How inflation affects businesses?
In the unprecedented times of the pandemic, a series of unexpected situations were encountered globally by all. The business & overall life changes were inflicted by the coronavirus, & this has been challenging to survive. Persisting to this when the economy is facing inflation, with a constant surge in goods & services pricing over time. It diminishes units of currency (like the USD & EURO), resulting in outcomes like a higher cost of living. A pandemic is an open invitation to a rising inflation.
Sustained inflationary difficulties affect small businesses across the globe, including the cost of labour & cost of supply to the cost of capital. The longer inflation grinds it becomes a bigger concern, the more of an impact it continues to have even on the economy.
Due to increased demand, high energy prices & supply chain issues, inflation has soared radically – & is likely to rise further in 2022.
Increasing inflation can affect you considerably, so let’s look at methods to start preparing your business & protect your supply chain.
What is inflation?
Inflation is the amount of how much prices of goods & services have risen over a period.
You generally will not notice the price amendments on a day-to-day basis, but in the long-term, inflation can have a huge impact on the overall cost of living.
What is causing the rise in inflation?
Usually, during a recession, unemployment increases steeply & customers decrease their expenditures in return.
However, inflation has now escalated because when the economy resurrected, people spent much more money than they had during the lockdown. This triggered the demand for things like food & drink, fuel, clothing, & meals.
The lack of shipping containers & building materials has made it more difficult & more costly for businesses to capture or deliver of goods – resulting in them hiking their prices to meet the demand.
What does inflation affect businesses?
Many debtors are getting frustrated by the situation, with the most general problems impacting them, such as:
- Heightened rates of materials & stock, which probably could take more than 3-6 months to reach the destination.
- Increased shipping costs, with certain containers valuating up to thrice the amount.
- Increased worker expenses, with inflation also applying to salaries.
These issues can have a tremendous effect, with setbacks often resulting in closing leads, highly strained cash flow & complexities in identifying new & reasonable suppliers.
How to prepare your business for inflation?
A stable economy requires stable inflation. While high inflation indicates a perpetually high interest rate, low inflation can result in constantly low interest rates. Hence, it is wise to take measures to turn around all negative impacts & adapt a beneficial strategy.
Factors to consider sustaining your business during an inflation:
- Plan ahead and bulk buy
Inflation is unpredictable, so it could be useful to have a plan in place for any increases. Regularly checking your cash flow can help you adapt quickly to rising prices, as can purchasing what you need in bulk. This may help you avoid delays as your goods will come in one delivery – and also gives you the chance to negotiate with suppliers.
- Evaluate prices
For small businesses, increasing prices can result in a decline in customers. As an alternative, you could try offering different products with higher profit margins. Or you could reduce the prices of your best-sellers to increase foot fall for other products.
- Reduce expenses
Restructuring your business processes, measuring productivity & reviewing your manufacturing costs are all effective ways of budget & cashflow management.
- Prioritize existing customers
According to Forbes, inviting new customers can rate up to five times more than maintaining a loyal one – while increasing commitment can help you grow your profits by 25%. Therefore, ensure you establish gives you a returning customer, & try to imitate the results through your other products or services.
- Get a flexible business loan (if applicable)
A fast & affordable loan is a great method to boost your cash flow or cover any bulk or heightened costs. But remember to always calculate your funds thoroughly & make certain that you consolidate any finance in good time – hence you are prepared for any risk that occurs.
How can we help?
We have highly qualified financial consultants with practical knowledge & experience. Our advisors with an average of more than 10 years of relevant expertise can help your business sustain in difficult times of the inflation. We respond rapidly to complex situations & we mobilise with immediate effect to meet clientele needs.
We have a flexible approach. We partner, advise, & help implement the best solution to the business & financial problems; the client maintains control over the initiative.
We consist of a value-driven cost model, offering excellence in service, with added value for money.