Navigating your business through the energy crisis

With energy prices at record rates in the UK, and experts not expecting a return to the levels we saw at the start of 2021 for some considerable time, many businesses will be looking at ways they can minimise the impact on their cashflow.

Even prior to the war in Ukraine, an increase in global demand and supply shortages has meant that wholesale prices have surged. Not only are businesses facing soaring energy costs, many are also continuing to feel the strain of the pandemic.

Businesses that are not on fixed rates with their suppliers will experience significant increases in their rates, which is set to worsen as analysts expect a second record surge in October. The high cost of these new bills will have a negative impact on businesses’ cash flow.

According to cost management comparison app Reducer, UK businesses are currently wasting £7.6 billion on bills that aren’t right for them.

There’s also the worry of suppliers going bust, increasing the uncertainty for their customers who would then be automatically switched to another supplier – and placed on high, out-of-contract rates.

To minimise the impact and find a better energy deal for your business you’ll need to compare suppliers and seek out contracts that offer more security for the future.

Analysing your spend history to identify areas where you are overspending will also help. This can be done through the likes of Reducer, which gathers the information it needs by connecting to your Xero or QuickBooks account.

Along with spiralling energy costs - and the knock-on effect of the ever-increasing price of fuel - from this month businesses also must account for the increases to Employer’s National Insurance and the National Minimum Wage – all of which will erode profit margins further.

As well as reducing business costs as much as possible, the next step is to consider how to drive sales. For many this will mean increasing prices to pass on cost increases and preserve profit margin. However, business owners should also consider how to influence the volume of sales and specifically the volume of the highest profit margin sales. By focusing on driving the volume of the most profitable product lines, the bottom line can be protected against cost increases. This is where we can help to analyse your business model and provide a focus for your sales strategy.