By David Richmond, Accounting Partner, Armstrong Watson Accountants, Business and Financial Advisers

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 until later this year, many businesses will be looking at ways they can minimise the impact on their cashflow.

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 and that could worsen with analysts expecting a second record surge in 2022. 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, there are additional costs for businesses around the corner – increases to employer’s National Insurance and Corporation Tax – and these will erode profit margins further.

Once you have reduced 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.

For more information, please get in touch with David Richmond on 01756 620025 david.richmond@armstrongwatson.co.uk