If you run a small business then you know things haven’t exactly been smooth sailing over the past few years. You’ve survived the pandemic, and now you’re facing soaring inflation and the possibility of a staff shortage.
According to the Australian Bureau of Statistics, the inflation rate for the March quarter was 5.1%, which was the biggest jump in over two decades. The figure was also higher than the Reserve Bank of Australia’s target inflation rate of 2-3%.
The increase in inflation will affect small businesses. Here are our top tips for how small business owners can prepare themselves for the impact.
1. Increase your workers’ salaries
Wages aren’t keeping up with inflation, and in a tight labour market, workers will be keen for higher salaries. It puts pressure on businesses to increase wages and benefits. While it’s a challenging period, look at ways to improve your employees’ wages. If that’s not possible, find other ways to reward them, such as offering bonuses, incentives or flexible work arrangements.
2. Focus on your best-performing goods
To improve your financial position, focus your activity on your best-performing goods and services. Look at reducing or removing anything with a low turnover or low profit as it’ll minimise any waste or additional costs.
3. Review your expenses
Spend time looking at your regular expenses and see if you can cut or reduce any costs. It’s a quick and easy way to improve your profitability and bring in savings. Some tactics include changing to more affordable suppliers, streamlining processes, and ordering items in bulk.
4. Consider passing on rising costs
It’s a delicate balancing act knowing when to increase your prices to customers who are also dealing with the rising cost of living. If you need to pass on any costs, the key is to communicate clearly and openly with your customers. Not everyone will be receptive, but your local customers will likely stick by you.
5. Speak to your accountant
Lastly, you should speak to your accountant. They can advise on strategies to help you save money and improve your cash flow.