The winter of discontent: SMEs need a strategy to battle the energy pinch, says EFM

Already struggling in the wake of Brexit upheaval and Covid devastation, many SMEs facing the current and projected energy price rises are fearing a nails-and-coffins scenario.

But at the same time many also believe that they will be protected by existing energy supply agreements – and in most cases nothing could be further from the truth.

Here’s where some of the greatest risks lie, and what SMEs can do to minimise them.

Serviced offices? You won’t escape the hikes

Firstly, SMEs who use serviced offices will not see the energy price rises absorbed by their landlords.

We know – because we have an extensive team of outsourced Finance professionals working with SMEs in serviced offices, and they are all reporting that licence and lease terms are not stopping energy prices going up.

Likewise, in premises where the energy costs are covered by a service charge, those charges are themselves increasing in line with the energy price hike.

Get help and review your licence or lease and know your position ahead of any price increase request.

Do It Yourself? Good luck with that…

For those SMEs that can contract their own energy suppliers, the “can” is now more theoretical than actual! We have reports of energy contracts ending and the new rates offered by suppliers being 600% higher than previously. (That’s a big “cannot” in any business’s book).

Worse, attempts to negotiate a more sensible rate have resulted in suppliers cutting all communication with their SME clients and simply putting them onto a risky variable rate, without so much as a by-your-leave.

Shopping around does little good, either. Many suppliers are now effectively closed to new customers and even those that aren’t often demand credit ratings or trading limits that are unrealistic if SME’s have a weak balance sheet or rating.

Where Finance expertise can help

What, then, are the options open to SMEs to prevent their business being swallowed by energy costs?

This is where outsourced Finance professionals like EFM can step in to make a real difference.

Firstly, Finance experts are in a position not only to consider and mitigate the knock-on effects of energy cost rises, but to review SMEs’ expenditure and increase their efficiencies, helping to find hidden savings that can offset energy cost impacts, and using data to help make informed decisions about increasing prices to recover costs and to forecast cashflow.

Secondly, and specifically with regard to energy, EFM can access a broker network that can deliver significant efficiency and price savings over both serviced and self-contracted approaches.

And lastly, drawing on Finance expertise as and when it is required – as per EFM’s model – rather than paying costly salary bills for full-time employed Finance teams means that SME clients facing spiralling energy prices are not left battling unnecessary overheads as well.

In fact, when it comes to rising energy costs, the fightback’s all about Finance.

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