As accountants, we are uniquely positioned to be the key advisor to business owners, as we have a close business relationship throughout the year. As such, one of the first things we would suggest is looking at the turnover of your business and whether your prices could be raised to offset the increased energy costs or other costs that might be impacting on your business.
It is also advisable to review other overheads as well, for example, insurances to see whether you could make savings elsewhere to compensate for the increase in energy costs. It is important to identify whether you think that your business is at risk from your exposure to energy costs. In any set of management accounts, it is important to bring in a revised estimate for energy costs.
It is also important to consider your cash flow forecast to identify pinch points across the year and if you do get into difficulty, you should seek business recovery or insolvency advice at the earliest opportunity. If there are any difficulties in paying your bills, it is advisable to discuss your situation with your energy company as soon as you can.
Addressing the issue head on
It is important to address this issue head on because many SMEs are heavy users of energy and so they will undoubtedly face very much larger bills and more quickly, as a result.
The energy crisis is not happening in isolation; businesses are dealing with many more cost increases right now, including larger salaries to fund, higher fuel prices and higher raw material prices generally, as well as the added difficulties and delays in sourcing supplies.
With a warning of a recession on the cards for later this year, the tipping point for SMEs can come incredibly quickly, so this cannot be ignored otherwise profitable firms are at risk of failing due to a cash crunch.
Weathering the storm
Taking a proactive approach is key – you might want to consider taking an energy survey. This could be a good idea to help you identify where savings could be made and where your energy is currently being lost or wasted.
Your employees can also help to ease the burden and make a real difference to your costs – you might want to encourage them to adopt best practice for energy conservation – this is an easy win to keep usage to manageable levels.
We can also give advice on the capital allowances that are available to you on sourcing energy conservation materials or measures. You can claim capital allowances when you buy energy efficient, or low or zero-carbon technology for your business. This reduces the amount of tax you pay.
Agreeing a fixed price for your energy would be a smart move; unfortunately, it seems prices are only going one way, and this will give certainty on cost. Another consideration you might want to make is moving your business to a more energy efficient premises if, of course, your situation allows.
For more information, please contact me or your local Westcotts office.