Lee Murphy, managing director at The Accountancy Partnership, said: “The scale of the problems entrepreneurs currently face is on par with the challenges of the pandemic, and continued instability and inflation is making it more costly than ever before to run a small business.
“Small business owners now face shop prices 6.6% higher than they were this time last year. This is combined with energy bills that are predicted to rise to more than £4,000 from April, following the energy cap being limited to six months.
“These inflationary pressures are likely to bring many businesses to boiling point. Unfortunately, this is becoming a reality for some businesses as insolvencies were up 40% in the UK in the last quarter, compared to the same period last year.
“Sadly, the extra burden that food inflation is causing for families is also something that businesses need to think about. People who work from home, and employers who provide amenities to staff will all feel the extra pinch. It’s important they take time to evaluate their spending habits beyond what their bank statements say and consider to what extent some costs really add value to the company. It may be something that is being spent on out of habit alone, rather than a necessary expense.
“Managing cash flow is also key to maximising savings. This is particularly important for very small businesses that don’t have much in reserve as a buffer. Monitoring the timing of what’s coming in versus what’s going out can help to avoid unnecessary spending caused by taking out expensive short-term finance to cover the gap before their own clients pay. Looking into bookkeeping software can be a great help as it will automate most of the process, removing the admin for the business owner.”