This year’s UK Business Risk Report unsurprisingly found that more than a third (34%) of UK business leaders cite financial uncertainty as their number one concern. This figure rises to 44% for leaders of microbusinesses (0-5 employees), who may be more vulnerable to financial shocks.
Interestingly though, these fears don’t seem to be affecting the optimism of business leaders. The majority expect business performance to improve, citing:
- sales growth;
- improved productivity and profitability;
- and plans for increased capital investment.
Growing a business above and beyond its pre-existing capacity will inevitably involve additional costs. From:
- hiring extra employees;
- buying new equipment or machinery;
- or holding more inventory.
As businesses continue to face a 'cost-of-doing-business crisis,' these extra costs could impact profit margins. They may also affect businesses' ability to invest in further growth.
While inflation has fallen in recent months, it remains high compared to the Bank of England’s target of 2%.2
Meanwhile, energy bills, which again have fallen slightly over recent months, seem set to rise again in January 2024.3
All this means that, for businesses planning for growth, reducing business costs is likely to be more important than ever.
Businesses can take several steps to reduce costs without affecting their ability to thrive and grow sustainably. These measures can also help avoid exposing businesses to more risks.
How to reduce costs in the workplace: Energy bills
Higher-than-usual energy bills have been a significant problem for businesses for some time. With bills expected to rise again in January 2024, this issue is not going away. This is certainly one area where businesses can manage workplace costs effectively. Often without the need for significant investment.
The Energy Savings Trust estimates that small and medium enterprises (SMEs) could reduce energy bills by as much as 25%. This can be achieved by adopting a range of energy efficiency measures and driving behavioural change in the workforce. This could include simple measures, such as switching to low-energy lighting. It can also involve encouraging all employees to turn off lights in unused rooms.
How to reduce costs in the workplace: Late payments
Late payments may not usually be viewed as a workplace cost, but they can still have a serious impact. They can affect cash flow and lead to extra costs for credit control resources and legal fees.
This has not escaped the attention of business leaders. 35% of whom are expecting to see late payments increase over the next twelve months.4
One solution is to invest in trade credit insurance. Although, this cover is primarily designed to protect against non-payment for goods or services, it can unlock a wealth of benefits. A well-designed trade credit programme can also be a tool for business growth.
Trade credit insurance protects against lost revenue and unforeseen costs. It can also improve and unlock access to financing. It can also help mitigate risks before they materialise and optimise your businesses’ working capital.5
How to reduce costs in the workplace: Supply chain savings
A long and complex supply chain can be risky, potentially adding extra costs to the business. This can be both managing the supply chain and the impact when things go wrong.5
This, along with the desire to reduce supply costs, is likely why nearly three-quarters (74%) of businesses have recently reviewed their supplier contracts and relationships.4
The key in any supply chain review is to build resilience into the supply chain without adding extra costs. There are many ways to do that, including:
- Vetting suppliers thoroughly, looking at their financial health and asking for references. Again, something that trade credit insurance can incorporate.
- Developing a crisis plan for when supply issues do occur.
- Having ‘Plan B’ suppliers in place to minimise disruption if a main supplier is unable to deliver.
- Investing in insurance to soften the financial blow if supply issues do rear their head. That could include trade credit insurance to cover the failure of service provision by a supplier. Or contingent business interruption insurance to protect against physical damage caused by an incident at a supplier or customer premises.5
How to reduce costs in the workplace: Cost-effective employee benefits
Many business leaders are concerned about attracting and retaining talent. According to this year’s UK Business Risk Report, employee wellbeing and benefits are now under the spotlight.
In fact, many employees now cite wellbeing as a key deciding factor when applying for a new job. So an organised and targeted approach to providing employee benefits can deliver huge benefits. Businesses could see improvements in both employee wellbeing and business outcomes like retention and productivity.
That said, there’s no single approach to creating the right employee benefits package for your business. The key is to understand the wellbeing benefits that your employees value the most. Gen Z for example have much different needs to the generations that have come before.6
How to reduce costs in the workplace: Health and safety
It’s often overlooked, but health and safety in the workplace can have a significant impact on workplace costs. Decreased productivity, disruption following an incident, and even Health and Safety Executive (HSE) fines can all have a detrimental impact on your business.
Poor health and safety management systems get expensive quickly. Ill health, injuries and accidents stack up, with a wide range of related knock-on costs. The most recently available figures tell their own story:
- HSE fines amounted to £26.9 million in 2020/21.
- And the total cost of health and safety incidents was estimated at £18.8 billion in 2019/20.5
There are several ways you can adopt smarter health and safety compliance in your business in a bid to reduce related costs:
- Safety incentive programmes recognise workers for reporting injuries, illnesses, near misses, or hazards.
- Safety culture surveys and behaviour surveys are a great way to assess your business’s safety culture and employee behaviour.
- Accredited health and safety training courses are not only an important exercise, but also a legal requirement.
Download our safety and health at work guide for more tips. It provides guidance on maintaining an effective health and safety risk management system.
How to reduce costs in the workplace: Efficient insurance protection
Recent research found that nearly one in five (19%) SMEs have reduced their insurance cover in the past 12 months. This change was made in response to rising insurance premiums.5 At the same time, they’ve also increased business costs more generally.7
Yet, according to a study by Deloitte, most UK businesses are focused on finding ‘best value’ insurance. Rather than cancelling policies outright. That means striking a balance between securing the right cover and the right protection, which can be a complex and involved process.
For many, the best approach is to work with a trusted advisor. For example, an insurance broker. They can help you understand the risks the business must protect against. The broker can then help to develop a cost-effective programme of insurance.
On top of that, premium finance can help businesses to manage the cost of insurance, without compromising on protection. This can be done simply by allowing premiums to be paid in instalments rather than as a single lump sum.
We’re here to help
In many of the areas mentioned above businesses can benefit from expert advice and support. This help can come from industry associations, professional advisors, and their insurance brokers. If you need help and support, get in touch with a Marsh Commercial advisor. They can assist with everything from risk management and insurance to employee benefits.
Or find HR employee benefits and risk management solutions on our new digital marketplace. Take a tour today.
Sources
1. fsb.org.uk/cost-of-doing-business-crisis
2. bankofengland.co.uk/monetary-policy/inflation
3. bbc.co.uk/news/business-58090533
4. Marsh 2023 UK Business Risk Report
5. marsh.com/us/uk-gimi-q1-2022
6. marsh.com/attract-retain-engage-tomorrows-leaders-today
7. allianz.co.uk/one-in-five-smes-cut-insurance-cover-amid-cost-of-living-crisis
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