In today’s current climate, business owners and managers are under near-constant pressure to keep business costs down, whilst also encouraging business growth. With almost everything increasing, from labour costs to raw materials, this has made it more difficult for companies to stay ahead of their competition.
Despite trying and best efforts, entrepreneurs and business owners aren’t always aware of how to withstand how inflation can impact their business and future growth. With that in mind, let’s take a look at some of the ways that you can protect your business from inflation.
What Is Inflation?
Inflation is the term used to describe the rate of increasing costs for goods and services. It can be caused by a number of different factors, including natural disasters, politics, global conflicts and recessions – all of which have happened consecutively over the past few years. Covid has also had an impact on the rate of inflation due to long-standing supply chain issues, increased spending and borrowing by the government and increased demand for certain products and services brought about by lockdowns.
How Does Inflation Impact Small Businesses?
Inflation can be crippling for small businesses, as they often don’t have the same budget flexibility as larger or more established businesses. When small businesses are hit by inflation, then they are likely to see their profits affected more than bigger businesses. As well as this, smaller businesses will often have less access to funds, which in turn makes it harder for them to navigate economic battles, such as inflation.
3 Ways To Protect Your Business Against Inflation
Protect Your Cash
As a business, you want to ensure that your cash is protected. In order to do this, you need to be flexible with your spending, particularly as interest rates and consumer uncertainty are on the rise. When inflation increases, the value of money decreases in line, so protecting your cash reserve ensures that you always have enough to hand.
Another way you can protect your finances is to reduce your exposure to bad debt. As inflation rises, you need to keep your business and bottom line protected, so try to get a sense of how your customers or clients are with their invoices – even the most reliable payer can get behind in payments when times get hard. Consider taking out bad debt insurance if you feel that this could pose an issue in the future.
Cut Back On Expenses
Going through a period of high inflation can be a good time for you to review your business costs and look at ways that they can be reduced. Review contracts or subscriptions and make the decision as to whether they are necessary to your business, or set out to look for cheaper alternatives.
Consider A Loan
If your business is taking a hit due to high inflation, then taking out a loan or other form of secure funding can help to keep your business afloat. There are many different options available for businesses of all sizes, with many governments schemes also on offer. You can also consider getting mentoring or independent advice to help you decide which avenue is best for you, and look into whether different forms of insurance, such as credit insurance, can help to protect your business further.
