It’s not an easy time for businesses or the people who work in them. Our Team SAS has prepared a list of measures you may wish to consider to help your business work with the challenges of rising inflation.
1. Review your costs and do some planning
In your review we recommend dividing every business cost a ‘low’, ‘medium’ or ‘high’ effect on the business.
Then do the same exercise with these costs in three new boxes (see example below) focusing on low, medium and high exposure or expected exposure to inflation.
| Low Costs with low impact on business | Medium Costs with medium impact on business | High Costs with high impact on business |
| Low Costs with low exposure to inflation | Medium Costs with low exposure to inflation | High Costs with low exposure to inflation |
Develop a strategy which focuses first on the two ‘high’ cost/exposure boxes. This will help you work out a plan of action for the worst-case scenario of spending large amounts of your revenue on business costs leaving you with an unprofitable business in the following year.
2. Financial clarity
Many businesses don’t have the capacity to see the bigger picture in their financial performance. They might miss anomalies and issues on a granular level, because they only have a superficial view of what is happening. Make sure your management information is up to scratch and make an informed decision on important matters.
If you need help making these important and complex decisions, seek out financial expertise.
3. How can my business be more productive?
Many employees will be finding it difficult with the inflation increase. They may start asking you for pay rises. Plan ahead to check if salary increases are affordable for your business.
Consider other benefits you may be able to offer such as work from home allowances and salary sacrifice benefits.
Are there any tools or software you can invest in, to increase the company’s productivity? Remember that you may be able to claim capital allowances on your investments including the annual investment allowance. Check current guidance to see what you can claim for. https://www.gov.uk/capital-allowances.
It is important to acknowledge if your business can’t afford to insulate your team from the situation but they will certainly appreciate your efforts.
4. Don’t delay, act today!
Are there opportunities to fix costs with suppliers now to have certainty for the future on costs with high inflationary risks?
Act fast on fixed billing opportunities particularly on energy bills and other inflation sensitive costs.
5. What about price?
We highly recommend you consider a review of your prices, once you’ve considered all the other factors listed above. Smaller businesses often under utilise pricing adjustments. Check that you are maintaining margins and the financial health of your business. These factors are key for survival.
The levels that you can adjust your prices to, will depend on many factors such as if your services or goods are ‘must-haves’ or ‘nice to haves’. Your ability to flex your pricing will depend on your services/goods being critical, low cost, impossible to buy elsewhere and the strength of your brand. If you increase your prices it is worth remembering that your prices are usually another people’s costs.
If you’d like to discuss your business then please get in touch. As part of our commitment to SMEs we are part of a trusted business advice service. The ICAEW Business Advice Service (BAS) connects owners of small and medium-sized businesses with ICAEW regulated firms who will provide a free initial consultation, without obligation.
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Use of this guidance is for reference only. Specialist Accounting Solutions Ltd accepts no liability for any errors therein or any losses or damages arising from it.
