The Report 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 policies.
Research conducted for Post Office International Payments to establish why SMEs make these potentially costly decisions revealed that fewer than just under forty 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 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 20 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, mobile phone providers, or private healthcare. Less than 2 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 or making an international payment. However, while 65 per cent of businesses questioned made payments overseas, around thirty per cent said they always used the same provider.
This may not be the case because more than three-quarters of SMEs said they transfer funds abroad using their UK bank, incurring charges for each transaction. Since around a third of SMEs making international payments did so on a daily or weekly basis or monthly, they could expect to pay significantly more because bank charges could be as high as £25 per transfer.
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 transferred. Yet nearly three-quarters 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, which commissioned the Trends Research survey 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.”
