Guide to Finding the Way Through Rising Inflation and Business Costs

Both consumers and companies are experiencing the effects of rising prices. The ramifications of this situation for proprietors, would-be company owners, and managers of existing companies are far reaching. However, there are options available that can combat, mitigate, or even leverage inflation.

The inflation and rising costs dilemma

Recent research by the CBI (Confederation of British Industry) shows that average expenses in UK manufacturing increased by 87% in the three months to April 2022, the fastest pace since July 1975.

Some of the increases are linked to the post-pandemic rebound. While the importance of controlling costs is undeniable, it is also clear that there is room for improvement.

With greater inflation, it’s tougher to plan, establish budgets, price things effectively, and manage in-put expenses. It’s harder to invest and more expensive to hire new workers.

It’s all about the money

For the most accurate cost estimates, it’s always preferable to follow the money, since every company is unique. What are the primary expenses involved in keeping your business open? Prioritizing large numbers may be beneficial since even a minor modification to a large number can have a large impact.

Perhaps a written checklist like the one provided below would be useful as a springboard.

• Rent
• Wages/payroll
• Business Rates
• Heating
• Lighting
• Money and Banking
• Marketing

While it’s true that focusing on the biggest input cost issues is where the bulk of your attention should be, even tiny modifications may add up to significant savings over time.

Sync up and amplify

The best course of action may be to adopt an integrated costs strategy, one that combines financial and sustainability imperatives to increase their extent and impact.

For instance, you could try to locate a smaller office or manufacturing facility. It’s probable that rent and gas expenses will decrease.

A flexible work schedule that allows for both in-office and remote work provides comparable advantages while reducing overhead costs. That might lead to greater work happiness and productivity, which in turn could help ‘pay for’ salary agreements that adjust with inflation.

Spending and saving

Investments made for the short term may pay off in the long run. Replacing office equipment with super-efficient ones, for instance. Solar panels, LED lighting, and energy-efficient insulation are all possible solutions. The initial investment may be justified by the ensuing cheap bills and predictable expenditures. The environmental advantage, however, is sufficient argument in and of itself.

It might be cost-effective to purchase raw materials, manufacturing capacity, and supplies in bulk. Keep in mind, nevertheless, the hazards that might arise. It’s possible that the basic materials might decay or become outdated. In addition to these concerns, one must account for storage space, operating funds, and available cash.

‘Green’ incentivising

Another idea may be to create ‘green’ incentives for workers to adopt savings. Your firm may, for instance, contribute a percentage of its cost savings to a sustainability initiative like the planting of trees and hedgerows.

The immediate feedback of publishing cost-savings statistics every week or month might be useful. This will also demonstrate how important visible metering is. The two processes—measuring and managing—are often intertwined.

Those marginal savings can carry more weight if bolstered by such incentives. Developing positive routines should lead to improved morale and cost savings for the company.

Cost-benefit analysis

There is usually room for saving money and cutting out on unnecessary activities. However, deciding which cost-cutting measures are most important may be challenging. Too much slacking off might damage top-line sales numbers. Finding the sweet spot where your company and its consumers both feel like they got their money’s worth is the ultimate goal.

Need help?

A failing business can still thrive when the business owner acknowledges faults and works towards rectifying them, and a thriving business can be better when the right business systems are in place.

If you would like to get some free advice about getting your business back on track speak to one of advisers today, call us on 0800 975 0380 or email [email protected]

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