Energy Crisis: Tips for SMEs
Global events are putting a strain on living expenses. The energy crisis that has been caused by the war in Ukraine has seen the prices of gas and electricity increase at unprecedented rates. Much of the coverage on the so-called ‘cost of living crisis’ in the news media has focussed on the impact this will have on personal finances, but it could also be disastrous for small and medium sized enterprises (SMEs).
A study by the freelance services marketplace Fiverr estimates that SMEs are already £186,000 out of pocket due to rising inflation and energy costs. Data compiled by YouGov found that 60% of SMEs are having to pay significantly higher energy bills than at the start of the year. Three quarters of those firms’ prices say they will have to pass on the costs to their customers.
What was once seen as routine and manageable business costs are now business critical considerations. As such, business owners will need to look at this problem strategically, possibly altering some of their operations to mitigate expenditure.
Here are xxx tips on how your business can manage the energy crisis, and associated challenges.
Can’t pay your energy bills? Urgent help
Some companies will be in a situation where they are struggling to pay their immediate bills. Ofgem have compiled a list of actions that you can take to mitigate urgent concerns. These include:
- Agreeing a business energy payment plan: Suppliers may be able to work with you to agree on a workable scheme that you can afford more readily. You can ask for a payment break or a reduction, more time to pay, or to access a hardship fund.
- Checking business finances schemes and grants: These are available both from your supplier and also the government and charitable organisations.
- Seek business debt advice: Organisations such as the Business Debtline offer fact sheets and advisory services over the phone and web chats to help you access funds and build a coherent plan to minimise debts.
Organise your finances
When costs go up, inflation bites and customer spending dwindles, now is the time to ensure that your business’s finances are as healthy as possible. Here are some actions and strategies you can put in place:
- Prepare an urgent cash flow: Over the next four-six months, expenditure will go up. Look at the money coming in and out and project your cash reserves. Getting a snapshot of your current and future financial position could make all the difference.
- Cut back on expenses: You will naturally look at these while working on your cash flow. Be brutal. If the expense isn’t necessary i.e. an essential operational cost or a revenue driver, now is the time cut back.
Expand remote working
UK SMEs have largely embraced at least some form of remote working. One survey estimates that 60% of small and medium businesses are now ‘hybrid’ i.e. employees are splitting time between remote and in-office work.
By shifting to more remote work, the business should be able to save money on energy costs, while also reducing emissions from travel.
In theory, this should help your staff’s living costs, as well as the businesses. A study by MoneySuper Market conducted during the rise of remote work in light of the Covid-19 pandemic, found that the average UK office worker could save upwards of £550 per year by commuting three days a week instead of five.
However, it’s almost impossible to generalise the needs of your staff. After all, the cost of living crisis could change priorities, and shift the balance of individual budgets. If the savings of not travelling to the office are now lost to rising energy costs, the desire for more working from home may dwindle. Also, if your business is considering a switch to full remote working, employees will require a change of contract if the office is no longer considered their primary place of work. It’s also likely they will request a new set of perks, one of which may be a contribution to their living costs.
Communication with staff, to ensure a happy medium is crucial, and could help soften the blow of both the business, and the employees’ finances.
Conduct an energy audit
An energy audit is a review of your business’s energy output. It will look at how much energy you are consuming, where you are using the most, as well as how much you are spending on both gas and electricity.
Some suppliers offer an audit free of charge, but you can also undertake this yourself pretty easily. Scour back through your last couple of years of bills, look at when your usage spikes and troughs, and come up with a plan on how you can cut back.
Not only will this save you money, but it will also help you cut back on emissions, creating a more sustainable business financially and environmentally.
This might seem like an overwhelming and time-consuming task, but it needn’t worry you too much. There’s plenty of guides out there that will walk you through it. This blog from E.on is a great place to start.
Make your office more energy efficient
reduce costs in the long run. For businesses that are in a healthy financial position, here are some actions you can take:
- Introduce more efficient equipment: From new radiators to LED lightbulbs, new photocopiers, laptops or desktop computers, reducing the energy consumption from inefficient machines will reduce cost. Yes, ‘A+++’ efficient machines are more expensive than their energy-guzzling counterparts, but the reduced consumption will save money in the long-run.
- Make sure your workplace is well insulated: If you own your own office space, implementing insulation in your wall and roof space will reduce your gas consumption by keeping heat in. If your employees are always reaching for the thermostat, you will see your prices go up.
- Switch to renewable sources wherever possible: Installing solar panels can reduce energy consumption by as much as 70%. Certain local councils will offer business loans of up to £5,000 to implement solar technology to your premises. Also, incorporating green software, that both reduces consumption and draws from renewable sources can help – the Pennyhill’s website (the very place you’re reading this article) is greener than 95% of other sites. An efficient business is not only cheaper to run, it has less of an impact on the environment too.
Seek advice from a green accountant or bookkeeper
Conscientious and strategic accountancy firms will be able to advise on reducing both your enertgy expenditure, and your business’s environmental impact.
At Pennyhills we’re passionate about sustainable business. Get in touch to find out how we can help you manage your business through the energy crisis.