1. Productivity problems
A SME’s most important asset is the productivity of its employees. Anything that hampers that productivity, from being inundated with emails to unnecessary meeting, is a cost to the company.
According to the CEO of Leesman, Tim Oldman, the working environment is often one of the most overlooked costs. He said: “Worryingly, just 54 per cent of employees agree that their workplace enables them to work productively.”
He believes that businesses that offer a number of different areas to work are best placed to get the most out of their employees.
2. Staff turnover
Replacing staff can be a very expensive endeavour. A report conducted by Oxford Economics found that replacing an employee that’s on an average salary can cost up to £26,595.
The total consists of the cost of reduced output while the new employee gets used to their job (it can take up to 24 weeks until the new worker is fully productive, according to the report) and the costs of recruitment, including the time interviewing candidates and agency fees.
3. Long payment times
Tungsten, an e-invoicing company, conducted research showing that 12 per cent of the UK’s 5.2 million small businesses wait over 90 days to get paid by customers.
While waiting for the payments, SMEs still need to pay fees on overdrafts or loans and some need to dip into their cash reserves just to survive.
CEO of Crunch Accounting, Darren Fell, said: “Allowing your customers 90 days to pay an invoice is incredibly bad practice – you’re waiting an entire quarter before receiving payment. If you insisted on 14 or 28-day payment terms you receive money faster, can pay your own bills faster, and can reinvest the money in your business.”
4. Protecting intellectual property
Many SMEs think that protecting their intellectual property is a distraction, mainly due to the time it takes and cost of the process. It’s only when a competitor steals their amazing idea does the hidden cost of not filing the claim become clear.
Elizabeth Ward, an IP expert, said: “It’s important not to waste time when it comes to protecting your IP as there is often a limited window in which to act. If you fail to file for a patent or register your trademark, a competitor may beat you to it – which can spell the end of your big business dreams.”
5. Data protection
If SMEs don’t ensure all customers’ data is protected, they can face some very serious penalties.
According to Tim Halstead, a data protection consultant, “Data protection is easily overlooked by small businesses. But the costs of getting it wrong can be enormous, as companies that breach the Data Protection Act can face fines of up to £500,000.”
Common mistakes include not training staff on the correct data protection processes and also failing to store sensitive information separately.