Seven top tips for protecting your business against inflation
With all the recent announcements from the new Chancellor there’s been even more talk about the economy and rising inflation than usual. Increasing costs are a concern for every business, of course, and that’s not all business owners have to contend with at the moment.
On the flip side to Government decisions is the Bank of England’s activities. One of the main tools the Bank of England has to control inflation is interest rates, but this is a double-edged sword. Though increasing interest rates can positively impact savers and attract inward investment to the country, it can also hit borrowers, including businesses.
So, if you are a business owner, what can you do to limit the impact that inflation and rising interest rates may have on your enterprise? Here are a few ideas…
- Put your productivity under the microscope
With energy costs rising and costs possibly increasing as a result of a weaker pound, becoming more efficient is critical. To be able to do more with less will help to keep your bottom line stable. Start by having a close look at your processes. Identify areas where you can make quick and easy improvements. Are there tasks that your staff are spending unnecessary amounts of time on? Perhaps certain processes can be simplified or removed altogether. You’ll be surprised at how even saving a few hours a week will help to improve productivity.
- Consider automating where you can
It’s possible you’ve been so engrossed in doing business day-in, day-out, that you haven’t focused on making the most of the latest technology out there. Start by reviewing what tasks within your business are repeatable that don’t require a lot of decision-making. Bookkeeping and admin should be top of your list. Think about contract creation, invoice production, debt collection, shipping, that sort of thing. Then look at your marketing activities. Would a customer relationship management system (CRM) help to automate some of your marketing? It’s great when it costs less to get new business.
Then, once you’ve done that, investigate what apps are available that could help you to automate these tasks. Don’t be afraid to get advice if you need it. Remember, once you have certain automations in place, not only will your business reduce the time it takes to carry out a task, but it will reduce errors, improve customer service, and hopefully increase sales leads too.
- Review your regular subscriptions and service contracts
If you’ve been in business for a while, there’s no doubt that you’ll have got comfortable with some of your suppliers. However, though strong supplier relationships are crucial for a successful business, that doesn’t mean the modus operandi you’ve been pursuing needs to continue unchecked.
Make this a time to negotiate better terms and consider hard whether certain contracts still benefit your business in the way they used to. Examples include your internet, waste management, IT support, building maintenance, and equipment servicing. All these could be critical for your business, but it won’t harm to give them a review. Check for ‘add-ons’ you don’t actually use. Consider whether a downgrade makes sense. And assess whether it’s time to switch to a more up-to-date technology overall.
- Evaluate your product offering and pricing strategy
You’re not the only business that will be feeling the pinch. Now might be the time to consider offering a ‘cut-down’ version of your products or services to businesses in need. They’ll thank you if you empathise with their situation, and you’ll build a stronger relationship with them as a result. Plus, you’ll stand a better chance of maintaining your margins than if you simply seek to increase your prices to match inflation.
- Get tough on cashflow
Different businesses will be in different stages of their growth cycle. However, when interest rates are rising, a pragmatic approach to investment purchases is critical. Grab low rates whilst you can, and make sure any potential investments really will deliver a return that will be sustained as a possible recession bites.
Then, also consider the money that’s flowing into your business. It’s important that you keep tabs on customers who don’t pay promptly. Make sure you start reminding them to make a payment sooner than you normally would. Keep the communication channels open and encourage them to give you a specific deadline for when they will make payment so you can plan accordingly.
- Check the robustness of your supply chain
The last thing you want in tumultuous times is to have orders you can’t fulfil. So, make sure you’re not over-reliant on one supplier; spread your risk and create a backup supply chain. Check lead times with overseas suppliers and see if there is a domestic supplier who can step in; they’ll be grateful for the business. And stock up on core suppliers but don’t overspend on storage unnecessarily.
- Ensure your HR strategy is resilient
Staff management can be a real challenge when things are tough. Ensure you have access to the skills your business needs, and do what you can to retain the talent that is essential to your operation. Then, with respect to the staff you already have, consider career and professional development opportunities instead of just salary rises. Not only will you boost morale, but you’ll have motivated staff whose improved skills are supporting your business.
A final word
With inflation on the rise and higher interest rates predicted to be around for a while, taking steps now will shore up your business whilst times are tough. Take solace that you aren’t the only business owner who is concerned. The great thing is, with the right support and advice from key professionals such as your accountant, your business will come out the other side stronger and ready to spring forward.
Roger loves ‘getting his hands dirty’, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice.
Using an extensive network of business contacts to leverage the best guidance and practical solutions, he has been called a Business Godparent due to his caring, hands-on approach.
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