Is your SME counting the cost of not watching the overheads?Category: Money Posted on 16-01-2013
Consumers in Britain are always looking around for the best deal. Whether this is by comparing prices at the supermarket or by downloading voucher applications on a smartphone so that they can get 2-for-1 meals at their local restaurant, the desire to save money is clear.
This is particularly true in the current economic climate, but why is the same thing not happening for the country's small and medium-sized enterprises (SMEs)? According to research from Clydesdale and Yorkshire Banks, more than half admitted to reviewing their day-to-day costs just once every calendar year.
It was revealed that small businesses could save themselves nearly £16.5 billion annually by taking steps to cut costs, without a knock-on effect on the service they offer or the staff that they employ.
There are a number of reasons for not searching out the best deals or reviewing running costs. Lack of time and misplaced loyalty to the current provider were up there as excuses, despite knowing that a better offer could be found just around the corner.
On top of this, one in seven organisations never regularly reviewed the costs for the biggest areas of their expenditure. This includes things like electricity and gas prices, which have risen by 69 per cent and 87 per cent respectively over the past seven years – while the government has said that we could expect to pay a further 26 per cent on top of this by 2020.
Driving round the bend
If your SME has a small fleet of cars to look after then you would have undoubtedly been affected by the rising price of fuel. While the government has scrapped January's planned 3p per litre fuel duty rise, companies will still be shelling out a lot of money to make deliveries or travel to meetings. The banks' research showed that motor fuel has risen by a staggering 44 per cent in the last seven years.
"Keeping a watchful eye on overheads is crucial to ensure business growth and profitability. With difficult trading conditions it can be easy to lose sight of some of the simpler ways of helping your business, but regularly reviewing costs should be top of the to-do list for any SME owner or manager," said Paul Shephard, director for business and private banking at Clydesdale and Yorkshire Banks.
Earlier in December, the banks introduced a raft of new measures which are designed to help organisations grow by lowering some of their costs, this included bringing in fee-free lending and a new switching package with free day-to-day banking for businesses whose annual turnover is up to £2 million.
"Small businesses are facing daily cost increases, energy bills alone have risen by more than three quarters. Even relatively simple measures, such as making sure computers are switched off at night, rather than left on standby; all go towards bringing costs down.
"By concentrating on reducing the costs of the basics such as energy and fuel, SMEs can free-up the maximum amount of cash to be used elsewhere supporting their growth. And because these are simple steps, they are not time-consuming; it need be no more than a couple of hours once a month or even quarter," Mr Shephard said.
"Our research shows that there are significant savings to be made without a huge amount of effort. And all of these savings avoid cutting quality, service or wage bills, leaving money to be invested back in to the business, which in some cases is going to be tens of thousands of pounds."
Head up in the clouds
One major area for saving money could lie in technology. Whether this is the need for power to keep monitors and computers running, or utilising third party infrastructure. The cloud is a fantastic example of this, where businesses can use data centres to keep their information online without having to shell out for their own servers and hard drives.
What's more, the reliance on an office will be reduced as members of staff will be able to work remotely. Facilities such as Google Drive and Dropbox can now be accessed from smartphones and tablets, as well as laptops and computers, so work can be carried out on the move – thus limiting how the office is used.
Can you justify your outgoings?
Whether it is technology, power or fuel, you need to be able to justify all of your outgoings. Draw up a proper business plan and find out what is earning revenue and what is not. It is often the small things that add up for SMEs, so going back to basics is a good place to start.
Are you printing out reams of paper when you could easily share information on the cloud? Do you really need to pay for the latest, fastest computer, or will second-hand machines get you by? Are you getting value for money from experts or can you use your friend network to get advice and tips without having to pay out a small fortune?
You can also take a look at your marketing activity. By including discount codes on leaflets you will be able to see whether the 1,000 handouts you gave for a certain product has actually reaped any rewards. Have a think about whether you can make the most of digital marketing channels such as email marketing and social media.
In the case of the latter, websites like Twitter and Facebook are free to use and are a great way of building up a following. They also provide the ideal platform for your customer service activities. You will be able to communicate with the public to answer any queries, in the knowledge that in a world of retweets and likes, everything that you do will be passed on to other members of the online community and help your message to spread.