In this post-pandemic world, one challenge that has come to the fore is that the cost of energy has the potential to make or break your business.
Nearly two thirds of businesses report that energy costs account for 5 to 20% of their total expenditure and, as wholesale energy prices soar, the cost of electricity and gas continues to increase.
Unlike the average domestic household, businesses are not protected by energy price caps. So, what action can business owners take to minimise the impact of rising costs?
From energy efficiency measures to seeking professional advice, we have compiled a list of methods to effectively reduce electricity and gas costs within your business.
How to reduce your energy costs
- Turn off equipment – Leaving a piece of equipment in ‘stand by’ mode is expensive and an additional cost that is easily avoidable. Make sure all computers, printers and other electrical equipment are shut down and switched off between uses.
- Monitor energy usage – If you haven’t already got a smart meter, now is the time to invest in one. Smart meters display the real-time cost of energy consumption, which can help to identify high usage areas within your business sooner rather than later.
- Double-check your bills – Never assume that your bills are correct. Check your bills each month to ensure you aren’t paying the price for a supplier’s error, such as an unexplained charge.
- Switch your energy supplier – If your contract is coming to an end, carry out some price comparison research online to make sure you are getting a competitive deal from your current supplier. Switching energy suppliers doesn’t have to be a painful process.
- Seek professional advice – A recent report found that 38% of SMEs were not aware of the financial assistance available to them through government support. Our insolvency experts can help you to access funding that will reduce the financial pressure of energy costs.
What to do if you can’t pay your energy bills
It is vital to seek professional advice as soon as possible if you are struggling to pay your electricity and gas bills. Failure to pay could lead to a supplier cutting off your energy supply, which could prevent your business from trading.
Our expert Business Recovery & Insolvency team can help you to decide on the best path forward for both your business and your finances.
Our formal rescue and restructure options include:
- Sourcing funding and finance – If your business is low on funds due to irregular cash flow issues, we can assist you in sourcing external funding and finance. Invoice finance is one option available to companies that operate within industries where late payment invoices are common. Invoice finance allows partial access to outstanding invoice payments, giving you more certainty over your cash flow.
- Company Voluntary Arrangement (CVA) – If the financial difficulties you are experiencing are short-term, you may be eligible to apply for a CVA. As a licensed insolvency practitioner, we would negotiate with your creditors to reach a more affordable debt repayment agreement. A CVA enables your business to continue trading while you pay off your debts over a fixed time period.
- Administration – If your business is at risk of a ‘winding-up petition’, Administration could provide you with a valuable breathing period by preventing any legal action from creditors, whilst protecting the Company’s business and assets.
Pursuing voluntary liquidation
If our rescue and restructure options are deemed unsuitable for your business, Creditors’ Voluntary Liquidation (CVL) may be the only solution. A CVL enables you and any company directors to fulfil your legal obligations, while minimising your risk of receiving misconduct or wrongful trading allegations.
You may also be eligible to claim director redundancy if you opt for voluntary liquidation, which could fund the process and provide you with some financial stability going forward.
Our Business Recovery & Insolvency experts can help you to navigate the challenging and complex liquidation process from start to successful finish.
Contact us for further advice
When it comes to financial advice, time is of the essence, so if your company is struggling in the face of rising energy costs and other financial difficulties, contact our Business Recovery & Insolvency experts for tailored next step advice. Prevention is always better than cure – the sooner you act, the more rescue and restructure options available to you.
PKF Smith Cooper is a multi-award winning business and accountancy firm based in the Midlands. We provide business owners across the UK with specialist support in a variety of areas including insolvency and business advisory services.