Blog
How we can help with rising costs
Monday 3rd October 2022
Andrea Cassidy
High inflation, increasing interest rates and a slump in investor confidence indicate challenges ahead for many businesses. But you already know this. More important is, what can business owners/leaders do about it? Let's dive in....
Act now
If your business has costs that are very sensitive to inflationary pressures, either now or in the medium-term, consider whether there is an opportunity to fix those costs with your supplier now to have certainty for the future. It may cost more to fix right now but the price of certainty may well be worth the extra cost. This could be energy costs, material supplies, or finance facilities.
Invest for the long-term
It may seem counterintuitive to invest when stormy times are ahead, but now might be the best time to invest for various businesses.
For example, there are various schemes being run by the Isle of Man Department of Enterprise to encourage investment in reducing energy usage (Business Energy Saving Scheme) and supporting businesses to implement changes to improve in key areas (Business Improvement Scheme). For more information on these schemes, check out the Department for Enterprise website:
Department for Enterprise website
People
People are the backbone of all businesses, and it is people that really feel the pinch of rising inflation. Increased productivity can be realised with investment in technology, processes and/or staff training. Think about how you can be more efficient by harnessing new technology or analysing and updating outdated processes. Even if you can't afford to shield your employees from the impact of inflation entirely, they will appreciate that you are trying to do something about it.
Pricing and margins
Maintaining margins is key to the financial health of your business and possibly its survival. A major factor in maintaining healthy margins is pricing your product or service correctly, considering the rising costs due to inflation.
The extent that you can alter your pricing strategy depends on many factors such as whether you sell essential goods or services or more luxury 'nice to have' goods and services. If your good or service is critical, tricky/impossible to get elsewhere and you have a strong brand, then you have more power to increase prices. Ultimately if you need to increase your prices to maintain your margins then you should.
Cash is king
Lots of businesses have only just got back to normal following the Covid-19 pandemic and their cash reserves are either drained or lower than normal levels. What constitutes a suitable cash cushion is different for each business, but as we head into more uncertain and turbulent economic times, more cash = more comfort.
Having cash reserves enables your business to absorb bumps and knocks that are inevitably coming. If you need to increase your cash cushion look to increase finance facilities, raise investment or set aside more money from day-to-day operations. The tighter the current cash balance is, the more important good cashflow forecasting and planning is. If you don't currently do any cashflow forecasting, then I strongly suggest you start so you don't get any nasty surprises.
Visibility to make sound business decisions
Many businesses don't have full visibility over their current or future financial performance. It is a problem we are seeing more and more. If you are a business that is working with outdated or flawed financial information, now is the time to work on changing it.
Greater visibility = more informed decisions, which should translate to better decisions. With faster, more relevant and accurate financial information you will start asking yourself questions like 'what if?' and 'should I?'. By using a trusted and skilled advisor like us, you will be able to arrive at answers to these questions.
If you would like to discuss how Augment can help your business you can email, phone or better still, book a video call with us.
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