Why firms need to watch their business costs

The cost of doing business is increasing quicker than the rate of inflation, according to new data, showcasing the need for firms to keep a close eye on their finances.


According to the Forum of Private Business, the costs of doing business are rising 3.1% faster than the rate of inflation.


The UK rate of inflation has fallen from 2.7% to 1.6% but the business costs are up by 4.7%, showing that higher levels of funding are required to operate.


Despite the increase, the FPB had initially predicted that costs would rise by 6% earlier in the year, so the situation may be slowly improving.


Of the businesses surveyed, 63% revealed that their working costs had increased with energy and marketing the main risers – noted by 70% and 76% respectively.


The main issue for four in ten of these businesses was that they could not pass rising costs on to customers, leading to cost-cutting elsewhere within a firm.


This could have negative connotations in that other parts of the business could then suffer as a result, placing further financial strain on a company.


For firms with concerns over their finances, seeking corporate recovery advice could provide them with a set of possible solutions.


Increasing transport and energy costs are the key drivers of rising expenses, while other areas such as marketing, advertising, research and development can also require a considerable outlay.


Despite an improving economic outlook, the latest figures serve as a reminder for many smaller businesses to keep a close eye on their outgoings.


Potential interest rate changes could have an impact, as could calls to increase the minimum wage, meaning many business may need to act soon.


There are plenty of ways for businesses to reduce their spending, while they may also be spending money on unnecessary services.


By Phil Smith


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