As we reach an annual inflation rate of 8.3% this year - the highest since 1982 - the challenges of soaring energy costs, labor shortages, and supply issues pile on as business owners and employees struggle to stay afloat. Let’s look at a few ways your business can save money and ride out the inflation wave until things go back to normal.
Focus on Cash Flow
Your accounts receivable may have a collection cycle of six months to even one year! Depending on the product or services you’re offering, a six-month cycle may be the norm. However, remember that the longer it takes to get paid, the more time you’re giving the dollar to drop in value, losing you money in the long term. Tightening your collection cycle will help you get paid and reinvest that money faster while tweaking prices in order to match the inflation rates….which brings us to the question of cost.
Increase Costs If Needed
It’s a necessary part of running a business. As businesses around you hike prices up in order to keep their heads above the water, you need to do the same. It’s a delicate balance, however, to increase prices while keeping everything at an affordable level for your target audience. Do your market research and have some serious talks with your Fractional CFO about price increases, even if they’re only temporary.
Look At Your Supply Chain
Supply chain issues are expected to run straight through this year, which means businesses need to revamp their own supply chain. As products take longer to arrive to our shores and the prices soar, business owners are now looking closer to home in order to source materials and manufactured products.
While the prices may seem more expensive at first, consider the long term costs of pulling products from overseas. Time and money is being wasted as we continue to stubbornly outsource items that are either not available, don’t come on time, or are becoming more expensive than if you sourced them locally.
Reskilling and Upskilling
Upskilling is teaching your employees new skills so that they can do their job more efficiently and effectively. Reskilling is teaching your employees new skills so that they can work in new positions in the same company - without you having to hire new talent for those positions. In both cases, it helps employees feel valued, and it better prepares them for the future. With The Great Resignation still going strong, keeping your current employees and helping them (they’re also dealing with inflation) is more cost effective than trying to find new talent and onboarding at such an unsure time.
Inflation is affecting everyone. From employees to SMBs to large, well-established companies enterprises, everyone needs to look at strategies to make sure they can weather this out and come out stronger. If you have any questions on how you can help weather-proof your business, reach out to Adam Kae & Associates.
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Disclaimer: This article contains information and opinions from Adam Kae & Associates, and the information and opinions should not necessarily be seen as the best possible solutions for your business. Please contact us at firstname.lastname@example.org to help you find the best solutions for your business.