How businesses can cope with the cost-of-living crisis

Reduce energy costs

High energy prices are one of the biggest contributors to the cost of doing business crisis. With the Government’s Energy Bill Relief Scheme, which discounts businesses’ energy bills, due to be significantly scaled back from 1st April 2023, the issue is likely to continue to pose significant challenges for many businesses.

There are steps you can take to reduce your energy costs such as using LED lightbulbs, switching off electrical equipment at the end of the day, installing building insulation and using smart meters to better monitor your energy usage.

For more advice on how to deal with rising energy costs, read this guide.

Switch to hybrid working

Operating a physical office for your business can add significant costs so switching to home or hybrid working might be a solution. It allows you to make savings in areas such as rent, utility bills and office supplies.

Running a business from home as a sole trader also means you can get tax relief on certain expenses, while for businesses with staff, home working can lead to increased employee productivity, motivation and wellbeing.

It must be noted that home working isn’t without its challenges. It’s not a method of working that works for everyone and can lead to employees feeling isolated. Staff can also be distracted at home and morale can suffer due to reduced face-to-face interaction.

Providing occasional access to a co-working space where employees can meet might help. The costs are likely to be less than paying for a dedicated full time business premises. 

Embrace technology

Business owners often waste time on admin which could be better spent on activities that boost sales. A YouGov survey revealed that a quarter of small businesses admit to losing an average of 10 hours per week on administrative tasks.

By embracing technology, businesses can make efficiencies and improve productivity which often leads to reduced costs.

Software such as Dext allows you to store receipts electronically via a smartphone app. This means you can send expenses paperwork instantly to your accountant and ensure you never lose another receipt.

Failing to record all your expenses could mean you pay too much tax, something that is particularly important to avoid during times of high costs, when every penny counts.

Accounting software like QuickBooks and Xero helps you to stay in control of your finances and get a snapshot of how your business is performing whenever you want. This gives you a better oversight of any cash flow issues so you can take action to deal with it. Monitoring costs and their impact on your finances is crucial. 

Your accountant should be aware of the latest business technology so have regular conversations with them about solutions that can benefit your business and help you reduce costs.  

Use greener vehicles

Switching to environmentally friendly vehicles could help to bring your motoring costs down in the long term.

Electric vehicles (EVs) are currently exempt from road tax, and there is some funding available such as a Government grant to cover most of the costs of installing an home EV charging point.

Read more about the advantages and disadvantages of electric vehicles in this guide.

Access funding and support

Although interest rates are high which makes debt financing more expensive, there are funding options which could help you deal with rising costs.

The Government’s Recovery Loan Scheme has been extended until 2024 and provides loans and overdrafts of up to £2m (£1m for businesses within the scope of the Northern Ireland Protocol).

You might be able to access grants which is money you don’t need to pay back. Visit the funding section on the Government’s website and contact your local council to ask what’s available for local businesses. We have a guide to finding and getting a grant here.

If you’re having problems paying your tax bill, you might be able to set up a payment plan through HM Revenue & Customs’ Time to Pay policy.

Meeting other business owners to talk through your challenges can help you come up with solutions. Find events on Eventbrite and Meetup or via business groups and associations.

The TaxAssist website features lots of free business advice including the Cash Flow Management Knowledge Hub and tips on managing cash flow in a crisis.

Raise your prices

Increasing your prices is never an easy decision, but it might be something to consider to offset the cost of living crisis.

Analyse your exact costs to calculate by how much you need to raise your prices. You can then segment customers into different categories to identify those who will be least sensitive to price increases.

Actions such as adding extra value for customers can help soften the blow of an increase and it’s worth being open and transparent about why you are increasing prices. You’ll likely find lots of your loyal customers will appreciate your honesty.

Find more detailed advice on raising your prices in this guide.

How TaxAssist Accountants can help

TaxAssist Accountants can provide the right advice to support your business. While our expertise covers tax, accounting, bookkeeping and payroll, we can also connect you with other providers we work with both locally and nationally.

Contact us to find out more about our services and to book a free video or face-to-face consultation.

Date published 16 Feb 2023 | Last updated 20 Mar 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.