Hasty payments mean SME businesses strapped for time lose £billions

- SMEs waste an average of £550 p.a. by failing to research business costs
- Post Office® International Payments Inertia Factor Report indicates that funds collectively lost by SMEs top £2.64 billion a year
- Fewer than two-in-five do competitive research to get the best deals
- Nearly two-thirds make payments overseas but only 28 per cent research these and three-quarters incur charges by using their bank

New research has revealed that billions of pounds are being lost by small and medium-sized businesses in the UK every year because they fail to research the market and find the best deals when they take out or renew a range of insurances and make regular payments.

The Inertia Factor Reportfrom Post Office International Payments found that SMEs waste an average of £550 each per year because they do not have time to research competitive prices for regular business costs and swap to cheaper providers. Collectively this adds up to a loss of around £2.64 billion annually on office, travel, healthcare, motor and car breakdown insurance policies¹.

Research conducted for Post Office International Payments to establish why SMEs make these potentially costly decisions revealed that fewer than two-in-five (38.5 per cent) do any form of competitive research before renewing policies or making regular payments².

The reasons given were invariably time and convenience-related, indicating a general inertia among the small business community. A third of SMEs automatically use the same provider without surveying the market while a quarter of the 2,500 businesses who took part in the research said they always use their bank if it provides the service.

In addition to the extra money spent on insurances, around a quarter of SMEs (24.1 per cent) admit wasting over £500 a year on business or leisure trip payments. However, they were more likely to research the market for hotels and flights than for other business payments, with almost one-in-five (19.2 per cent) comparing costs to get the best deal.

By contrast, less than one per cent did so when it came to arranging car breakdown cover (0.4 per cent), mobile phone providers (0.6 per cent) or private healthcare (0.7 per cent). Just 1.8 per cent checked competitive costs when purchasing foreign currency while only nine per cent of SMEs researched the market for office insurance.

The research found that SMEs were most likely to seek out the best deals when organising car insurance (34.3 per cent) or making an international payment (27.7 per cent). However, while almost two-thirds (65.1 per cent) of businesses questioned made payments overseas, around three-in-ten (29.7 per cent) said they always used the same provider and a further 27.4 per cent thought they were already getting the best deal so they did not shop around.

This may not be the case because more than three-quarters of SMEs (76.7 per cent) said they transfer funds abroad using their UK bank, incurring charges for each transaction. Since around a third (32 per cent) of SMEs making international payments did so on a daily or weekly basis (10.6 per cent) or monthly (17.6 per cent), they could expect to pay significantly more because bank charges could be as high as £25 per transfer³.

Nor would they benefit by obtaining better exchange rates on higher value transactions because Post Office International Payments research revealed that rates offered by banks were standard, whatever the amount transferred³. Yet nearly three-quarters (72 per cent) of those surveyed said that each transfer they made was valued at over £2,000 and one-in-five said that each transaction exceeded £10,000.

Only 5.9 per cent used a fee-free International Payments specialist like the Post Office, whose rates also increase for higher value transactions.

John Willcock, Head of Post Office International Payments, said: “Our research made it clear that convenience is king – but this can be costly for small businesses. SMEs told us that time was the big issue for them but when you set this against the amount of money lost every year on insurances and other repeat business purchases, they would be well-advised to conduct a routine check first before signing on the dotted line.”

¹/² Research conducted by Trends Research between 28 April-29 May 2013 among 2,500 UK SME business leaders. See research finds in the separate Post Office International Payments Inertia Factor document.

³ Research by Research & Marketing Solutions for Post Office International Payments (April 2013) found that the minimum transfer charge made by UK banks was £9 (HSBC), rising to £25 per transaction (Nationwide).

Contact - Carmel McCarthy