Preparing Your Business for Inflation

Business and inflation

Many businesses and households have benefited and enjoyed low inflation over the years. However, our economy is going through a lot as a result of the Global pandemic and Brexit; thus, we are faced with the possibilities of high inflation.

Protecting your business from a rise in inflation is important, and there are certain things you can do to minimize the impact of it getting high. In this post, we have gathered some useful tips that can help you to prepare your business for any rises that occur. However, before we discuss how you can prepare for inflation, let’s talk about how your business can be affected by a rise.

How can high inflation affect my business?

There are a lot of ways your business can suffer from high inflation. Inflation can disrupt your business plans as it increases costs and reducing your profit margins. This usually compels businesses to charge customers more, and so inflation continues.

Certain strategies such as interest rates and quantitative easing have been adopted by the government, alongside the Bank of England, to control inflation rates. These strategies help the government stay close to their target (2% inflation rate), as it is believed that the value of money can reduce significantly if it goes above this level.

Sometimes, it is easier for larger corporations and businesses to handle the impact of high inflation as they spread their loss by taking advantage of economies of scale. On the other hand, a rise in inflation can directly affect the profit margins of small businesses.

How to handle inflation rise?

It is important you have a solid structure in place to help your business easily adapt to the possibilities of a rise in inflation since it can be unpredictable. You can reduce the impact of inflation on your business in the following ways:

Plan and assess where possible

Inflation can be unpredictable, and you don’t see it coming as the rate of inflation can increase from 0.5% to 5% within months, depending on the state of the economy. Thus, having a plan or a rise in inflation can be difficult.

The only action that can be available to most businesses will be to check cash flow, streamline business areas where needed, check levels of productivity to know if there is room for improvement. You can equip yourself and your business with the tools and resources to prepare for the future when you assess the current situation you are in.

Prepare and react

What procedure does your business have in place to handle an increase in inflation? A lot of businesses have something to fall back to if an unforeseen event should occur, like an overdraft facility. Assessing your situation and taking advice (if needed) will put you in a better position to react accordingly for your business and niche in the event of high inflation.

Cash flow

It is important you assess your cash flow when making future plans for your business. Ask yourself these questions: if my financial information up to date? Is there enough money in my company account and can my account offer all I need? Do I keep management accounts? Do I need to update my cash flow forecast accordingly due to the rise in inflation? Having a plan is key when big changes occur as it is the perfect moment to assess, rethink and update accordingly to improve your business.

Have a financing facility

You can contact us to discuss a financing facility if you think it will be difficult to handle your finances. You can easily reach out to us for assistance if you seek an invoice financing facility to boost cash flow, asset finance to purchase the equipment you cannot afford, or want to re-mortgage your business premise to free locked up cash.

As inflation is on the rise, it is crucial that you prepare your business for the inevitable to minimize the impact of high inflation.

How we can help

If you think that an increase in inflation is going to cause damage to your business or if you are struggling already you can call our business advisers on 0800 975 0380 for some free, no-obligation advice, you can also email us on [email protected]. As always, the earlier you contact us the more options there will be available.