5 ways to reduce your business energy bills
17 November 2022
Rising global energy prices are a worry for all business owners. When the cost of your predicted annual bill goes up, that’s likely to stretch your cash flow thin.
So, what can you do to overcome the problem of rising electricity and gas prices? We’ve outlined five simple ways to reduce your energy bills.
Simple ways to reduce the impact of the energy crisis
The obvious way to beat the energy crisis is to reduce your company’s energy usage.
With prices going up, cutting your energy consumption makes good sense and should help reduce your annual bill. As an added bonus, cutting down your energy consumption also makes your business more sustainable, more energy-conscious, and a better global citizen.
Here are five ideas for bringing down your energy usage:
- Properly insulate your buildings – you obviously need to be sensible about heating and cooling your workspaces during the hot or cold months of the year. Using heating and air conditioning (air-con) 24/7 can be expensive, so it’s a good move to properly insulate your workspaces. If your rooms stay warmer in winter, and don’t bake in summer, your heating/air-con won’t be working so hard – reducing your energy spend.
- Be sensible with your lighting – lighting is another essential overhead, but also an area where smart gains can be made. Use energy-efficient light bulbs that draw less power. Don’t leave exterior lights on after business hours. And fit sensors in offices, meeting rooms, and workshop spaces that turn off the lights if no-one is using the room. These are small actions that can quickly start to cut down your bill.
- Switch to energy-efficient equipment and technology – the business tech we use is gradually becoming greener and more energy-efficient. Review your company’s main electrical equipment and see how much energy could be saved by moving to updated, energy-efficient tech. With so many pieces of equipment always plugged in and turned on, having tech with low-power modes and automatic standby modes can greatly reduce your energy consumption as a busy office or factory.
- Consider using renewable energy – one way to escape the monopoly of your energy provider is to provide your own off-grid power. Climate change is an ever-growing problem, so switching to renewable energy not only gives you an independent power supply but also reduces your carbon footprint. If you are looking at solar, think about how much power you consume, and when you consume it, to understand the return on your investment.
- Shop around for the most affordable energy provider – finding the most cost-effective energy supplier can go a long way to bringing down your bills. Prices are obviously rising across the sector, but check out what deals are being offered by other energy providers and shop around. Consumer's Powerswitch website offers a useful comparison tool, but it's worth noting, that not all retailers participate. You'll also find lots of tips on this website.
Energy prices are likely to remain unstable for some time, so it’s important to keep a close eye on your energy overheads and their overall impact on your finances.
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Your business structure plays an important role in how your business operates, how profits are taxed, how decisions are made, and how much personal risk you may be exposed to. For many businesses, the structure chosen at the start made sense at the time. But as your business grows or changes, it is worth asking whether that structure still supports where you are now - and where you are heading. The three most common business structures are sole trader, partnership and company. Each has different cost, administration, tax and liability considerations. Operating as a sole trader A sole trader structure is where one person owns and runs the business. The main benefit is simplicity. It is easy to set up, and from a tax perspective, business profits or losses are included in your personal tax return. Being a sole trader also does not prevent you from employing staff if your business grows. However, this structure can carry more personal risk. Sole traders generally have unlimited liability, which means if the business runs into financial or legal trouble, you may be personally liable. This makes the right insurance and risk management especially important. A sole trader structure can also become limiting if you want to bring in other owners, attract investment, or prepare the business for sale. Working within a partnership A partnership is where two or more people go into business together. Partnerships can be a practical way to combine skills, knowledge, resources and capital. They are usually relatively simple to set up and manage, although it is important to have a clear partnership agreement in place. This should document how profits are shared, how decisions are made, and what happens if one partner wants to leave or circumstances change. From a tax perspective, partnership profits are generally not taxed at the partnership level. Instead, each partner includes their share of the profits in their own personal tax return. The main risk is that partnerships do not offer the same legal separation as a company. In many cases, partners may be liable for partnership debts jointly and severally. There are ways to reduce this risk, such as using a limited partnership, but this should be considered carefully with the right professional advice. Operating as a company A company is a separate legal entity from its owners, who are known as shareholders. One of the key advantages of a company structure is limited liability. In many cases, a shareholder’s financial liability is limited to the amount they have invested in the business. A company structure can also be useful if you want to bring in investors, introduce new shareholders, or sell the business in future. However, companies usually come with higher administration and compliance requirements than a sole trader or simple partnership structure. This includes annual accounts, tax returns, Companies Office requirements and other record-keeping obligations. It is also important to remember that company funds belong to the company, not personally to the directors or shareholders. Money is usually taken out through salary, dividends, drawings or director loan accounts, depending on the circumstances. Getting this right is important from both a tax and cashflow perspective. When should you review your structure? It may be worth reviewing your business structure if: your business has grown or become more complex you have taken on staff, debt, assets or higher levels of risk you are considering bringing in another owner or investor you are planning to sell, exit or pass on the business your personal circumstances have changed you are unsure whether your current structure is still tax-effective or appropriate Is your current structure still working for you? There is no one-size-fits-all answer when it comes to business structure. The right option depends on your business, your goals, your risk profile and your future plans. If you are unsure whether your current structure is still the best fit, talk to our team. We can help you understand the pros and cons of each option and work with your legal adviser where needed to make sure your structure supports your business now and into the future.
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