News Column

Businesses Expect Expenses to Rise in 2013

Feb 19, 2013
business costs

Six in 10 businesses owners say they expect the expenses to rise this year and most attribute the expected increase to spending associated with business growth, a survey indicated.

As businesses grow, owners said they expect to spend more on fuel and insurance, and less on taxes or licenses, sales and marketing, and office supplies and equipment as the company grows, the online survey conducted for Pex Card indicated.

"There's a lot of trepidation among small business owners about what's going to happen in the coming year," said Toffer Grant, founder and chief executive officer of Pex Card, which commissioned the survey.

Thirty-four percent of businesses that answered the online survey in December indicated business improvement or growth was the main reason they expected their expenses to rise in 2013 while 25 percent cited a still-negative economy.

The higher price of fuel was cited by 10 percent, followed closely by a general rise in prices given as a reason by 9 percent of the respondents. Rising healthcare costs was listed by 5 percent.

The average small business spends nearly $800,000 in expenses, the survey indicated. The amount spent varied widely, depending on the size of the company -- $378,000 for companies with less than 10 employees to $1.7M for companies employing more than 25.

Compared with 2007-08, Grant said, businesses have the viewpoint that they're better off now than they were back then.

"Nobody was really sure what was going to happen tomorrow, much less in a year," Grant said of the Great Recession.

Business owners have to adapt to the economy, whether in decline or recovery.

Now, he said, there seems to be a better sense of stability in the market, but the track businesses have taken meant they've had to "cut fat keep business moving into a stable period versus one focused on growth or focused on survival."

They also have taken a look at non-traditional revenue or savings sources, he said.

Some companies have pared back office staff, gone from full- to part-time employees or contract out for specific specific skill sets, he said. Another alternative is modifying the pricing structure downward so more contracts can be signed and more long-term service relationships created, Grant said.

Modifying pricing structures "may yield less on a percentage basis, but it provides cash flow," he said. "And businesses have to have money coming in."

Companies may try to control business expenses by gaining more control over cash flow, perhaps through a prepaid card program.

Pex Card, based in New York, offers a turnkey commercial prepaid card program specifically to help businesses streamline employee expense management that allow a business owner to manage pre-funded deposits directed to prepaid cards employees can use for day-to-day spending.

"It's a virtual petty cash box on steroids," Grant said of his company that began before the latest downturn. "We're creating a system of corporate operational governance [that is] day to day based on cash flow, not any type of credit."

The cash flow way of thinking is a trend Grant said he has observed in the business sector now.

"They're using cash flow instead of debt to operate their businesses," he said.

The poll of 179 respondents was conducted in December 2012 by Survey Monkey. Data analysis was done in-house by Pex Card.



Source: Copyright United Press International 2013


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