MANY of Peterborough’s small businesses are throwing money away by failing to review their outgoings often enough, according to new research.
The survey by Yorkshire Bank shows that a fifth of SMEs in the east go at least six months without reviewing costs while 15 per cent never review their expenditure at all. Micro-businesses – those with less than ten employees – were found to be the most likely to review costs with nearly one in four doing so at least once a month. However, sole traders were the least likely to try to make savings with 33 per cent never taking the time to review costs.
Among the most common reasons given for not reviewing costs, 22 per cent said they simply did not have enough time.
Simon Moore, head of Yorkshire Bank’s Business and Private Banking Centre in Peterborough, said, “It is quite surprising to discover that so many SMEs in the east are not looking at their key costs regularly – meaning they could be spending money they don’t need to.
“By identifying the biggest costs within your business and planning to reduce these where possible, owners will be giving their company the best chance to remain competitive in a challenging economic climate.”
The research research found the top five business expenses (excluding staffing) were: materials and supplies; rent and rates; vehicle fuel; IT software or technical support; and utilities. Nearly a fifth of those questioned said these combined costs made up more than 50 per cent of their businesses’ total annual expenditure.
Simon’s advice to SMEs looking to secure best value includes:
- Materials and supplies: Never be afraid to ask for a discount – the worst that can happen is the supplier says no. If you are not comfortable: set an objective; research the supplier and know what to expect; don’t allow yourself to be intimidated; don’t let your passion for your business cloud your judgement; and always remember if the deal isn’t right you can walk away. An easy way to identify alternative suppliers is comparison websites such as reviewcentre.com and ukofficedirect.co.uk. Finally, investigate bulk buying.
- Rent and rates: Rent levels can be negotiated with new landlords looking to maximise occupancy and a new property may offer lower prices than you are currently paying. To save you time and to make the process easier the Department for Business Innovation & Skills launched its ‘Small Business Lease’ which is free to download and use. By moving to a newer building you could also make other savings through more energy efficient running costs.
- Fuel: Companies purchasing large quantities of petrol and diesel could save money by reviewing purchasing strategies and fixing costs in advance. The risk with fuel hedging is the possibility that fuel prices could drop below the pre-arranged price set out in the contract, but with many market commentators believing that prices are on an upward trajectory, this option could still be attractive for many. The Federation of Small Businesses operates a fuel card scheme where companies can receive as much as 3p off the price of a litre of fuel although minimum amounts apply. Another easy way to make savings is to cut out unnecessary journeys by making use of tele and video conferencing or free internet services such as Skype.
- IT software or technical support: Cloud servers eliminate the need for large in-house servers to manage a range of IT functions and therefore reduce maintenance costs. Further details are available from the Information Commissioner’s Office while comparison sites such as comparethecloud.com offer an idea of the range of services available. Savings can also be made through the purchase of second-hand, reconditioned or refurbished computers. Organisations such as The Carbon Trust offer a leasing deal and access to energy efficient equipment with more details available from its website.
- Utilities: With the UK Government predicting electricity and gas prices to rise by 26% by 2020, it makes sense to keep bills as low as possible. Business price comparison websites such as uswitchforbusiness.com, comparethemarket.com and energyhelpline.com provide a free service to find the most competitive rate for your business.
Simon added: “No two businesses are the same and each will have its own priorities. However, what should be common to all is the desire to reduce costs and to reinvest that money to achieve sustained growth.
“Perhaps the greatest factor SMEs face is the lack of time and so every opportunity to streamline this process should be welcomed. There are a number of organisations and online forums which offer immediate access to valuable information and these opportunities should be exploited wherever possible.
“It makes sense to set up formal review procedures in every business, regardless of size, on a regular basis.”