– This article was last updated on 19 July 2021-
Creating a budget is a crucial part of what businesses do, whether just starting out or for the year ahead. This can be an essential task for the procurement of investment, or a crucial factor in strategic decisions. Nevertheless, many costs go unfeatured in the planning.
Here are some of the common costs that small to medium size (SME) business owners should be aware of and look out for as they seek to manage their expenses:
Low Productivity
Unanticipated and unnoticed low productivity among staff can plague even the most sophisticated organisations – yet employee productivity is surely a business’s most important asset. So consider to best utilise the workspace available, creating alternative work areas if necessary. Also, see what software solutions there are for better communication and document management.
Inefficient Management of Business Expenses
Three quarters of UK businesses are still reliant on spreadsheets and paperwork to organise their business expenses, while a similar proportion of finance leaders recognise that they need to know more about how to best reclaim VAT. A lack of awareness of automated systems and web-based solutions for business expenses is costly, yet often goes unaddressed.
Staff Turnover
In a 2014 report by Oxford Economics, it was calculated that replacing a member of staff on an average salary can cost a business more than £25,000. A well-planned process for replacing employees is therefore highly important.
Slow Payments
Research has indicated that more than 5 million SMEs in the UK have to wait a full 3 months before receiving money owed to them. So it is recommended to agree on 1 month or less for your payment terms and start spending as required as early as possible.
Registration
Even if the registration or licensing process doesn’t cost anything in itself, the time and organisation required to complete it is something that you may need to factor into your planning and budget.
Insurance Costs
Insurance for the protection of assets or to cover liability or a sudden inspection, is required for many businesses, and premiums can suddenly rise as companies grow or the conditions within which they operate change.
It is important, then, to be aware of what the likely outcomes are of anticipated events in your business or industry. We can never budget with 100% accuracy, but we can still minimise any risk and be well prepared for the unexpected.
