South East: 2011 will be 'most difficult year yet'

For many businesses in the South East, 2011 will be the most difficult year of the economic cycle. As public sector cuts take effect and consumer confidence falls, companies will need to find new ways to cut costs.

Malcolm Kimber, president of the South East Society of Chartered Accountants (SESCA), said: “Although recent figures showed a fall, inflation is still high. This is just one of a number of pressure points facing businesses, especially small and medium sized companies (SMEs). Cutting costs is one measure that is within a business’s control though and can make a difference between a profit and a loss.”

To offset cost increases SESCA has the following advice:

1. Consider the product or service
Re-examine the basics of your product or service – can you add value (selling price) for little extra cost or provide the same for less cost? Cheap materials can often diminish the end result which in turn will damage the brand and affect sales. Ensure that any cuts made don’t diminish the unique selling point (USP) of your offering.

2. Find cheaper sources of supply
Many suppliers will offer new account benefits and there may be significant benefits to switching. New suppliers, competitive pricing and improved alternatives could have moved things on considerably since you last reviewed your supplier.

3. Tackle overheads
Overheads are costs such as people, space and energy costs. Using any or all of these inefficiently is costly. Organising workloads and workspaces can have significant improvements. Think carefully before making redundancies though – consider alternatives such as changing staff hours.

4. Moving goods and services
If you monitor the costs of transporting goods and people you will have seen your costs escalate in the last few months. It is unlikely that the price of fuel will come down soon so perhaps now is the time to evaluate possible alternatives.

5. Technology
Using technology can help in a number of ways – working smarter, not harder. Better communications technology can reduce the need for meetings. Simple technology improvements like email instead of post for invoices could save thousands in stamps alone and Skype makes video conferencing free.

6. Financing costs
If you’ve got any form of borrowing, it might be costing you dearly not only in terms of interest payments but also arrangement fees and costs of reviews. In addition covenants on loans and overdrafts can increase costs. So make sure you have the right source of finance for the need, and look for ways to pay down debt.

7. Taxation
Is your business fully utilising the allowances and reliefs to which it is entitled? Even after the 2011 budget reductions relief for pension payments are still generous. What about the NHI holiday for start-ups in regions outside the South of England?

Kimber added: “The second quarter will be difficult because of tax increases and public sector cuts. Businesses need to be on their metal to conserve cash and cut costs. This will put them in a good place when the recovery becomes more firmly established. A conversation with a chartered accountant about potential cost savings may pay dividends.”