SMEs 'wasting' profits
Small, medium and micro-sized businesses waste as much as 15% of operating profits because of inbuilt inefficiencies in their structures, contracts and IT systems.
A small business making a profit of £3m could be wasting as much as £500,000 due to wastage, according to KLegal, the law firm associated with KPMG,
The problems identified by KLegal include the use of complex group structures which can be difficult to simplify; joint ventures too costly to unwind, problems with ecommerce strategies and IT systems; and uneconomic contracts.
To counteract this, the firm advises SMEs to keep a simple operating structure; use contractual trading agreements rather than joint ventures; and review and make changes were necessary to contracts and systems within the business.
David Mandell, partner in corporate law at KLegal said regulatory demands were one reason ‘why it pays for businesses to keep things as simple as possible in the early years’.