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Don’t forget about flexibility: 70 per cent of switchers cite renewal note prompting

Most businesses, regardless of size, want flexibility. In fact, SMEs are known for agility – there are fewer people calling the shots, there are often no clunky legacy systems in place, and they can adapt with the market as it changes.
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Small and medium-sized businesses are often able to hit the ground running, but it’s important to make sure contracts are just as flexible. Here are some top tips for finding a supple supplier.

Most businesses, regardless of size, want flexibility. In fact, SMEs are known for agility – there are fewer people calling the shots, there are often no clunky legacy systems in place, and they can adapt with the market as it changes.

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It’s not surprising then that businesses want suppliers to be flexible too, and getting locked in to a contract that isn’t fit for purpose or that is too expensive can be a real bind.

Why flexibility matters

According to a report for Ofgem, the most often cited reasons for small business owners’ dissatisfaction with suppliers are price increases (30 per cent), poor communications (14 per cent) and contracts rolling over without their knowledge (13 per cent).

On the other hand, of the businesses that had switched in the last 12 months, 89 per cent cited a lower price or tariff as one of the main reasons. In addition, 70 per cent cited receiving a renewal notice from the existing supplier.

It is clear from this that, when reminded of the flexibility of contracts, small businesses will seek out cheaper opportunities.

As we explored in a previous article, one thing SMEs need to be on the watch for is rollover contracts. As a contract draws to a close, a business will receive notice of its switching windows – if, during this time, the business fails to switch or renegotiate a contract, it will be rolled over and often on to a more expensive tariff.

Knowing when you can switch or renegotiate a contract is a key part of flexibility. But it is not the whole story – there are other things a business can do to ensure flexibility.

Get the right contract

One thing that will ensure flexibility for your business is to make sure you have the right type of contract in the first place.
Pay-as-you-go or fixed term? As short a contract as possible, or find a long-term one so your costs are fixed for longer?

On average, businesses that reported switching in the last 12 months contacted four suppliers, either directly or through brokers. Shopping around is a great way to get the deal that’s right for you – do your homework and know your options.

We explored this issue in more detail in a recent article, here.

Keeping an eye on data

Simple measures that monitor energy usage can help small businesses get a handle on spending, which in turn can help improve flexibility.

According to the Federation of Small Businesses (FSB) only one in five small businesses have measures in place to monitor energy usage, despite the fact that it can lead to significant efficiencies.

“If you’re really looking to save the pennies and optimise your spending, you can do so by knowing which of your appliances or machines are consuming the most energy,” said Thomas Spires from See Your City.

“If there’s a particular part of the day where energy consumption is highest, it’s great to know when and why that is.  An international airline saved $40,000 a year by removing one olive from their salads, if your company is big enough, every kettle counts.”

There are two main types of metering technology, smart meters and Advanced Meter Reading (AMR).

AMR eliminates the need for manual meter reading – usage is monitored and reported to the supplier, and data on energy consumption is available to the business. The benefits of this system are that businesses only pay for what they use, and can predict future usage more accurately and account for it accordingly.

Smart meters have the added functionality of displaying the usage in real-time to the user as well as the supplier. They also records usage in pounds and pence, making budgeting that much easier.

Ultimately, when your energy contract is flexible it frees you up to work on other things. Who wouldn’t want a little more time to focus on the core business?

Finding the right contract, knowing when to switch to make savings and keeping an eye on what you’re spending are all great ways to ensure your business runs as efficiently as possible, and means your business can adapt more easily to any changes thrown your way.

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About Author

Letitia Booty

Letitia Booty is a special projects journalist for Real Business. She has a BA in english literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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