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
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Wrists, knees, terrible rages – I felt overwhelmed when Barry came to see me

I teach my registrars to be aware how a consultation is making them feel: that can give valuable clues to the patient’s own emotional state.

To begin with, it seemed that Barry’s wrists were the problem. He told me about the pain he was experiencing, the pins and needles that came and went in his hands. I started to examine him. His palms were calloused, his fingers thick and stubby, veterans of the heavy work he’d undertaken throughout his 57 years. Even as I assessed this first problem, he mentioned his knees. I moved on to look at those. Then it was his back. I couldn’t get to grips with one thing before he veered to the next.

I teach my registrars to be aware how a consultation is making them feel: that can give valuable clues to the patient’s own emotional state. Barry was making me feel overwhelmed, the more so as I learned that he’d been experiencing all these problems for years.

“Why are you coming to see me about them now,” I asked, “rather than six months ago – or in six months’ time?”

“I need some time off, doc.”

There was something about the way he wouldn’t meet my gaze. And again, that feeling of being overwhelmed.

“What’s going on at work?” I asked him.

His tone hardened as he told me how he’d lost his temper a couple of days earlier. How one of the others had been winding him up, and something inside him had snapped, and he’d taken a swing at his workmate and landed a punch.

Barry had walked out and hadn’t been back. I tried to find out if he’d heard from his boss about the incident, if he knew what was likely to happen next.

He told me he didn’t care.

We talked some more. I learned that he’d been uncharacteristically short-tempered for months; his partner was fed up with being shouted at. Sleep had gone to pot, and Barry had taken to drinking heavily to knock himself out at night. He was smoking twice his usual amount. Men like Barry often don’t experience depression as classic low mood and tearfulness; they become filled with rage and turn in on themselves, repelling those closest to them in the process.

Depression is a complex condition, with roots that can frequently be traced right back to childhood experiences, but bouts are often precipitated by problems with relationships, work, money, or health. In Barry’s case, the main factor turned out to be his job. He’d been an HGV driver but at the start of the year his company had lost its operator’s licence. To keep the business afloat, his boss had diversified. Barry hated what he now had to do. He was now a “catcher”.

I didn’t know what that meant. Getting up at the crack of dawn, he told me, driving to some factory farm somewhere, entering huge sheds and spending hours catching chickens, thousands upon thousands of them, shoving them into crates, stashing the crates on a lorry, working under relentless pressure to get the sheds cleared and the birds off to the next stage of the food production chain.

“It’s a young man’s game,” he told me. “It’s crippling me, all that bending and catching.”

It wasn’t really his joints, though. Men like Barry can find it hard to talk about difficult emotion, but it was there in his eyes. I had a sudden understanding: Barry, capturing bird after panicking bird, stuffing them into the transport containers, the air full of alarmed clucking and dislodged feathers. Hour after hour of it. It was traumatising him, but he couldn’t admit anything so poncey.

“I just want to get back to driving.”

That would mean landing a new job, and he doubted he would be able to do so, not at his age. He couldn’t take just any old work, either: he had to earn a decent wage to keep up with a still sizeable mortgage.

We talked about how antidepressants might improve his symptoms, and made a plan to tackle the alcohol. I signed him off to give him some respite and a chance to look for new work – the one thing that was going to resolve his depression. But in the meantime, he felt as trapped as the chickens that he cornered, day after soul-destroying day.

Phil Whitaker’s novel “Sister Sebastian’s Library” will be published by Salt in September

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt