According to November’s Small Business Statistics provided by Statista, the number one issue facing small business owners in America right now is inflation.
If you are a small business owner in the United States, you are probably feeling the effects of inflation in one way or another. Prices on the goods and services you consume and utilize to run your business are rising, but the prices you can charge for your own goods and services may not be keeping pace. This can put pressure on your profit margins and make it difficult to maintain your standard of living. Here are 6 small business strategies to battle inflation:
- Understand what inflation is and how it can affect your business
- Look at your budget and see where you can cut costs
- Raise prices on your products or services to offset the effects of inflation
- Consider hedging against inflation by investing in commodities
- Think about ways to increase productivity and efficiency in your business
- Review your debt situation and try to pay off as much as possible
Find more statistics at Statista
Understand what inflation is and how it can affect your business
The first step on our list of strategies to battle inflation is simply understanding what it is. Inflation is an economic concept that has wide-reaching implications for businesses. In its most basic form, it is the general increase in prices over time. It affects bookkeeping and accounting due to the need to adjust prices for goods and services. This, in turn, affects profits and overall projections for future revenues and costs, as well as potential customer growth/loss. Business managers should stay abreast of how inflation can influence bookkeeping, accounting practices, and the overall financial health of their organizations. With knowledge on these matters, business owners can make informed decisions about how to use their available resources more effectively during a period of inflation.
Look at your budget and see where you can cut costs
When you’re running a small business, bookkeeping and accounting are key components of making sure it is run in a cost-effective manner. Looking at your budget on a regular basis and seeing where you can cut costs is an important step to staying afloat and reaching your small business goals. Tracking expenses will help determine if an area needs more investment or if there is any overspending that needs to be addressed. By doing this, you’ll get an accurate picture of where each dollar goes and make adjustments as necessary. Taking the time to review your expenses regularly will help your small business stay profitable and efficient for a longer period of time.
Raise prices on your products or services to offset the effects of inflation
As a small business owner, it is important to consider raising your prices periodically to account for inflation. This allows small businesses to remain competitive and maintain their profitability while reaching their business plan milestone. Inflation affects small businesses in many ways, but when prices are kept regularly at the appropriate level, businesses can have a more predictable cash flow and better manage their spending. Raising prices helps small businesses stay viable in the long run, financially and operationally. This is one of the most popular steps on our list of strategies to battle inflation, which many business owners across America are performed ongoingly.
Consider hedging against inflation by investing in commodities
Investing in commodities is one way small businesses can combat the effects of inflation. While small business financials may be affected by a rise in prices, investing in commodities could be a viable hedge against those prices. Since commodities tend to maintain their value and supply better stability than cash, small business owners can benefit from setting aside part of their operating capital to invest in them. With small business bookkeeping providing an easy way to track income inflow and outflow, ensuring some funds are added to carry out commodity investments will provide small businesses with a resilient source of security against increases in prices and the rate of inflation.
Think about ways to increase productivity and efficiency in your business
Small businesses have to be savvy with their limited resources, so increasing productivity and efficiency is a must. Keeping business financials organized and up-to-date is a great first step – business owners should consider setting up accounting software and systems that simplify their financial management. Having clear short-term and long-term business goals that emphasize productivity and efficiency can also be useful; when evaluating new projects or initiatives, small businesses should prioritize activities and objectives that will further these goals. Lastly, small businesses should make sure they are giving employees what they need to do their jobs – such as adequate tools and training – in order to maximize their productivity. With careful thought put into how business operations are structured and managed, it is possible for businesses to increase their efficiency and reach new heights.
Review your debt situation and try to pay off as much as possible
Small business owners have a unique debt situation in comparison to many other individuals. Small businesses may carry more debt than most due to carrying inventory, equipment and possibly rental space for their work. It’s critical for owners to review their debt situation regularly and pay off as much of that debt as possible. Small business bookkeeping and small business accounting are both essential pieces of knowledge that can help entrepreneurs better understand and manage the debts incurred by their company. Investing the time to properly maintain the finances of your business will go a long way in enabling you to pay off all debts over time. It will also allow you to clearly draw decisions with confidence from your profit and loss statement.
Last step on the list of strategies to battle inflation?
Inflation can be a scary thing for business owners, but by following these six strategies to battle inflation, you can offset the effects of inflation and protect your business. If you need help managing your finances or budget, Tentho is here to help. We specialize in small business financing and can offer advice on how to manage your money during periods of inflation. Contact us today to learn more about our services.