58% of SMEs fear rising costs in 2024

Over half of SMEs are seriously concerned about rising costs while the shortage of skilled staff and supply chain pressure is denting confidence levels

Around 58% of SMEs were worried about escalating costs, especially high utility prices, while talent retention and a lack of candidates for skilled jobs was putting pressure on businesses, revealed the latest ACCA research.

In the past year, there has been an increase in job vacancies and SMEs were struggling to fill specific roles with a 31% increase in professional worker openings and 14% claiming they were unable to fill positions with suitable candidates. Also, 20% of SMEs stated that salary costs had also gone up by 10%.

Additionally, a quarter of SMEs said that utility prices had increased by 20%, highlighting the necessity for effective cost management and evolving financial strategies.

Aleksandra Zaronina-Kirillova, head of SME at ACCA said: ‘As we enter the new year, SMEs are grappling with a wide spectrum of challenges, but our findings are also a clarion call for SMEs to embrace strategic innovation. By addressing these challenges head-on, they can unlock new growth avenues and strengthen their market position.’

ACCA recommended that businesses use digital technologies to ‘streamline operations, reduce costs, and enhance productivity’.

Krillova said: ‘In these testing times, SMEs must pivot towards innovative strategies to navigate the complexities of cost pressures, talent retention, and sustainable practices. Our research not only identifies the critical hurdles but also offers a roadmap for SMEs to emerge stronger and more agile.’

Many other costs are proving a challenge for SMEs, including supply chain issues and shipping time. The cost of rent and lease payments can also have a negative impact on company finances.

These issues are likely to pose a huge threat to SMEs this year and with ever-growing tension in the Middle East and the war in Ukraine many are worried about the cost and time scales of supply chains, and coupled with the fallout from the pandemic, this could be enough to force some SMEs to close.

Another concern was the demands of the evolving environmental, social and governance (ESG) reporting agenda. Less than 50% of SMEs have been asked for data related to ESG with just over 50% of them stating that they had access to the information required. When it comes to help collecting the information on ESG less than 45% had received any assistance.

Accountants can help businesses set up ESG reporting systems to collect non-financial data, a new service that is just developing through accountancy practices. The introduction of new technologies will be a positive addition to SMEs when reporting on ESG to help streamline the methods of collecting the data.

SMEs have to report on three aspects of ESG, including environmental factors such as energy efficiency and reducing greenhouse emissions, social factors, such as the improvement of working conditions, and governance, covering the avoidance of bribery, and ensuring cybersecurity is up to date.

‘The importance of sustainability for small businesses cannot be overstated. Embracing sustainable practices is not merely an ethical choice but a strategic imperative that yields multifaceted benefits,’ the report said.

ACCA report, Business Challenges and Strategic Innovation Opportunities 2024

Will Drysdale |Reporter, Accountancy Daily

Will Drysdale is a reporter at Accountancy Daily - email news and leads to william.drys...

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