Increased Operating Costs are Putting a Strain on SMEs
Despite 2014 being a strong year for UK SMEs, struggles are still apparent surrounding the increase in their operating costs.
2014 saw a boost in the number of start-ups and entrepreneurs with a record 581,173 businesses file at Companies House. It has also been discussed recently that the UK offers the third lowest start-up costs across the world which seems to entice new companies in, but the on-going operating costs causes them problems down the line.
Figures from Close Brothers Business Barometer show 59% of SMEs are experiencing increased operating costs, and that 58% of this figure say that the increase in cost is having a negative effect on their cash flow.
The most prominent operating costs that are causing this pressure are energy bills and the cost of purchasing raw materials and stock.
Mike Randall, CEO, Close Brothers Asset Finance says: “We work with businesses across a range of sectors and we can see that they are all concerned about operating costs, which is unsurprising given the energy requirements, raw materials and machinery that many require. This is a situation that is leading to increased pressure on already-tight margins and it is entirely possible that operational costs will continue to rise for the foreseeable future.”
It is of the opinion that all businesses; micro, small, medium or large need to have a realistic cash flow forecast in place. It is also proposed that a business plan will give company guidelines to work alongside in order to try and maintain an appropriate cash flow throughout the trading year. By implementing small things such as these, it should help a company to see where any struggles will lie in future and give them time to prepare for them.