How to keep soaring summer energy costs from crunching your cash flow

Small businesses across the nation spend more than $60 billion in annual energy costs. And though fuel and utility expenses are a regular operational expense, the summer months often bring higher energy prices and increased spending.

Budgeting for fluctuating energy costs can be difficult, even under the best circumstances. Understanding your usage patterns and taking strategic steps to reduce costs, can make it easier to adapt to higher prices.

Understanding how your business uses energy

To effectively manage your energy costs, you need to understand exactly how your business uses energy.

Businesses based in agriculture, construction, or transportation are likely to spend more on oil and fuel. Businesses that have refrigeration needs, like food distribution centers, restaurants, groceries, and manufacturers, will likely have high electric costs. The same is true for businesses that rely on high-powered machinery or equipment as well as HVAC systems.

In some cases, energy costs can be managed through deliberate conservation efforts, like shutting off lights when no one is in the room. In other cases, your energy costs will be tied to external factors, like oil prices and seasonal temperature shifts.

By understanding how your business uses energy, you can plan for the more expensive seasons and take steps to cut costs where possible. If you can’t reduce your energy spending, find ways to offset the higher costs by streamlining other areas of your budget.

Reducing energy costs

Reducing your regular energy costs can help you free up capital for seasonal increases that come with summer fuel prices or heating or cooling needs. These energy saving tips can help.

• Update lighting
  Lighting accounts for 10% of electricity consumption in the U.S., according to the U.S. Energy Information Administration (EIA). For business owners, this can represent a significant portion of their operational budget.

  Simple updates like installing LED or CFL light bulbs, motion detectors, and automatic dimmers can help you create a more efficient space and cut down on regular operational costs.

• Reduce idle times and unnecessary trips
  Fueling construction vehicles, delivery trucks, and even the company car can be costly. Whenever possible, turn off vehicles and gas-powered equipment when not in use. Choose routes and make travel plans that are more fuel-efficient.
• Replace or update equipment and machinery
  Poorly functioning equipment and machinery can be an unnecessary drain on productivity and energy. Make necessary repairs or invest in energy-efficient models to cut costs over time.
• Practice regular maintenance
  Not all poorly functioning equipment needs to be replaced. In some cases, regular maintenance, like cleaning units and replacing filters, can fix or prevent energy deficiencies.
• Use smart technology
  Smart building components can make it easier to monitor and control thermostats, lighting, HVAC, and any other energy-consuming product on your grid.  Many of today’s commercial energy management systems make it easier to evaluate energy use and make money-saving changes.

Can you finance energy costs?

Energy-efficient upgrades and cost-saving measures can unlock capital, but sometimes it won’t be enough. Seasonal energy prices (gasoline, oil, coal, and other renewable fuels), rising (or falling) temps, and other factors outside your control can lead to substantial increases in monthly bills.

When that happens, business owners are often forced to make tough decisions about how and where they spend their money. Neglecting energy bills is typically not an option. After all, failure to pay can result in costly interruptions in service. The same is true when it comes to fueling machinery and equipment.

If you’re facing rising energy costs and are short on cash flow, short-term business funding may be a solution. Funding solutions, like those offered by QuickBooks Capital, can help you bridge gaps in cash flow and manage unexpected expenses.

If you’re considering financing energy costs, it’s important to evaluate your options before choosing a lender. Be cautious of hidden costs or fees, which can make repayment difficult. QuickBooks Capital, for example, offers short-term business funding without origination fees or pre-payment penalties.