Many SMEs are dipping into savings after their businesses have been hit by falling sales, rising interest rates and soaring energy bills.
A new survey has found that nearly half of firms expect to deplete their savings over the next six months, with some predicting they will not survive.
This means that many firms will have to look at making savings in the hope of a turnaround.
A survey by financial specialists, Investec, shows that higher interest rates will make it more costly for businesses to take out loans in the coming year, forcing firms to consider dipping into reserves.
One ray of light has been that a small number of firms have seen their savings grow as a result of faster growth.
SMEs have an average of £117,000 in their savings accounts, according to Investec, though this varies widely between companies.
What savings can be made?
It’s not always the big ticket that can save money. A large number of small items can add up, so look at areas where you can save with the least inconvenience.
Staffing is an obvious area and is the major cost for most firms, however, a labour shortage means keeping good staff is important. That is where outsourcing some of the work can make big savings, particularly in areas like digital marketing, design, payroll, bookkeeping, and more. You pay an outside company and make savings on salary, National Insurance and pensions, plus training costs.
If you are in trouble, then the chances are the same is true for your supplier. So, see if you can renegotiate the terms of your contracts to reflect current economic conditions.
Up in the cloud
Cloud storage does away with the need for expensive desktop computers and hard drives. It saves space and keeps your data secure. It also allows for greater automation of many processes, which could make your operations more efficient and reduce the need to hire more staff as you grow.
Rent and remote working
The pandemic saw a big move to remote working. This has the advantage of allowing businesses to look at smaller premises to accommodate fewer office staff. That move would also cut energy bills and other overheads. Even if you stay put, it is worth trying to renegotiate your rent.
Need advice on how to make savings and run your business more efficiently? Please contact us.