SMEs not managing transport costs

A third of small businesses have taken no measures to better manage their transport costs, according to data released by Enterprise Rent-A-Car.

The survey found that despite 69% of small companies seeing their traffic costs rise 32% have done nothing to make more efficient use of their transport options.

The data also revealed that almost a third of small firms do not communicate their transport policy to their staff, resulting in a fundamental lack of control over transport costs.

"A sober and professional examination of any company's transport practices is likely to highlight at least a couple of practical steps that can be taken to cut costs. It's staggering that so few small businesses are taking the opportunity to find those efficiencies and put them into action," said Rob Ingram, director of business Rental at Enterprise Rent-A-Car.

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Small business spending shows signs of recovering confidence

By the end of Q2, spending on Visa Business Cards, which are designed for small businesses, saw a return to pre-September levels. In June 2009 a record number of transactions were made on Visa Business Cards, up 19% on the previous year. The amount spent was also up 11% year-on-year in June 2009.

Two spending categories in particular have seen large increases in recent months according to Visa’s data. These are:

* Temporary Staff Recruitment: After falling 22% between Q3 and Q4 in 2008, and a further 17% in Q1, the value of payments on Visa Business Cards bounced back 23% in Q2 2009. Overall the number of transactions made on Visa Business Cards for temporary staff recruitment increased 72% in Q2 compared to Q1

* Travel Agency spend: Whilst travel has been widely reported as one of the sectors hit hardest by the recession, the number of transactions made on Visa Business Cards increased 10% year-on- year in June 2009. After a trend of decline in the value of payments of 26% between Q3 and Q4 2008 there was a pick up of 5% in Q1 and more marked increase of 13% in Q2

Interestingly, although payments to travel agents are increasing, travel and accommodation continue to be areas where small businesses are tightly controlling budgets. The number of Visa Business Card transactions made on air travel has returned to pre-October levels but the value of those transactions has stayed much lower – on average 3% lower in Q1 and Q2 2009 compared to the same period in 2008. The pattern is similar for hotel & accommodation expenditure but the value of transactions has declined much further – on average 19% lower during the first half of the year.

Other categories which continue to be a focus for cost cutting are Printing and Advertising; and Computer Equipment & Services. During January – June 2009, they remained respectively on average 27% and 11% below the same period during 2008 in terms of the value of transactions.

Nigel Eaton, Vice President, Visa Commercial said: “It’s too early to talk about a recovery in the small business economy but the last quarter has seen a marked reversal of the downward trend in spending. Whilst businesses are still aiming to cut costs wherever possible, uncertainty about the rest of 2009 is having a strategic impact on some areas of spending – for example a surge in recruiting for the short rather than long-term.

“Meanwhile, businesses are looking to take advantage of the benefits of cards such as helping to track and control cash flow and protect against potential losses when ordering goods and services which later on may not be received. This may also be one of the reasons the use of travel agents who can also help with managing costs, appears to be more popular.

“Businesses are seeking more secure, convenient, and quick to use payment options that allow them to plan, pay online, and control their business spending over the short and medium term. Visa Business Cards offer a number of ways to do this including debit, prepaid and interest-free charge cards”.

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Small businesses running costs continue to fall

Small businesses across the UK are continuing to experience unprecedented levels of deflation resulting in rapidly declining operating costs. The cost of running a small business has fallen to -1.4 per cent deflation over Q1 2009, according to the latest Business Inflation Guide (BIG) from MORE TH>N BUSINESS.The sharp decline marks the second consecutive quarter of sustained deflation for the small business community. In Q4 2008 costs plunged to -2.9 per cent deflation. Declining labour, advertising, vehicle and raw material costs have all contributed to the continuing falls in Q1 2009, however MORE TH>N BUSINESS warns profit margins still remain under huge stress due to low demand for products and services.

Read more: http://newsroom.morethan.com/small-businesses-running-costs-continue-to-fall_649

Source: More Than

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Many small firms will struggle to pay the government's recent 2p rise in fuel duty, according to the Forum of Private Business (FPB).

The FPB has warned that at a time when many small firms are struggling financially the 2p rise means that the cost of fuel has increased 6% in less than 18 months.

"Cost increases of this scale are not sustainable at the best of times, let alone in a recession," said the FPB's chief executive, Phil Orford.

"There is no justifiable reason to raise duty on fuel further. The government should freeze additional fuel duty increases in 2010 to help protect small businesses and jobs."

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Decrease in NI costs could boost small businesses

Small business owners believe that a reduction in employers' National Insurance contribution rate in the forthcoming Budget would provide the biggest boost for their business, according to a new survey by Intuit.

More than 45% of those surveyed listed this as the number one measure that they wanted to see the Chancellor implement, followed by 33% who called tighter government controls of bank charges and 27% who want a further deferment of the rate of increase of corporation tax.

Small firm owners are pessimistic over the budget, with only 10% of respondents believing that April's Budget will include measures that will have a positive impact on their businesses.

Read more: http://www.newbusiness.co.uk/news/ni-reduction-tops-small-firm-owners-wish-list-april-budget

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It is important to cut costs in turbulent conditions - how can IT help?

