How to cope with the effects of rising costs
Is your business feeling the impact of the current situation? Business Control’s Richard Starkey considers the reasons behind rising costs and the ways that your business can adapt to withstand these economic changes.
As we’re all painfully aware, we continue to live through an unprecedented time of change and upheaval. Inflation has reached record levels, domestic gas and electricity prices are through the roof, not to mention the shortage of labour and basic wage increase. It’s a perfect storm.
And things aren’t looking great around the corner either, with more increases to come in April: the domestic energy price cap is going up by 54%; there will be an increase in National Insurance contributions and changes to income tax; and the UK hospitality & tourism VAT cut is due to end on the 30th. Before the conflict in Ukraine, inflation was predicted to peak at the end of the tax year but now economic forecasters are raising their expectations…
Mitigating these issues
Let’s focus on what your business can do to adjust in this time of turmoil.
Fuel costs aren’t affecting us too severely at this stage, but everyone will soon feel the imminent increase. And we have to run with it; so have you checked which tariff you’re on for energy recently? Could you operate your equipment at cheaper times of the day? We are reaching the end of winter, so don’t forget to turn your heating off – even just a few degrees lower will make all the difference.
As a business owner you will be fighting for every pound that comes in the door, but you should also be fighting every pound that goes out of the door. Take a strong position, and ask yourself are there any more costs to be squeezed out? Should you pass any increased costs on? (And yes, this will fuel inflation, but perhaps it’s fair to say that this isn’t your primary concern at this stage).
It’s all about cashflow. Companies literally live or die by it. Perhaps as a business owner you should have honest conversations with your suppliers? Or negotiate down your costs? Your premises are likely to be one of your largest fixed costs, so could you move to another location or downsize? There are £10,000 grants available from some local authorities to move into vacant high street properties. Try exploring other grants in your area. At the time of writing, there are still many available across innovation, growth and R&D and this could open up a whole new revenue stream in future…
Remember to take advantage of the ways in which technology can save your business money. We are working more digitally all the time, especially when it comes to transferring data. 10 years ago the volume of business we are doing now would require twice the head count, but as a result of digitalisation we’re working more efficiently with fewer bodies. Look at how far we have come by using technology smartly! You may already be acquainted with Zoom, but there is a wealth of other digital tools out there that save costs and time. Consider WhatsApp, Slack, Teams, Zoho and other CRM tools.
And lastly, be sure to increase scrutiny of your clients for their payments. It’s easy to cast your eye over your incoming business but it’s much more time consuming to start chasing people when their payments are overdue and generally keep on top of your financial housekeeping. But being vigilant will pay off!
While the projections for this year are a bit gloomy, being well informed should keep you ahead of the curve. And as ever, it all comes down to the numbers that run your company. As a business owner you need to be aware of where you are financially and what’s on the horizon for tomorrow. Even if this isn’t your strength, now is the time to invest your time and efforts into keeping things on track. Hang tight!
Check out our Accounting for COVID-19 blogs here periodically to get the very latest insight and information from the Business Control team.
