With the economy and rising costs top-of-mind during the past year as Barbados grappled with the recession and seemingly ever increasing oil prices, small enterprises have had to analyze their business models and seek to become as lean and efficient as practicable.
Several factors affect the cost of business – the economy, regulatory costs, high input costs, labour, materials, utilities, finance.
With the slowdown, it is crucial that Government remove all unnecessary burdens and disincentives which restrict entrepreneurial activity and [business activity], and implement solutions to reduce administrative barriers and improve efficiency.
eGovernance initiatives – online filing of VAT, NIS, Income Tax Returns – have alleviated waiting times and afforded small businesspeople the opportunity to complete these tasks in their downtime, thus saving time and money.
The process needs to be expanded to facilitate business registration, licences, remittances, and payments to vendors.
Tax levels have been identified as a factor of the escalating costs of doing business. It has been espoused that the change in VAT has occasioned higher costs, resulting in higher prices. It is hoped that there will be a review of the VAT rates and other taxes in 2012.
The process for ascertaining Approved Small Business Status is onerous, causing many entrepreneurs to forgo the benefits: lower corporation taxes, grant funding, technical assistance.
Improvements in the administrative process might influence increased participation, and could reduce operating costs of the beneficiaries.
Traditional business hours – 8 p.m. to 5 p.m. – restrict productivity and affect the cost of business. In a competitive global environment, we must adopt the 24/7 work cycle, introduce flexible work schedules which encourage telecommuting and promote continuous productivity.
These practices enable the maximization of resources, while controlling costs.
The rising cost of utilities continues to be a major source of concern for small firms, with some reporting increases as high as 200 per cent. This has negatively impacted all areas of business.
We must actively seek solutions to reduce our energy usage; otherwise it will be difficult to contain escalating costs. Government initiatives that provide subsidies/tax incentives to companies that engage in energy-efficient practices and promote green businesses are a step in the right direction.
The high cost of financing from traditional sources drives up the cost of business. The factoring programmes introduced in 2011, which offer accounts receivable financing at significantly reduced rates, can positively affect cash flow and working capital; we look forward to the expansion of these services.
The advent of e-banking has improved business facilitation, and it is anticipated that the increasing use of these facilities will see reduced finance charges.
Labour costs represent approximately 60 per cent of total overheads in the small firm. Many firms are impacted by inadequate skills in the workforce, resulting in high turnover or low productivity. To counter this, small firms are encouraged to invest in their human resources, present and future.
Investment being made in the future workforce include: facilitating business training at secondary schools, engaging work attachments, and participating in internship programmes.
Continuous training and development of existing staff is also being done to improve aptitude and increase productivity.
Furthermore, performance-based pay schemes are recommended to encourage efficiency and control costs.
While some effort has been made to contain costs, global economic conditions suggests that we need to be innovative in developing home-grown solutions to ride out the recession.
We must all be part of the solution to contain costs – by being more productive, restricting costs where possible, and supporting our indigenous industries.
