Combatting Rising Inflation

The business world is an ever-changing entity, and the current economic climate is no exception. With high inflation rates and the anticipation of more to come, it can be challenging for businesses to maintain their profit margins.

With this rise in inflation, the price of goods and services are expected to increase. This will have an impact on the profit margins of companies. Consumers will also become more selective when purchasing goods and services as they have less purchasing power.

Products that are likely to fare well in these periods of high inflation include staples or basic goods such as bread and milk, as even if they increase in price, consumers still need to buy them. Just like groceries in a supermarket, people will always need medicine and medical treatment. Consumers will place priority on spending on healthcare as opposed to less crucial goods and services - especially during the current times of the pandemic, where health is a major concern.

So, what can you do to combat this issue?

You can maintain your profit margins by reviewing your products and service pricing and taking into account the high inflation rates. You need to be careful not to price yourself out of the market, which will result in decreased sales. Businesses selling a range of products should also get to know which of your products (if any) will always sell well during inflationary periods so that you can make sure that you have them in stock (think those essential goods). You can also consider renegotiating outdated contracts or loans where you can for improved terms and consider opting for shorter contracts in times of uncertainty so that you are not locked in.

If possible, you should also consider helping your employees through this inflationary period with a pay increase - inflation affects them too. In this period of low unemployment, losing a staff member will more than likely cost you more in the long run.

Keep in mind there's no one size fits all - every business is unique. If you would like advice specific to your situation, we are here to help. Just ask! Adapting quickly to the changing economic conditions is crucial to your business's success - which is our ultimate goal as accountants!