A lot of companies are feeling the pinch with high inflation, but there are ways to mitigate its effects.
The impact on your company can be profound, from increasing supply-chain costs to demands from staff for higher wages. In such a scenario, it’s important to be proactive and put some measures in place to counter inflation effecting your business:
Prepare For Rough Times
We’re in a period of inflation not seen for more than four decades and it’s likely to get worse over the coming months. This is probably the last thing any business needs after the last two years, but it’s important to be realistic.
Involve your team in understanding that everyone will have to play their part. That could mean that any salary increases may have to wait a bit, although not long enough to compromise the livelihood of your employees.
Reduce Capital
When inflation is rife, paying the same nominal amount of money later means paying a smaller real value. Longer payment terms will also help reduce the cost of servicing your debt, with interest likely to increase in the coming weeks and months.
It also pays to invest any cash you have available rather than delay decisions on where to spend it because the longer you wait, the less value that cash will have. Speed up your decision process and spend it now, before the cost goes up even further. If you don’t have cash available, seek to switch your short-term variable debt into longer-term debt facilities at fixed rates.
Invest
It might seem counterintuitive, but spending money can actually help you beat inflation, especially if it makes your organisation more efficient. Technology investment in the form of artificial intelligence or business software can often take care of certain parts of your company.
This frees up other areas such as business development or cash flow, which can be spent in other ways to counteract rising costs. Outsourcing can also free up time and money within your organisation.
Be Honest With Customers
Given what happens to business costs when inflation rises, it’s likely that you’ll have to increase prices to cover at least some of the impact. Always try to be understanding of customers’ situations, while being firm in your reasons for needing to increase prices.
Try to involve your customers by empathising with their own struggle to cope with increasing costs and by doing so, seek to strengthen their loyalty. Where possible indicate that your prices rose by less than those of selected competitors.
Continue Marketing
Businesses will often cut back on marketing when the economy is struggling, but this is a false economy.
Continue with a marketing strategy, even if it’s revised. Marketing is a major way of propelling your business forward and growing your service users or customer base. In a tough market, where you may be losing customers because of the cost-of-living crisis or supply-chain problems, it’s important to communicate with them and be visible and clear with the service you’re offering.
For practical information on how you can effectively combat inflation talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
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