Looking for a strategy for building business resiliency? Here are six strategies to aid you in handling the impacts of inflation.
Many businesses are feeling the pinch as the price of products and services rises, with inflation at an all-time high. And even though interest rates are rising to curb price hikes, inflation is predicted to be elevated until 2024.
To mitigate the impacts of this disruptive time, businesses will need to develop resilience. Businesses will continue to spend more to attract and keep talent as a result of wage inflation. Prices will rise as a result of higher supplier costs, which will reduce consumers’ purchasing power. Additionally, deal-making and profit margins can be impacted.
Rising inflation could be a pain, but running a business needn’t be. You can handle the demands of an inflationary period by working decisively to boost your growth plan. Here are six strategies to aid you in handling the impacts of inflation.
Improve your cash flow
Having an in-depth understanding of your financial situation is more crucial than ever amid inflationary pressure. A vital part of your plan should be understanding your cash flow and working capital requirements. Conduct a financial modeling exercise to map out your situation. From there, you might consider a number of levers to enhance your cash flow, such as:
- extending payments to vendors
- tightening up invoicing and collection policies
- divesting underperforming divisions or assets
- prioritizing your resources in areas that are performing well
Lessen your tax burden
In order to find strategies for lowering your tax liability and maximizing losses, it may also be advantageous to consult with an advisor. If your business has suffered losses, there may be methods to use those losses to reduce your tax burden. A knowledgeable advisor can offer suggestions on how to maximize the tax-efficiency of your business. Don’t wait too long, though; some losses have an expiry date.
Talk to your lenders
The cost of borrowing is projected to increase as long as interest rates stay up. Given this, it could be a good idea to assess your debt and anticipated capital requirements. The best course of action is always to be proactive, regardless of the situation. Contact your lenders as quickly as possible, especially if you are:
- considering an expansion or an investment in new technology
- looking to refinance existing debt
- assessing your ability to meet current debt obligations
Revisit your growth-guiding strategy
If you want to increase your revenue, you must have excellent sales and marketing strategies, but what worked in the past might not work now. To draw in new clients, well-designed programs must take into account the existing situation. The same is true for your pricing objectives. To keep up with their own rising costs, many businesses are already raising prices, and this probably includes your rivals. The timing is ideal for a bolder approach, therefore refreshing your growth-promoting strategies.
Embrace digital transformation
Are you getting the information you need from your technology in time to make decisions? It could be time to upgrade if you don’t have real-time data access or if you require additional visibility into your financial data. To empower your decision-making and assist you in expanding your business, think about deploying a digital platform like a cloud accounting system, an enterprise resource planning (ERP) system, a warehouse management system (MHS), or a customer relationship management (CRM) system.
Align your operations
Despite your best efforts, overly complicated processes can ruin your bottom line. Remember that complexity is the enemy of execution. It might be time to restructure your operations if your staff, systems, or technology are operating in silos. Minor adjustments can have a significant impact. Find ways to streamline your operations so they may operate more profitably, more efficiently, and at a lower cost.
Have questions? Let us help.
Doing business in an inflationary period isn’t easy, but we’ll work with you to find the right solution for your business. Whether you’re looking to improve your cash flow, reduce your tax burden or streamline your operations, our advisors can help you find the way forward. Contact us today.