As the current economic storm gathers up pace, more and more businesses are being affected. So how can IT help you fight through these turbulent conditions?

By using different IT tools, you can empower your organisation to work smarter, not just harder….saving money and time across the board.

There hasn’t been a more important time for you to take a good look at where your money is going and start making bold decisions -which could be the difference between making it through the recession and not.

Here are some examples of savings you can start making within your business today with IT:

- Reduce travel costs by 20 - 40%* through switching to web and video conferencing
- Lower office costs saving 30 - 40%* through enabling employees to work from anywhere
- Cut the costs of hardware and power usage through use of virtualisation technologies
- Set up intranet sites quickly and cost effectively enabling teams and individuals to be more productive

*Forrester Research, October 2007 - Total Economic Impact of Microsoft Unified Communications Products and Services.

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Cost of running a business falls

The data revealed that costs for SMEs fell by 2.9% in the Q4/08, mainly due to the decline in the price of fuel and raw materials. Energy prices dropped over 18% and raw materials almost 12% in the last three months of 2008.

Despite the decrease in the price of goods small firms have been hit by a decline in consumer confidence and spending and the lack of inflation is resulting in a very depressed marketplace.

"Small businesses now have to quickly adjust to this deflationary environment with some benefiting more than others," said Mike Bowman, head of More Than Business.

"However, deflation is bad news for businesses that have their assets tied to property or large amounts of stock already purchased as it will be losing value day by day."

Source: More Than

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Fraud costs SMEs millions

Small companies are loosing up to £800m a year to fraud and online crime, according to a survey by the Federation of Small Business (FSB).

Over 50% of small businesses reported that they had been victims of crime in the last 12 months. Of those surveyed, 37% had problems with phishing emails, and 15% were victims of card fraud and IT problems caused by viruses and hackers.

"E-crime is becoming an increasingly serious issue for small firms, which are losing up to £800m a year to fraud and online crime - a cost which could have a significant impact on a small business," said Mike Cherry, FSB home affairs chairman.

The survey also revealed that a third of small firms do not report fraud or online crime to the police or their banks because of a lack of faith in the system and that 53% want clearer information about how and where they should report this type of crime.

Over 80% of those surveyed revealed that they would report fraud if a designated reporting centre was set up to gather data and follow through with prosecutions, like the centre that is already operating in Wales.

Source: http://www.newbusiness.co.uk

Profit is sanity

‘Turnover is vanity, profit is sanity’ – so the business saying goes. But what does that mean in practice? In an economic downturn, sales often start to fall and so businesses scramble to replace this lost turnover.

Competition intensifies and prices are cut to win business. But instead of replacing lost turnover to help cover your costs, you have unwittingly taken on unprofitable business that will leave you with a loss.

Is that new business worth it?

• Cost each product or service: do not take on business if it does not make a profit
• Look at ways to reduce costs: this will allow you more scope to reduce prices
• Be wary of big orders: this can lead to overtrading when the business takes on more work than it can handle and runs out of money to finance it

Maintain Profit Margins

The flip side of price is cost – you can maintain profit margins even if you are reducing prices, provided you also reduce the cost of what you are making or providing.

It is vital to keep overheads down but avoid cutting:

• Stock levels to such a low point that you cannot fulfil new orders
• Staff you need to run your business
• Sales and marketing expenditure which you need to attract new business
• Investment in equipment or product development that enables you to remain competitive
• Insurance as you could leave your business inadequately covered

On cutting costs...

• Don’t get emotionally involved. Make hard-headed business decisions. You may want to keep a particular office open because it was where you started or a certain product line because you created it. If it is losing you money, you have to lose it – or risk losing your business.
• Make decisions based on the facts. A “gut feel” is not good enough. It is only when you see what is profitable and what is not that you can make a decision.
• Start with non-essential expenditure – then tackle fixed costs such as utilities, stationery and other outgoings.
• Pass on price cuts. If you are under pressure to cut your prices ask your suppliers to do the same – if you can. If they won’t negotiate on price ask for longer payment periods or shop around.

Are you making the most of management information?

Knowing which products are going to sell best and bring in the most profits and which costs are rising and could hit your margins, is vital. For that, you need to have the right management information.

The key difference between this economic downturn and the recession of the early 1990s is information technology.

The Key Barometers

There are usually four or five barometers that indicate the health of any business. You need these to be annual rolling totals either on a monthly or even a weekly basis. Check the actual figures against those forecasted and against the previous year’s. These key indicators will vary from business to business but could include:

• Turnover – not just the total but some key figures.
• Enquiries – or foot traffic, number of visits to your website or another key indicator of interest in your product or service.
• Stock – if too much of one item is piling up it is a reflection that sales of that particular product are falling. The danger is that too much cashflow will be tied up when you need it for day-to-day needs.
• Costs – keep track of how these are rising. As has been seen in recent months, some costs – such as fuel – can rise rapidly.
• Late payments – you need to keep a daily eye on how quickly money is coming in so you can spot potential problems early on.

Then you need to act on the information. For example, by selling off surplus stock or putting up prices to reflect rising costs.

[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]

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