Between Brexit and the pandemic, Britain’s SMEs have had to cover plenty of unexpected fees over the past 18 months.
Between Brexit and the pandemic, Britain’s SMEs have had to cover plenty of unexpected fees over the past 18 months. According to research from business finance specialist, Equals Money, the average UK SME spends £608 every month on financial charges, fees and other expenses tacked on to whatever it is they’re actually paying for.
With disruption set to continue for the foreseeable future, it’s important that SMEs are prepared for further fees. Here is how SMEs can make the best of their relationship with suppliers, leverage technology for smarter forecasting, and save money while spending internationally.
Working effectively with suppliers
Problems with a supplier can often result in unexpected fees. In the Equals Money survey of 1,050 UK SME leaders, the most common costly decisions they reported were making rigid contracts with suppliers (20 percent) and choosing the wrong suppliers altogether (17 percent). As supply and demand continue to fluctuate – and especially in light of widespread shortages anticipated toward the end of this year – it’s important that businesses manage their relationships with suppliers effectively.
When choosing suppliers, price shouldn’t be the sole consideration. Businesses also need to consider value for money and other factors such as reliability and flexibility. At a time when certainty is in short supply, SMEs should consider paying a little bit more for a shorter or more easily re-negotiated contract.
Communicating with suppliers is also key. No supplier is looking to put a small business under, but there’s only so much flexibility they can offer on short notice. Remaining in contact with a representative of the supplier ensures that both sides have insight into developing trends and can adapt as necessary.
Forecasting fluctuating costs
Avoiding overdraft fees depends on a clear view of cashflow and a robust forecasting function. The SME leaders Equals Money spoke to found costs surrounding employees the hardest to forecast. Almost two in five (39 percent) listed salaries as tough to predict, while 34 percent found that expenses presented a challenge. Other expenditures that complicated forecasting included IT equipment at 34 percent, professional fees at 27 percent, and software and subscriptions at 17 percent.
To overcome these challenges, businesses need to make the most of the technology available to them. Currently, just 16 percent of the SMEs take advantage of the advanced forecasting software on the market. Plenty of forecasting solutions are available at competitive monthly prices, and many options even automatically gather inputs from other platforms such as an organisation’s accounting and expense management software to ensure that data is never overlooked.
Modern solutions also exist for managing expenses, although only 34 percent of businesses make use of them. The traditional paper receipt-based system for managing expenses is time-consuming and stressful, and it introduces considerable latency, which makes forecasting even more challenging. Instead, modern solutions enable businesses to instantaneously load cards with allocated budgets and spending restrictions, maintain real-time visibility over spending, and feed data directly into forecasts.
Organisations that leverage integrated solutions for accounting, forecasting and expense management will have a significant advantage. Being able to identify potential issues – many systems can automatically raise the alarm about unusual data – can provide businesses valuable time to make changes and avert catastrophe.
Paying in other currencies
Every one of the SME leaders we spoke to pays for at least one software subscription – and more than half pay for these subscriptions in either euros (28 percent) or US dollars (26 percent). Businesses operating across borders may also have to pay salaries and suppliers in other currencies.
Sending money internationally, especially using banks, is a major source of fees. Despite the frequency of paying overseas, fewer than half (48 percent) of businesses that send money abroad work with a currency specialist to do so.
Currency specialists can provide more tailored support for SMEs, including regular insights into currency markets, a wider range of payment options to limit the risk of fluctuating rates and dedicated account managers. Suppliers with local clearing accounts will also be able to lower the processing cost and negate the additional fees traditionally associated with international transfers.