Energy cost savings for medium-sized businesses - Business Works
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Energy cost savings for medium-sized businesses

Wayne Mitchell, Director, nPower Despite a drive by many businesses to reduce operating costs, a number of medium-sized businesses (MSBs) are missing out on significant energy savings each year by overlooking the importance of energy procurement.

We often find that when businesses think about saving energy costs, their first thought is to reduce usage. However, financial savings are there to be had much earlier in the process through knowledgeable procurement.

To understand exactly how businesses are procuring energy - and in response to the CBI and Government’s call for larger businesses to offer support to MSBs - we surveyed over 200 MSBs to form the report ‘Energy Matters’. We found that just 4% of those in the UK currently have a dedicated energy specialist, despite the average MSB spending over £180,000 on energy each year. While this is understandable as MSBs are cost and staff pressured, it is also concerning, as energy costs account for a significant proportion of a business’s overheads.

Our report showed that it is office managers accounting for the majority of energy procurement in MSBs - and they’re juggling a wide range of tasks. It is hardly surprising then that over three quarters (81%) of those responsible for procuring energy say they spend more time on administrative duties than procurement and that just one fifth (21%) of businesses have a formalised energy strategy. This is despite the fact that MSBs told us they rank energy as the second highest business risk they face.

In those businesses that do have a dedicated energy specialist the picture was very different.

In comparison, nine in ten (88%) say the introduction of the role has saved their organisation money. It was also in this role that the most amount of time was spent on energy purchasing. The business having a formalised energy strategy was most likely and the value placed on the role by the business was felt to be above average.

What is clear is that the person responsible for buying energy can have a significant impact on a business’s revenue, yet the importance of this role is undervalued across the UK.

By not having someone dedicated to procuring energy and not making energy a board level concern, businesses are missing a trick when it comes to having a positive impact on the bottom line.

Businesses need to take action to ensure they don’t miss out on energy cost savings and they remain competitive in a tough marketplace. One of the simplest things they can do is ensure they buy their energy at a good time, to avoid a peak in prices in the energy market and this can be straightforward. Energy cost savings are often missed because many MSBs are on fixed contracts and when the time comes to renew, they may not consider that at that time there could be a peak in price. There are products and solutions available that help with this – our latest innovation PriceWatch is one example.

With just a little bit of knowledge businesses can take control of energy procurement. Communication is key here. Businesses should speak to their energy provider and they will have simple ways to help them understand market movements and methods to ensure they purchase at the most cost-effective time.

Wayne Mitchell is Industrial and Commercial Markets Director, nPower. For more information and to read the full report click here.

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