Understanding how to prepare your business for the impacts of inflation is a critical element of business planning that you should address now more than ever.
Interest rates are straining businesses across the country as the costs for running businesses rise. Additional spikes in inflation could provide further challenges for businesses struggling to prepare for them.
With interest rates forecast to increase dramatically over the next year, here are some steps you can take to address the risk inflation may pose to you.
1) Improve Business Productivity And Efficiency
You should review processes and output and look at ways to improve or streamline your operations, such as through automation of processes. This could include:
- General workflow
- Sales and marketing, or
- Purchase orders
2) Cut Costs Strategically
Review your current service providers and contracts, like commercial property leases, telecommunications and internet providers, and service contracts, and compare the current market. You may find that some better deals or options allow you to minimise costs without impacting your business’s performance and opportunities. However, be mindful not to cut marketing spending or communications capabilities which could cost you revenue in the long term.
3) Revisit Your Banking And Financial Products Needs
Look beyond your short-term needs, ensure your interest rate on your business loans is competitive, and weigh the advantages and disadvantages of variable and fixed rates.
4) Develop A Cost-Effective Pricing Strategy
Rather than increasing prices, look at ways you could bundle your existing goods or services into new value offerings.
There is a link between your client relationships and your pricing. Raising prices suddenly could impact how customers view your business, but pricing too low will be detrimental to your profitability and sustainability.
Consider offering clients a discount if paying up front rather than on completion or offering a discount for paying invoices on time. It could cost you less to do this rather than maintain an overdraft with higher interest rates.
5) Consider Your Supply Chain
Overseas markets are volatile at the moment. Consider reducing risks by finding domestic suppliers that could also slash freight and storage costs. Create backups to your supply chain to mitigate the risk of having a singular supply chain that market disruptions could impact.
6) Review Your Workforce
The labour market is competitive, so you want to retain talented staff. Consider offering flexible work arrangements, offering four-day weeks (with increased hours per day) and looking for training and development opportunities, particularly those subsidised by the government.
Suppose your employee is not providing sufficient value to your business (such as working a redundant position or not meeting reasonable expectations). In that case, you may be better off letting them go. You could also consider replacing the under-performing staff member with a lower-cost offshore resource where the work allows. If you would like to explore this option, Float Accounting can assist you with finding and placing the right offshore resources into your business.
If you’re concerned about how inflation could impact your business, speaking with a trusted business adviser (such as your accountant) may eliminate some of those concerns. Float Accounting can provide you with a plan that targets your business year ahead.
Reach out to us if you need assistance.The information contained in this publication is for general information purposes only, and does not take into consideration your individual circumstances. You should obtain personalised professional advice before acting upon any information contained herein. To the maximum extent permitted by law, we accept no responsibility for any loss incurred by any person directly or indirectly due to any action taken or refrained from as a consequence of the contents of this publication.