another factor has been the evolving focus on Social Media platforms. While Facebook is still the most commonly used platform by SME’s, it is seeing more people move towards Instagram ads or Google ads as a tool with greater RoI.”
For Darin Archer, CSO at Elastic Path, “2019 saw the rise of chatbots, but also a shift in mindset, with brands seeing the opportunity and impact of improving customer service. Most companies are now talking about ‘customer success’ and ‘customer experience’ and recognising that their business can be quickly disrupted by a DTC company with a better experience or get lost in the abyss of mega marketplaces like Amazon if they don’t do something about it.”
Tax was Made Digital and a small victory on VAT
April 6th 2019 marked the launch of Making Tax Digital. The aim is to remove the need for paper returns and record, and instead make all aspects of the process digital. While there are upsides for businesses, clearer digital records could reduce over/under payments and it could make the whole system more efficient, as with any digital system challenges to introduction remain.
While there are still certainly many challenges, from software to broadband connectivity, to overcome, it’s designed to make tax easier and more efficient, which should help you get it right at the first attempt – SMEs should maximise any help they can get if they run into trouble using the system, but overall adopting technology should bring positive changes.
In September, announced a one-year delay to implementation of the Value Added Tax (VAT) reverse charge until 1 October 2020 after “industry representatives…raised concerns” about the move. The reverse charge will prevent suppliers of construction services receiving VAT payments from their clients, with responsibility for handing over VAT due on payments shifting from supplier to client.
“With small construction businesses already suffering due to unprecedented uncertainty, slowing growth and rising costs, this was clearly not the right moment to hit them with the reverse charge,” commented Mike Cherry, FSB National Chairman, at the time of the announcement.
The announcement showed the value of small businesses to the UK economy, and proved that when leveraging the industry’s voice as one, SMEs can deliver meaningful action and results.