5 Tips for Business to Deal with Inflation
5 Tips to Deal with Inflation
What is inflation?
Inflation in a business environment is defined as a general increase in price and a fall in the purchasing value of money. Simple term but yet hard to overcome the inflation phase, especially with the post-effect of the Covid-19 pandemic.
What caused inflation to happen?
Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A swell in demand for products and services can cause inflation as consumers are willing to pay more for the product.
Given a scenario, businesses will decide to raise prices due to a lack of supply as consumers are very eager to buy goods and services. In another scenario, businesses may opt to charge more because they want to improve their profits without losing customers.
In a bigger perspective, limited oil production can make fuel expensive, and supply chain problems can keep goods in short supply, spiking up the prices.
Let’s begin with our 5 tips for businesses to deal with the inflation:
Be Super Clear & Precise on your spending
Business owners need to be fully aware and understand where money is spent the most and is it necessary and wise spending. To weather the inflation period, it is super critical to establish end-to-end and actionable visibility of spending by cost category, function, and department.
Why is this important? It will ensure the perfect level of accountability for the business, ensuring all decisions made for the business are made knowing the full impact on the profit and loss.
Automate to Reduce Cost
Don’t assume that automation is only for big businesses. Generally, tasks that have few variables, repeatable and do not require much decision-making, it’s probably a good choice for automation. If you can automate aspects of your daily work, do it now (before situation persists to get worst)
Here are just a few of the business processes you can automate easily for your small business:
- Email blast
- Social media posting
- Bookkeeping – Download our Bookkeeping app, WhyQ KiraKira
- Sales & marketing – Download our Business app, WhyQ eBiz to create your e-store now!
Spend in the right place
In times of inflation, start addressing your operational inefficiency. Despite any period of time, we should always spend wisely, avoiding redundant positions or processes especially when we are a startup or small business. If one person can function well doing a 2 person job, then tough decisions need to be made accordingly as profitability comes to the front of the queue.
But, don’t cut costs that are unavoidable such as marketing cost as it is inevitable. But, always remember, broad and untargeted cuts could impede growth so decide wisely.
Get real about your debt
Post Covid-19 situation, many small businesses are in massive debt. Despite ‘surviving’ with a stimulus package by the government during the trying period, use any extra funds to pay up high interest debt that you acquire. Reducing how much you pay through lowering interest rates can help you protect against inflation.
Focus on your cash flow
What are the best inflation hedges? Of course it is cash. Cash flow is king! Sufficient cash from sales will ensure that you can cover the expenses, pay the bank and gain profit.
Also, a good flow of cash in the company resembles the company’s financial stability and health. If you have a business, download our 100% free Bookkeeping app, WhyQ KiraKira. It will help you to monitor your daily transactions, sales and expenses, debt collection and provide a platform to apply for micro loans from our micro-financing options. Thank me later for this!
Need more ideas & insights to grow your business, read WhyQ blog now.