Business is broken - and better communication is the way to fix it

New research reveals that over half of new businesses used personal credit cards to get off the ground - as lending to new SMEs tumbles by £400 million in a single month.

Last month, Business Secretary Vince Cable declared that the Government’s Funding for Lending Scheme was not working. He warned that the Treasury had to make considerable changes to the scheme to boost lending unless financing to credit-starved small and medium-sized enterprises (SMEs) in Britain shows imminent improvement. His call to action was underpinned by figures, out in the same week, which revealed that mortgage levels had soared to a five year high as consumer confidence returned. However, net lending to SMEs tumbled by £400 million in September.

A day later, Experian released its own research, a survey of 600 SMEs which discovered that almost one third of those that used personal finance had used a mortgage to fund their business, putting their home at risk. Almost half had used personal credit cards to fund their businesses. Resourceful? Maybe. Does it leave them vulnerable? Definitely!

All this news has broken in the last fourteen days, but I wouldn’t say it was a fortnight out of the ordinary for these kinds of headlines. I’m continually seeing reports and articles which highlight the struggles SMEs are facing as they look to recover from a crippling recession.

However, while these stories all highlight serious challenges for the SME sector, it’s not the main problem it faces today. The inability to connect with other organisations, especially enterprises, is proving to be the biggest impediment. Collaborating with other businesses and their respective processes, whether it be procurement, payment or lending, has become a mammoth task. It’s putting a major strain on SMEs’ time, resources and funds and, put simply, it's breaking business.

The lack of connectivity is genuinely hurting SMEs’ ability to access cash – they aren’t getting paid, and with no cash, they cannot evolve their respective propositions. The fact we are seeing, for example, this criticism of the Funding For Lending Scheme, demonstrates that this connectivity needs to be addressed. When you add further challenges into the mix, you can see that SMEs need all the help they can get. Look at Wonga’s unfair rates, which clearly don’t have the interests of SMEs at heart, or the claims that the Royal Bank of Scotland deliberately pushed SMEs to the wall, so they could get their assets on the cheap.

So how have SMEs found themselves with these numerous obstacles and what can they do to overcome them and flourish? All aspiring SMEs aim to form business partnerships with larger organisations in order to accelerate their evolution. Yet they have failed before they start, as all too often they are strangled by large inoperable procurement and finance systems.

For too long, enterprises have demanded all their suppliers adhere to these clunky, inflexible systems, leaving SMEs with two options – spend valuable time and money adopting the systems that the bigger players insist on, or pass up the opportunity and never realise the goal of working with large organisations. Naturally, the SME often ends up bending over backwards and opting for the first. However, once they are finally on their new partner’s system of choice, they are locked in. There is no reason for vendors to improve the software, so SMEs continue to struggle with archaic, expensive processes. They essentially become prisoners, not suppliers. I know a small business that was being forced to pay $9,000 to send an invoice, or, to put it another way, being forced to pay $9,000 to send a 10 kilobyte email. In today’s social, open world, this is a ludicrous situation.

It’s still happening today, but it’s not just SMEs feeling the pain. Today there are so many incredible, innovative start-up businesses that can bring considerable value to an enterprise. However, these larger organisations are missing out on working with these dynamos, which could see their businesses suffer and their competitors prosper. And all because they insist on carrying out business processes “their way”.

What’s needed, both for SMEs and enterprises, is an agnostic approach, to communicate better with each other. Connecting on one platform, which removes barriers to business and facilitates better communication, will allow SMEs to build partnerships with their bigger counterparts. It will enable them to do so much more than just get paid quicker. They will be able to create apps to improve processes, transact faster and more efficiently and discover new partners and customers along the way. This will ultimately boost collaboration, increase revenues and improve business bottom line.

Business secretary Vince Cable. Photograph: Getty Images.
Christian Lanng is CEO of Tradeshift
Dan Kitwood/Getty
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I believe only Yvette Cooper has the breadth of support to beat Jeremy Corbyn

All the recent polling suggests Andy Burnham is losing more votes than anyone else to Jeremy Corbyn, says Diana Johnson MP.

Tom Blenkinsop MP on the New Statesman website today says he is giving his second preference to Andy Burnham as he thinks that Andy has the best chance of beating Jeremy.

This is on the basis that if Yvette goes out first all her second preferences will swing behind Andy, whereas if Andy goes out first then his second preferences, due to the broad alliance he has created behind his campaign, will all or largely switch to the other male candidate, Jeremy.

Let's take a deep breath and try and think through what will be the effect of preferential voting in the Labour leadership.

First of all, it is very difficult to know how second preferences will switch. From my telephone canvassing there is some rather interesting voting going on, but I don't accept that Tom’s analysis is correct. I have certainly picked up growing support for Yvette in recent weeks.

In fact you can argue the reverse of Tom’s analysis is true – Andy has moved further away from the centre and, as a result, his pitch to those like Tom who are supporting Liz first is now narrower. As a result, Yvette is more likely to pick up those second preferences.

Stats from the Yvette For Labour team show Yvette picking up the majority of second preferences from all candidates – from the Progress wing supporting Liz to the softer left fans of Jeremy – and Andy's supporters too. Their figures show many undecideds opting for Yvette as their first preference, as well as others choosing to switch their first preference to Yvette from one of the other candidates. It's for this reason I still believe only Yvette has the breadth of support to beat Jeremy and then to go on to win in 2020.

It's interesting that Andy has not been willing to make it clear that second preferences should go to Yvette or Liz. Yvette has been very clear that she would encourage second preferences to be for Andy or Liz.

Having watched Andy on Sky's Murnaghan show this morning, he categorically states that Labour will not get beyond first base with the electorate at a general election if we are not economically credible and that fundamentally Jeremy's economic plans do not add up. So, I am unsure why Andy is so unwilling to be clear on second preferences.

All the recent polling suggests Andy is losing more votes than anyone else to Jeremy. He trails fourth in London – where a huge proportion of our electorate is based.

So I would urge Tom to reflect more widely on who is best placed to provide the strongest opposition to the Tories, appeal to the widest group of voters and reach out to the communities we need to win back. I believe that this has to be Yvette.

The Newsnight focus group a few days ago showed that Yvette is best placed to win back those former Labour voters we will need in 2020.

Labour will pay a massive price if we ignore this.

Diana Johnson is the Labour MP for Hull North.