Tackling the rising cost of running a business in Australia

Tackling the rising cost of running a business in Australia

Running an Australian business is getting more expensive by the day. In April 2022, data released by the Australian Bureau of Statistics (ABS) revealed that 57% of Australian businesses had experienced increased running costs in the previous quarter, and 21% of businesses said their costs had increased to a “great extent.”

Here, we identify the major factors driving the cost of doing business in Australia upwards, and we point to a simple way of easing the pressure.

A Perfect Storm for Inflation

Perhaps the biggest factor driving the increased cost of doing business in Australia is inflation. Just this month, Australia’s inflation rate reached 6.1% – the fastest annual increase in 21 years. We seemingly hear about skyrocketing inflation whenever we turn on the news these days. But what does the term “inflation” actually mean?

Inflation refers to a decrease in the effective purchasing power of money. If you have $1,000 now and the annual inflation rate is 10%, it means that in one year’s time you will get 10% less goods and services (on average) for your $1,000. Effectively, then, inflation eats away at the real value of money. Sometimes it takes small bites, other times (like now) it takes larger bites. Either way, inflation inevitably increases the prices of goods and services, leading business costs to spiral upwards.

What Causes Inflation?

Inflation has two main causes:

  1. An increase in the money supply, which undercuts the value of existing money
  2. A decrease in the supply of goods and services, whose relative scarcity increases their price

In the wake of covid-19, 2022 represents a perfect inflationary storm. Not only are we dealing with the on-flow effects of governments liberally printing money and boosting credit to stimulate their economies in response to the pandemic, but we are also dealing with the other major factor impacting business costs in Australia: supply-side issues. 

Labour Shortages + Transport Bottlenecks + Production Delays + War = Supply Issues 

Companies the world over are facing issues in sourcing the products and people they need to do business, and Australian firms are no exception. Skilled labour shortages – which may in part be attributed to the Great Resignation – are currently compounded by two issues impacting the supply of commodities and goods.

First, the world is still feeling the downstream effects of covid-related lockdowns, which shut down businesses throughout 2020 and 2021, causing massive transportation bottlenecks and production delays. Second, Russia’s invasion of Ukraine and the ensuing trade sanctions have seriously undercut the global supply of key commodities, especially oil and wheat. 

A decreased oil supply is particularly problematic for Australian businesses because of the ripple effect it has on energy prices. Oil is still a critical source of energy throughout much of the world, so anything that reduces the oil supply necessarily increases demand for other forms of energy, consequently raising energy prices across the board.

Lowering the Cost of Doing Business in Australia

ABS data suggests that the most commonly reported business cost increases are for fuel and energy. As such, it is more important than ever for businesses to shop around and find the lowest energy prices available on the market at a given moment. For business owners who simply don’t have time to shop around themselves, Make It Cheaper can help.

At Make It Cheaper, we regularly review the energy market and work with businesses to help them take control of their energy bills and achieve potential savings. Contact us for an obligation-free review today.

Looking to save on your business energy bill?

We find savings for 4 out of 5 businesses. See how much your business could save.

5 Ways to find hidden savings in your business

5 Ways to find hidden savings in your business

Between the increase to minimum wages, the increase in superannuation and rising inflation, many aspects of running your business are becoming more expensive.

While it’s always prudent to keep an eye on your expenses, it’s now becoming crucial to review your ongoing and everyday operating costs to ensure you’re not paying too much. 

Conducting an audit to identify areas where you could save is likely to generate a strong return on investment, in terms of time spent auditing vs savings made. It can seem like an overwhelming task, but with a clear hitlist and strategic goals, you can knock this project over sooner than later. 

The sooner you get started, the sooner the savings flow through. So, here are a few different areas of business operations you could review with a goal of making savings and driving efficiencies, without compromising on quality, service or output.

1. Staffing

Your team is likely to be amongst your top two expenses, alongside rent/lease. Your staff expenses may have increased in line with a recent 5.1% increase to minimum wage, and the July 1 uptick in superannuation (10% to 10.5%). 

While reviewing staff requirements can be a huge undertaking, it could reveal some impactful savings. For instance, retailers and hospitality businesses may be able to review demand on specific days and adjust staffing levels, while corporates may be able to analyse their organisational structure, to ensure all roles offer strong ROI. 

2. Subscriptions

This is one of those expense lines that can catch many businesses off guard, as that pesky “auto renew” can see you paying for resources you don’t ultimately use. 

These usually get auto-debited from credit cards or bank accounts, so grab 12 months worth of statements and highlight subscriptions. Then, analyse whether you really get value from them. Keep an eye out for subscriptions and apps to do with HR and hiring/scheduling; news sites; IT and tech; and operations and logistics. 

Reviewing other recurring expenses to the business, like consultants and freelancer agreements, can also offer savings. 

3. Supplier costs

It’s good practice to review supplier costs on at least an annual basis, looking for opportunities to outsource elements of production where possible. 

Depending on your specific suppliers, you might be able to negotiate lower prices based on volume or loyalty. It may also be a good idea to shop around with other suppliers to see what’s available: you can take these costs back to your existing supplier to price match, or look at moving suppliers if the savings are significant. 

4. Energy expenses

With energy price increases taking effect as of 1 July, your business/es may not have received a bill that reflects higher prices yet – but they’re coming. Increasing wholesale energy prices have prompted regulators to approve price hikes nationally of up to 19% for businesses (depending on your state or territory).

Electricity, gas and even solar rebates are all being impacted and the more sites or premises you have, the greater you’ll feel the impact. There are 5 things you can do to help ensure your business doesn’t pay too much for energy, but the most impactful is around comparing energy plans. By auditing your usage and rates then shopping around for a more competitive deal, you have an opportunity to move to a cheaper network tariff, with your provider or a new retailer.

5. Internet and phone plans

When it comes to the basics in your organisation, like internet access, phone systems and mobile phone plans, there can be a wide margin between the cheapest and most expensive providers in the market. 

Reviewing your internet or mobile plans offers a great opportunity to find better rates, with particular cost efficiencies available when you bundle services together (ie internet + phone + mobile phones). Start by asking your existing provider for a better deal, and if they’re not willing to come to the party, review your options in the market.   

At Make It Cheaper we constantly review the energy market, working with businesses to help them take control of their energy bills and achieve potential savings. Contact us for an obligation-free review today on 1300 957 721.

Looking to save on your business energy bill?

We find savings for 4 out of 5 businesses. See how much your business could save.