Ten tips to help businesses deal with inflation - Rob Stokes of Optimum Professional Services
By Rob Stokes
It's been well-reported that inflation is rising, and people are beginning to see price increases hitting their pockets.
Thanks largely to rising prices in energy, along with a very buoyant second-hand car market and the increasing cost of eating out, inflation has risen at its fastest pace in almost ten years, hitting 4.2 per cent in the year to October.
So what will this increase mean for businesses which have largely been enjoying stable prices?
Rob Stokes, head of Accounts & Audit with Optimum Professional Services explains below.
The Bank of England has already said it may need to raise interest rates, which will affect the cost of borrowing.
Rapid price rises can make consumers more cautious, particularly over discretionary or impulse purchases, so if you are planning a price rise then gradual increases may be preferable to a sudden hike, to avoid deterring too many customers.
Inflation also impacts businesses' costs, such as stock, suppliers and utilities (and we have mentioned the energy prices rises). Now would be a good time to review stock levels and suppliers to ensure you are able to remain profitable.
Our advice is always to plan ahead, and planning now will help your business to weather a storm of inflation and any interest rate increases.
- With the end of the year approaching now is a very good time to review budgets and, if necessary, adjust any targets in light of inflation rises.
- Look at your 'won't pay' customers and consider removing them from your books. Similarly, look at your debtors and chase up overdue invoices (where possible), which will help with cashflow.
- Look at your terms of business and make sure your payment terms are very clear. Ensure you invoice in a timely fashion, which will again help with cashflow.
- If helpful, agree extended payment terms with all suppliers in advance.
- Look at your banking facilities. It may be wise to discuss future needs.
- Focus on customer relations. Now really is the time to put in that extra effort. With price pressure, customers themselves may well be shopping around so make it hard for them to want to do so.
- Talk to your team and see what ideas they can come up with to save costs and streamline processes. Get their buy-in and support.
- Scrutinise your business and see what cost savings you can make without compromising your operation.
- Where else can you save money? Can you save staff costs? Can you eliminate unprofitable services and concentrate on those which bring in the most revenue?
- Look at your KPIs and measure them on a daily basis.
In November, Bank of England Governor Andrew Bailey apologised for the rising prices and warned inflation could climb as high as five per cent, before falling back again. So now, more than ever, businesses need to look at ways to weather any storm ahead.
For help and advice on business and tax planning, please get in touch with me, Rob Stokes, head of Accounts & Audit with Optimum Professional Services. Email firstname.lastname@example.org.
Optimum works with business owners across Cheltenham, Gloucestershire, Swindon, Wiltshire and the surrounding area.
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