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Rising costs for SMEs

Utilities, staff and bank lending are still the biggest challenges for Britain's small businesses.

Although staffing costs are generally the biggest and most obvious cost to an SME, the utilities that they pay are often overlooked. SMEs should make them a priority for cost cutting before even looking at reducing staffing. There are multiple savings to be made through utilities and generally running costs, such as looking to lease instead of buy and buying second hand where possible for machinery. Another costly utility is energy.

New legislation called P272 has been brought in to change the way that energy usage is calculated to half hourly (hh). This will give everyone with a Profile Class between 05-08 a more accurate bill. The P272 will also include new peak and off peak pricing depending on their usage at certain times of the day. They say that businesses which experience a higher bill due to this change but, will find it easier to mitigate this with an alternate usage pattern or using more energy efficient practices.

The best way to manage these costs is to have regular reviews of your fixed costs. Just by doing this there will be savings to be made. Even if the savings are only minimal it will still develop a cost consciousness within the business.

Other possible savings are there to be made through multiple methods like outsourcing, which would link with staff reductions. If HR and Payroll were outsourced the business can cut back on the salaries from those departments. However cuts to staff can leave the business without key human resources or at a competitive disadvantage.

Keys to Cost saving

  • Regularly review utility contracts
  • Make sure you are not paying for more insurance than you need
  • Consider leasing rather than purchasing
  • Buy second hand where appropriate
  • Pool resources such as office space
  • Join/create purchasing co-operatives
  • Purchase basic supplies in bulk
  • Cut down on paper and print
  • Watch the thermostat

The final hurdle for SMEs is borrowing, which is more relevant in a previous article we did on start-ups, however that is and has been on the increase over the past couple of years and is not something that most SMEs are concerned with, they are generally looking to increase customer base by either diversification into new areas or improving their customer's experience.

The biggest area to focus on is daily running costs. If these aren't controlled then they will creep up which is why it is smart to regularly review them if you want to keep your SME thriving.

Have you managed to save costs and increase business efficiency? or are your operational expenses just too high? Leave your comments below:

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