Why UK SMEs must protect their digital future

A recent survey carried out by the Management Consultancies Association (MCA) reports that technology and digital challenges are the biggest worries for business owners in 2019.

Business transformation, digital strategy and the need to understand rapidly advancing technologies are all named in the research as priorities. The survey asked 250 decision-makers across the private and public sector, taking in opinions from UK SMEs and bigger businesses.

Improving efficiency is the top challenge for UK SMEs

Across both the private and public sector, SMEs named ‘efficiency’ as the biggest business challenge. This is followed by Brexit concerns, potential disruption from the incorporation of automation and AI and effectively deploying digital transformation. More than half of business owners in financial services cite Brexit as the biggest business challenge, while public sector business owners are more concerned about recruitment.

While Brexit is a big concern to every sector in the UK, this survey shows that there are many challenges facing UK SMEs. In order to effectively manage digital transformation, it’s vital that businesses identify cyber-security priorities and take effective steps to protect data insight and intelligence.

Working in the Fourth Industrial Revolution

Paul Hingley is the Data Services Business Manager at Siemens UK. He says: “We are now in the midst of the Fourth Industrial Revolution. It is based on the use of cyber-physical systems where the growth of connected devices through the Internet of Things will see digital transformation increase performance. Applications and digital services will also help build new digital business models that will differentiate organisations.”

At the centre of the digital transformation challenges for every sector is data. It’s estimated that the total amount of data generated across the world will exceed 45 Zettabytes (one zettabyte is equal to 1 trillion gigabytes) by 2020. That’s an increase from 7.4 Zettabytes just three years ago. According to an IDC report commissioned by Seagate, “the global datasphere will grow to 175 zettabytes by 2025.”

Behind this phenomenal growth of data is the increasing connectivity of machines, devices, sensors and meters.

The Internet of Things – challenges and benefits

As digital platforms increasingly utilise automation and AI, there will be more seamless connection of all kinds of technology. This includes augmented and virtual reality, simulation, cloud storage technology and digital security protection. All of this will have an impact on businesses over the next ten years.

Mr Hingley says: “Internet of Things-driven benefits to production are clear as it allows data to become actionable and delivers value to the business. In order to benefit, businesses have to embrace the technological forces that are transforming both society and  industry, that will see the most successful evolve into data-driven digital enterprises.”

As UK SMEs, corporations and multinationals continue to meet the challenges of digitisation, the issue of security is more critical than ever. A connected world means more vulnerability and that presents challenges of its own. Malware is on the rise, phishing big data is always a danger and there is always the danger of cyber-attacks that can severely damage businesses.

Legislative changes to cyber security

Last year, an EU Directive regarding Security of Networks & Information Systems became UK law. It’s designed to increase resilience of information and network systems and improve overall security.

The directive says that businesses that operate within specific sectors, such as healthcare and transport should be identified as “operators of essential services” (OES). They must take appropriate security measures to manage network and information system risks.

James Turner, Managing Director of Turner Little Limited says: “The increasingly advanced digitisation across every business sector will be an improvement to our daily lives. However, the risks of malicious cyber-attacks are also increasing dramatically. It’s just as important that UK SMEs understand the risks and take appropriate measures to ensure the security of their data and business.

“When setting up a small businesses, cyber-security can often take a backseat in favour of other priorities, which might include maintaining cashflow, recruiting staff or winning new business. However, it’s vital that SMEs thoroughly understand the dangers that can affect their businesses too, regardless of the industry sector in which they operate.

“Stepping into an increasingly digital future is challenging for everyone, particularly at a time of such political and economic uncertainty. Committing to appropriate security standards will future-proof your business and ensure that you benefit from digital transformation.”

About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

Late payments report shows clear problems for small businesses in the UK

New research by Bacs Payment Schemes, part of the UK’s retail payments authority, Pay.UK, shows that late payments are causing huge problems for small businesses in the UK. Businesses are now facing an outstanding bill of £6.7 billion, just in payments they’re owed. This is up from £2.6 billion in 2017.

Small businesses in the UK are suffering

The cost of recovering the money that is overdue is now (on average) £9,000 per business. As well as the costs involved in actually recovering the money, more than 33% of SMEs in the UK are waiting two months beyond agreed payment terms to recoup it. This is almost double the number of businesses who reported the same problem in 2017.

Data from the UK Small Business Commissioner, in conjunction with Lloyds Banking Group agrees. Their research finds that there are regional variations with late payments, with small businesses in the north east wait an average of 40 days to receive payment, three days more than the UK average.

What is the recommendation for payment terms for small businesses in the UK?

Two years ago, the office of the Small Business Commissioner was launched by the Government to monitor payment practices for small businesses. Paul Uppal currently holds the commissioner position and has issued a recommendation that large businesses pay small business suppliers in no more than 30 days.

Cashflow challenges faced by small businesses not only hamper their growth and that of the overall economy. The Commissioner says: “Our initial findings indicate that almost two-thirds of payments are likely to be owed to smaller firms at any time. This is money that could be used to grow smaller businesses and generate tangible economic activity. Instead, it is stuck in large firms’ business ledgers doing nothing.”

Information on payment terms to small business suppliers has been collected by the commissioner for two years. The challenge for the Government now is to utilise the information in such a way that helps small businesses make useful decisions about which large firms they should do business with.

Regional variations across the UK – and the impact

The data also shows that 65% of large businesses in the UK pay smaller suppliers in an average of more than 30 days. 20% wait more than 50 days before paying small businesses they work with.

Small businesses in the Humber and Yorkshire areas are worst off, as they are forced to wait an average of 43 days for their bills to be settled. The second worst payment time can be seen in the East Midlands and Northern Ireland, where businesses are forced to wait an average of 41 days. London businesses are the best off, with businesses reporting payments at 34 days.

To deal with the increasing problem caused by late payment, Mr Uppal is recommending that a ‘traffic light’ system is introduced in order to clearly show which businesses are later payers. He says: “A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of goods or services but also resembles part of their financing model.”

Lloyds Bank Commercial Banking’s representative, Ed Thurman, adds: “We have discovered wide variations in payments depending on where businesses are located. Two weeks can be critical in the financial well-being of a smaller business. Businesses could consider utilising invoice financing products to mitigate these challenges.”

James Turner, Managing Director of Turner Little Limited says: “The effect of late payments on small businesses can be devastating. It not only slows down the growth of their business, but also impacts on the daily lives and potential mental health of those dealing with the delays.

“More than 25% of SME owners who are facing late payments are forced to withhold payment to their own suppliers. Similarly, 28% report cutting their own income to keep the cashflow going for their business. With a 6% increase in the number of small businesses in the UK experiencing the problems of late payments, there is clearly a lot of work to be done. It’s important that business owners plan ahead as much as possible to mitigate the challenges posed by late payers.”

About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.