How to protect your business from rising inflation
Is your business struggling to cope with rising inflation? Many business owners are reporting rising costs which are having an unwanted impact on their businesses.
Read on to find out how rising inflation may affect your business and what to do about it.
What effect will rising inflation have on your businesses
With rising inflation businesses can be left with a difficult choice – raise prices and risk losing customers or retain current prices and run the danger of operating at a loss. The impact of this will depend upon the type of business you have. A service-based business with staff able to work from home will be affected far less than a manufacturing company running machinery 24/7.
With the huge increase in energy costs in the UK recently, this is going to have a significant impact on bricks and mortar businesses. And this hike in energy costs is likely to have a detrimental impact on your customers who may no longer be able to afford what you offer.
Different types of businesses will also be affected in varying degrees as to whether they offer something that is needed on a regular basis by their customers or whether they sell ‘nice to have’ products or services that hard-hit householders may look to cut back on.
How to protect your business from rising inflation
Act now
Sitting with your head in the sand thinking this is all going to blow over any time soon is not an option. It is the businesses that plan and act now which will have the best chance of survival. As the adage goes, ‘fail to plan, plan to fail’
Review your cashflow
Now is the time to take a close look at your business and review income, expenditure, and cash flow.
When did you last have a price increase? Is it feasible to have one now? What are others doing in your industry? Look at your competitors and see what is happening within your marketplace and if prices are increasing across the board.
Where costs are high, investigate if it is possible to either re-negotiate these for a better rate or at least fix them to avoid any price increases in the near future.
How long are customers taking to pay you? Would reducing the amount of time you allow customers to pay help with any immediate cash flow issues?
Review your products and services
When was the last time you took a close look at your products and services and analysed your profit margins on each? Are these products and services still what your customers want in a changing marketplace? How adversely will your customer base be affected by rising inflation? Is it possible to provide a scaled-down version for those who don’t have the disposable income they may have previously had?
Review efficiency
Now is the time to review business operations and reduce any inefficiencies.
Take a close look at production lines, delivery options, and administrative tasks. Look at ways to streamline and automate wherever possible.
So much time and money can be saved by moving from outdated manual business processes to automated options. Cloud accountancy software is a classic example of where savings can be made. Rather than having a staff member sit for hours creating invoices, chasing in payments, reconciling the figures, etc, and then having to go over everything again when mistakes are made, accountancy software can undertake the lion’s share of the workload.
Accountancy software is now essential with Making Tax Digital and should already be in place if you are VAT registered. Ensure you are using all the shortcuts available to make the process as timely and streamlined as possible.
Communicate with staff
In an uncertain economic climate, your staff may be left feeling vulnerable. They may also be feeling the pressure of rising inflation and be looking for a salary increase which is unlikely to be feasible if you are looking for ways to help your business cope with rising costs.
Ask staff for help in finding ways to cut costs and improve productivity. Make them feel involved in the future of the business. Rather than giving salary increases, if your business model allows, offer alternatives such as working from home or flexible hours.
Review your marketing
When your customers may be tightening their purse strings, it’s imperative you take advantage of getting your share of the market available.
Make sure you are continuing to market effectively to your target market, and ensure your website is up to date and easy to easy for visitors. Communicate with customers and be as visible as possible to them.
What to do if you need help
If you are concerned about the effect rising inflation is having, or will have, on your business speak to your accountant now. They should be able to provide you with practical advice on how to help your business cope. Do get in touch with us at Maynard Johns if you would like any advice on 01237 472071.