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One Million Pound Average Annual Spend For Smes

  • Annual outgoings bill rises to £1.4 million after five years of business
  • London tops the table as biggest business spenders

New research from American Express® has found small and medium sized enterprises (SMEs) spend an average of £1 million (£1,016,194) each on business expenditure every year. The biggest costs in this annual shopping bill include hiring new staff (24%), paying suppliers (20%) and investing in technology (19%).

The study, conducted in partnership with the Centre for Economics and Business Research, found firms at the larger end of the SME spectrum – those with 50 employees or more – spend an average of £3 million (£3,029,033) each year on buying goods and services for their companies. Meanwhile micro businesses that typically have 1 – 9 employees, spend an average of £225,379 per year.

Furthermore, SME spending rises as businesses become older, as companies set up at least 15 years ago spend an average of £1,385,400 annually. The data highlights that getting cashflow management right from the start is an integral part of being a successful business and ensuring a smooth path to growth.

Jose Carvalho, Senior Vice-President at American Express commented: “Running a business can be an expensive affair and as our research demonstrates, there are significant costs involved when building a business. However businesses that have the ambition and drive to grow shouldn’t be deterred. By having a robust cash flow management system in place SMEs will have an essential tool to manage costs efficiently without impacting the running of the business, its staff and customers.”

The UK Map of Business Costs

Location is also key when SMEs plan for future operating costs. The research found that business expenditure varies across the UK, with the cost of doing business in the Capital three times more expensive than in the North of the country.

UK Region Average annual SME business expenditure
London £1,827,807
Central

(West Midlands, East Midlands and East of England)

£1,144,947
South

(South East, South West)

£696,602
North

(North East, North West, Yorkshire & Humberside)

£526,882

January and December have been pinpointed by SMEs as the months where they experience the highest expenditure – 17% and 16% respectively.

Mr Carvalho continues: “More than half of SMEs are using business revenue to finance company expenses, while a quarter using personal savings. We found just over one in 10 (13%) use business loans or credit cards. The benefit of working with a credit provider that has cash management tools is having access to expertise and support to help with your cash flow.”

To help SMEs maximise their cash flow, American Express has put together the following top tips: 

  • Cashflow not profits – prioritise cashflow ahead of profits, as the former is essential to making sure that you pay your suppliers and staff effectively, and forge positive relationships from the beginning.
  • Breakeven point – determine your breakeven point, when your income starts to exceed your expenses, and always have this front of mind to ensure you don’t overbuy one month and can budget effectively throughout the year.
  • Set up payment terms with customers – before signing a new customer, ensure you have agreed payment terms so you are not left out of pocket.
  • Work with a card provider – when choosing a business card, consider a provider that can support with cashflow management solutions and enable you to have a centralised way to manage your cashflow, and which gives you line item detail on your transactions. The American Express Gold Business Card* provides 54 days deferred payment on purchases and no pre-set spending limit.
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