With inflation now running at more than five percent, businesses across the country are experiencing price rises at rates they’ve not seen since the dark days of the early 1980s. The cost of everything is going up, from food to fuel, and nobody quite knows where it’s going to end.
Businesses, however, don’t have to go along for the ride. While it will be impossible for you to shield yourself and your customers from all price rises, there are steps that you can take to keep inflationary pressures under control.
Back in 2009 after the financial crisis, prices also spiked. However, thanks to a clever combination of technology and efficiency improvements, companies were able to better keep their prices down.
Today, the business community needs to do the same.
Automate Everything You Can
Automation has been proceeding apace since the industrial revolution, leading to the fantastic wealth we see all around us. For the first time ever in human history, millions of people have reliable access to all the resources that they need to survive.
As a business, though, you can take this much further. Thanks to globalisation, labour has been relatively cheap over the last couple of decades. But with rising incomes in China and the Great Resignation, that’s no longer the case. Hiring people is becoming more expensive.
That’s why so many firms are now investing in automation. It eliminates rising labour prices, allowing you to operate more efficiently and pass on savings to customers.
Cut Out Unnecessary Work Another strategy is to simply eliminate work that you no longer need to do. For instance, do you need to hire a team of accountants to your firm, or would you be better off just using software instead. As inflation looms large in the economic lens, companies are reexamining whether they need to keep all their existing staff, or if they need to make cuts.
Eliminating work can take a number of forms. This include:
- Directly laying people off
- Offering people voluntary redundancy
- Streamlining manufacturing processes
- Reducing the number of goods on sale
- Offering opt-in services
When you take this approach, it forces your firm to consider which activities are actually benefiting it, and which it can do without. It also makes you look at how you’re performing those activities in a way that may allow you to get costs down further. For instance, do you need to hire a bunch of IT department employees, or would you be better off with reliable and efficient IT support from a third party?
Cut Your Consumption
How you cut your consumption is very much a matter that your firm will need to consider on a case-by-case basis. However, once you go looking, you often find many opportunities to save.
For instance, when you have more spending visibility, you can see which factors are driving costs up at your firm, and which are constant. You can then seek alternatives to rising prices to match the inflationary environment.
Companies, for instance, that make many acquisitions, often find themselves with costly and inefficient organisational structures. Old practices from absorbed firms sometimes fail to meet the standards set by the parent organisation.
The trick here is to break down information silos and open them up to the whole company. Everyone should have access to decision data.
Spending better can also lead to enhanced cross-company collaboration on large projects. Simply connecting people is often sufficient to save large firms millions of dollars.
Understand Your Spending Environment
Firms that can improve the resolution of their spending visibility are in a much better position to figure out how to fight inflation. Once you have a high-level view of the situation, you’re in a much better position to see where money is being spent, and by whom.
For the most part, there won’t be any impact on your processes: this is not a surveillance activity. Instead, it’s more about keeping track and enabling the right level of accountability. You want to ensure that people in your organisation are making spending decisions that conform to your budget.
Learn The Difference Between Strategic And Non-Strategic Spending
Lastly, in inflationary environments, top-level executives are much more likely to make across-the-board cuts that reduce total expenses but don’t really help the firm thrive. Cuts may get rid of staff that they need to reduce their costs further and get their prices under control.
Always create a distinction between strategic and non-strategic spending. Make sure that you continue spending on items that move you towards your long-range goals. Inflation is likely temporary.