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Could Your Business Handle Inflation?

With inflation surging, costs rising and interest rates increasing (after being stable for a decade), businesses may be feeling the heat about their profit margins. Your business may be struggling to absorb these rising costs amid labour shortages, while also requiring spare capital to expand and further digital transformation initiatives.

In a time where growth should be at the forefront of your mind, you may instead be struggling with the incoming additional financial pressure. Here are five measures that business owners can put into place to mitigate the impact of inflation. 

Renegotiate Contracts To Reduce Costs

Many of your fixed-term agreements may have been made previously with pricing based on a certain set of assumptions. A project that commenced several years ago could now be operating at a loss, due to the cost of supplies today. In this instance, renegotiating the contract to reflect these changes is the best course of action. There is no sense in continuing a project if you would be put out of business by the overall cost to you after all. 

Consider Alternative Pricing Strategies

To what degree might you be able to pass the inflationary price rises onto your customers without alienating them? Small scale increases to your products occurring over multiple times may be more palatable to your customers, such as with quarterly rises rather than annual rises. If things swing back, your business can maintain the increased pricing and profit from the gain instead. 

How Do You Manage Wage Increases For Your Staff? 

Consider how wage competitiveness for jobs could impact your staffing. If matching industry expectations for wages in a sector is not feasible, consider alternative options as incentives, such as flexibility, opportunities for career advancement and better work/life balance options (e.g. 4 and a ½ day weeks, WFH Mondays, etc). This might be a method to compete at a lower pay scale by focusing on other benefits. 

What Are Your Key Products? 

Identify the products that your customers come to you for (your ‘milk and bread’ as it were) and use them to stimulate the sales of more profitable products or services. Reduce your key product pricing and instead upsell or cross-sell additional products to increase your customer’s basket size and gain additional purchases. 

Diversify Your Supply Chain

Identify opportunities to diversify your supply chain relationships and mitigate your risk of interruptions. It could be a critical point for your survival – the last few years have demonstrated that reliance on overseas production can be detrimental to a business. You could become a supplier yourself, investigate options closer to home for supply purposes or work out how government incentives could be used to benefit your business. 

Rethinking your strategy for inflation now rather than later could be a key maneuver in ensuring how your business performs in the long term. You can speak with a trusted adviser today for logistical guidance for your business.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.


What our Client Say

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier

David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

David and Alison Parker

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Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

Carl Gillmore

Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier