How to Protect Your Small Business Against Inflation in the Wake of Covid-19
The covid-19 pandemic has caused financial hardship across the globe. The world may be slowly – and shakily – recovering, but inflation rates are already on the rise, which can be bad news for small businesses. Fortunately, there are steps you can take to protect your enterprise against rising costs. Let’s take a look at how to protect your small business against inflation.
Increase Productivity to Offset Inflation
Increasing productivity means doing more in less time. This may mean changing how you do things or coming up with new ways to work faster and smarter. This can help to offset inflationary costs.
Start by creating an operational blueprint to get a clear picture of all of the workflows and processes you currently have in place. This will allow you to identify areas for improvement and eliminate processes that drain your time.
Consider which processes you may be able to automate, as this can save you a huge amount of time and produce more accurate results. The best tasks to automate are those which are repeatable and don’t require a great deal of brainpower, such as:
- General ledger entries
Hire Out Some Tasks
If you have tasks that come up occasionally but aren’t worth hiring someone full-time for, consider outsourcing them. Let’s say you’re a graphic designer who is occasionally asked to create mockups of new website designs for clients, even though this is outside of your remit. You don’t need to hire an employee for this sporadic work, so you would be better off working with a freelance web design company that can take on these projects. This will help you to save money on staff salaries whilst remaining productive and meeting your clients’ needs.
Review Your Subscriptions
Subscription costs are often overlooked but they can really mount up over time. Reviewing your subscriptions regularly will help keep costs down and help you remain prepared and in control when prices change.
Review Your Expenses
It’s easy to get caught up in the moment when it comes to spending money, but having a plan ahead of time can help keep this from happening. A realistic budget and careful bookkeeping will help you to stay on track and keep spending to a minimum. Reviewing and reducing your expenses is crucial in helping you to mitigate the impact of inflation on your small business, so consider using accounting software such as QuickBooks or Xero to help you stay on top of your spending.
Keep an Eye on Cash Flow
Cash is king in business and maintaining a healthy flow is essential for protecting the financial health of your enterprise. It’s important to avoid debt and maintain plentiful cash reserves to tide you over if inflation really starts to pinch. Get into the habit of creating cash flow statements and forecasts so that you understand your position, and look for ways to help you improve, whether that means reducing costs, taking out a line of credit or leasing equipment rather than purchasing it outright.
Reassess Pricing Strategies
In the current business climate, you need to be especially vigilant when it comes to pricing. Keep an eye on your competitors and make careful note of how they’re adjusting their prices to absorb the impact of inflation. It’s important to maintain your margins wherever possible but if you don’t want to increase prices, at least reassess your pricing strategies and ensure that business is still profitable.
The key to managing inflation and achieving success in the coming years is understanding and accepting the fact that you’ll need to do more with less. You can increase your productivity by hiring out tasks and using automation to enable smarter ways of working. Meanwhile reviewing subscriptions and expenses, keeping an eye on cash flow, and reassessing pricing strategies are important to ensure that your numbers remain in check.
Inflation will affect business owners everywhere, so it’s important to understand how it could impact your business and then take the necessary steps to absorb the impact. As always, preparation is key to survival.