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How boutiques, SMEs can cope with rising electricity costs

With a potential recession looming and electricity costs up more than 10 per cent since last year, smaller firms have started enacting cost-cutting and energy-saving methods to stay afloat.

user iconLauren Croft 10 November 2022 SME Law
How boutiques, SMEs can cope with rising electricity costs
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Compared to BigLaw firms, which often have the increased capability to support complex cross-border investments into Australia, boutique and SME firms will need to brace and prepare for a potential recession in different ways, as recently reported by Lawyers Weekly.

Particularly with a global downturn on the horizon, boutiques and SME firms are increasingly focused on cost-saving methods and ways to keep their businesses afloat and clients happy.

Back in May, the Australian Energy Regulator (AER) released projections for the coming months for SMEs, predicting that small businesses would see an increase of up to 13.5 per cent ($815 more than the previous year) in their energy costs.


However, Australian Competition and Consumer Commission (ACCC) head Gina Cass-Gottlieb recently told the House of Representatives economics committee that the median household electricity bill is up by 25 per cent since April — with small businesses being up by $1,500.

Following this development, Lawyers Weekly spoke to four boutique and SME firms on what they’re doing to mitigate costs moving forward.

Results Legal has altered its way of working since the onset of the pandemic — but managing director Karl Hill said that moving forward, both businesses and suppliers could be affected by rising costs.

“We have had artificial trading conditions since COVID began, with hundreds of millions of dollars in direct government stimulus, hundreds more in bank and ATO debt deferrals, record-low interest rates and temporary insolvency protections. We actually haven’t returned to pre-COVID trading conditions yet — let alone experienced a hard landing,” he said.

“What high school economics tell you is that there are consequences to printing money, which is effectively what has been happening. Costs are going up (just look at electricity prices), and trading conditions are tightening. Even though we have had strong consumer spending, there’s a tightening cycle on the way. It’s not only the businesses that engage with consumers that will be affected; it will also impact the suppliers of those businesses.” 

Relationships with suppliers, however, are important for the success of smaller firms, according to Chloe Moorfoot, partner and insolvency practice lead at FAL Lawyers.

“Small business is about maximising sales and revenue. Therefore, make cash flow a priority and manage stock levels accordingly. Relationships are also an overlooked but key part of keeping costs down,” she advised. 

“It costs more to replace an employee, client, or supplier than it does to retain them, for example, and cultivating strong relationships is key to reducing turnover — and therefore additional expenses — in those areas. Optimise expenses where possible and build relationships with suppliers, customers, clients and your people in order to have support to weather any financial storm.”

Travis Schultz, managing partner at Queensland-based Travis Schultz & Partners, said that whilst rising energy costs have been “problematic”, the firm has been finding ways to save both money and electricity.

“We are fortunate that in our Sunshine Coast office, we had been able to install solar when we did our fitout — and that’s making a big difference now. In our city office, we are currently working with the landlord to look at the logistics around installing solar as well,” he explained.

“But my advice to my colleagues would be to try and control the ‘controllables’. And rather than race to cut out line items on the expense side of the ledger, first try and find ways to increase the revenue line — because cutting expenses can impact workflows, marketing and efficiency and have a negative consequence for morale and culture.”

This can also mean increasing efficiency at the same time as saving money — as director and principal of Bowes Legal Jane Bowes has found.

“Electricity, wages, insurance, [and] cyber security costs are all increasing at a rapid rate and are contributing to the mounting financial pressure on small-business owners. We have to work smarter. At Bowes Legal, we operate the firm online and 99 per cent electronically, meaning we have removed the old-fashioned way of doing things in a manual and voluminous way,” she said.

“We rarely use printers (which chew huge amounts of electricity). We utilise different programs and apps to ensure business efficiency. However, the cost of energy is a constant cause of stress, and our long-term goal is to look for a green office space [that] uses reusable energy to ensure we can minimise the financial impact as energy prices soar. We certainly can’t skimp on the air conditioning in Central Queensland!”

In addition, if smaller firms are prepared for rising costs, they can also start preparing their clients, too, added Mr Hill.

“We are working closely with our clients at present to prepare for conditions [that] will inevitably see a higher risk of defaults — both consumer and commercial. Our clients are ‘getting their ducks in a row’: reviewing their terms and conditions of trade; looking at their credit risk management and ensuring they have adequate security in place. 

“For our corporate clients, which include some of Australia’s biggest trade credit suppliers, we are encouraging them to get back to basics — undertaking security reviews, renegotiating terms and conditions of trade, and assisting them to review viability on higher-risk accounts and industry segments,” he added,

“We have been working with our clients for a while now to get their houses in order — once their counterparties start to default in a tightening market, it’s too late to improve your position. Businesses large and small need to act now.”