Why high costs are a concern for SMEs
Set against a backdrop of an improving economy, many small businesses in the UK are still facing large running costs in their battle to succeed.
And that is not the only challenge faced by SMEs and entrepreneurs as many lack the necessary resources and time to be cost-effective.
Everyday costs in these smaller firms are therefore a lot higher per employee than for larger businesses and corporations. This has resulted in a growing number of SMEs entering into partnership with larger firms to use their expertise and facilities at preferential rates.
However, most of these businesses still need to proceed on their own, meaning they have to tackle the issues they face in order to be successful.
For instance, the compliance bill for firms with nine employees or fewer equates to around £164 per person – almost seven times the cost for companies with more than 50 employees.
Compliance costs are the main expenditure for small businesses, with spending on advice one of the main contributing factors.
SMEs have noted a £713 rise in their compliance bill in 2014, with the total cost of compliance now at more than £19.2 billion, up 4% from 2013.
The Forum of Private Business’ latest business survey revealed that costs are rising faster than revenues, with 38% of firms saying they are unwilling to pass on the costs to the customer.
The need for increasing pension contributions and the possibility of wage rises adds further pressures to company finances, showing why good financial awareness is essential.
In some cases business recovery is required to ensure a firm is run in the correct manner or to identify aspects where improvements could be made.
Complying with regulation is essential for small businesses and the levels of work required are increasing on a regular basis.
Accessing available finance can help ease some of the burden although businesses also need to be aware of the different options available to them.
By Phil Smith