The Cost Of Living Impact On Small Businesses

None of us are strangers to the ongoing cost of living crisis and the impact it is having on our personal finances. Rising energy costs, the war in Ukraine, sky-high inflation and tax increases are all contributing to the challenging economic climate that we’re all facing.

Businesses are inevitably feeling the pinch too, as the cost of living crisis (or often referred to as ‘the cost of doing business crisis’) forces suppliers to increase their prices and consumers to tighten their pockets.

Small businesses and the cost of living crisis

Our 5.5 million small businesses are the backbone of the UK economy, making up over 99% of the business population. And although brilliantly resilient, resourceful and adaptable, many small businesses struggle more with fluctuations and price hikes than their larger counterparts.

In fact, data from Novuna Business Finance suggests that a staggering 92% of small businesses are worried about how the cost of living crisis will impact them. Many are concerned about how their business will absorb additional costs, from rising energy prices, supplier increases and shortages and employee wages going up, with 38% feeling unable to pass these on to the consumer.

So if you’re reluctant to increase your prices, what are some of the other ways you can adapt to the cost of living crisis?

1. Scrutinise your spending

It may seem like an obvious suggestion, but taking the time to thoroughly scrutinise your spending is a good way to identify key areas where you could save money. For example, are you paying for subscriptions which are no longer necessary? Could you make energy-efficient improvements to your office space? Or perhaps you could reduce your operating costs or swap to a cheaper, domestic supplier (which will likely save you money in shipping and import costs AND improve your carbon footprint!).

2. Encourage hybrid or remote working

For many businesses, hybrid working is the future. It can help you to cut down on energy costs in your office space, whilst also promoting a healthier work-life balance for your employees – boosting productivity and cutting down on commuting costs. If it’s a plausible option for your business, it’s definitely worth considering.

3. Use technology to your advantage

In today’s market, there’s technology out there to help you with pretty much anything; from accounting, payroll, bookkeeping and HR to social media, content creation and more. Take a look to see if you could streamline your processes and make them run more efficiently and cost-effectively by automating them via digital software.

4. Reward your customers

At a time when customer spending is at an all-time low, rewarding customers for their loyalty can be a great incentive for encouraging them back into your store. You may wish to try a loyalty scheme or other reward schemes, or perhaps even a payment plan to help your customers spread the cost of their purchase.

5. Make use of government support

The Energy Bill Relief Scheme is still in place until the end of March, with the government recently announcing that the Energy Bills Discount Scheme will then begin in April until March 2024. For further details about the scheme, please visit the government website.

If you’d like further advice or support regarding your business and its accounts or would like information about digital bookkeeping software, please don’t hesitate to get in touch with our team of accountants. We offer a range of business accounting services, which can be adapted to suit your business’s needs.