Back in February 2022, the sudden onset of war in Ukraine led to an immediate increase in the cost of fuel and energy affecting the price of gas, electricity, petrol and diesel for consumers and businesses alike.
The government supported with various schemes for a period of time, but this has now reduced to those consumers and business sectors which they deem to be the most in-need.
Wholesale prices have now reduced, however there are some lasting impacts of those earlier increases. Businesses who renewed their fixed price contracts during times of higher costs are still locked into those rates along with those companies who forward purchased fuel.
This particularly affects high energy users such as engineering, agriculture and manufacturing and also impacts on input costs in materials or wholesale goods for those further down the supply chain, such as those in hospitality or care homes.
Companies which operate fleets of vehicles may also find that the diesel price is still much higher than the petrol price at the pumps, something which the RAC are campaigning to fix.
So what can businesses do to manage their costs and avoid a potential cashflow crisis?
Ways your business can reduce costs of fuel & energy
- Speeding and fast acceleration pushes more fuel into the vehicle and therefore fitting speed limiters on vehicles could prevent excessive speeds. You could also educate drivers about more fuel efficient driving methods to ensure they know how to accelerate gently.
- Keeping on top of simple but effective vehicle maintenance jobs can save costs in the longer run. Clean filters, change spark plugs and check tyre pressure regularly.
- Revisit your most usual driving routes and ensure they are planned to be as efficient as possible.
- Consider whether upgrading to newer, more efficient vehicles, or even electric, could provide more cost savings overall.
- Review your utility providers once again and potentially switch if there’s a better deal, negotiating to remove penalties or be paid to exit any expensive fixed contracts.
- Many Growth Hubs or regional development agencies offer energy audits and grants for more efficient fuel generators. Find your local contact and enquire what schemes are available in your area.
- In your premises you could switch to energy-efficient light bulbs and office equipment. Install programmable thermostats for heating and make sure your workspace is insulated properly. Train your staff and get them onboard with how to reduce energy consumption.
- Review your actual costs regularly with up to date management accounts and ask your accountant to prepare financial projections so you can identify any upcoming cashflow gaps.
- Improving your own business credit score will ensure you are receiving the longest supplier credit possible. Also it is likely that the best rates and prices will be granted to those companies deemed to be lowest risk.
- Use business finance products to speed up your cashflow and have flexible credit lines in place to draw upon only when needed.
Building a financial safety net
Individual business owners can’t control what’s happening in the economy and wider world, but by building in financial cushions, you can provide yourself with tools and facilities to mitigate any immediate impact of surprise costs or unexpected events.
Having access to flexible credit
One off items of expenditure require business loans and you may not be in that position yet.
However, all businesses should have access to a permanent, flexible line of credit to provide access to a cashflow safety net.
Speak to one of our funding specialists to find out which is the most suitable facility for your own business, accessing our panel of over 100 lenders and thousands of finance products and our wealth of expertise dealing with small businesses across a range of different sectors.
Business owners who set up these cashflow lines have peace of mind and the confidence to make good business decisions, to take advantage of exciting commercial opportunities.
Contact us for more information.