Dealing With Inflation in 2023

Survive and Thrive

The annual inflation rate at the time of this article is 6 percent.

Are you concerned?

If you are, it's time to develop strategies that can help you to be prepared and thrive. Our motto is, "be prepared, not scared."

Inflation is a persistent increase in the prices of goods and services over time, and it can have significant impacts on small businesses if you don't have a plan. Small businesses are particularly vulnerable to inflation because they often lack the resources and economies of scale of larger corporations to absorb increased costs.

As inflation causes prices rise, small businesses may struggle to maintain profitability, as they are forced to increase prices themselves or absorb the increased costs. This can lead to reduced demand for their products or services, as customers look for cheaper alternatives, and ultimately, it can threaten the survival of small businesses.

Therefore, small businesses need to understand inflation's effects and develop strategies to manage its impact to ensure their survival and continued success.

Focus on Cash Flow

Your accounts receivable may have a collection cycle of six months to even one year! Depending on the product or services you’re offering, a six-month cycle may be the norm. However, remember that the longer it takes to get paid, the more time you’re giving the dollar to drop in value, losing you money in the long term. Tightening your collection cycle will help you get paid and reinvest that money faster while tweaking prices in order to match the inflation rates….which brings us to the question of cost.

Increase Costs If Needed

It’s a necessary part of running a business. As businesses around you hike prices up in order to keep their heads above the water, you need to do the same. It’s a delicate balance, however, to increase prices while keeping everything at an affordable level for your target audience. Do your market research and have some serious talks with your financial advisor about price increases, even if they’re only temporary.

Look At Your Supply Chain

Supply chain issues are expected to run straight through this year, which means businesses need to revamp their own supply chain. As products take longer to arrive to our shores and the prices soar, business owners are now looking closer to home in order to source materials and manufactured products. While the prices may seem more expensive at first, consider the long term costs of pulling products from overseas. Time and money is being wasted as we continue to stubbornly outsource items that are either not available, don’t come on time, or are becoming more expensive than if you sourced them locally.

Reskilling and Upskilling

Upskilling is teaching your employees new skills so that they can do their job more efficiently and effectively. Reskilling is teaching your employees new skills so that they can work in new positions in the same company - without you having to hire new talent for those positions. In both cases, it helps employees feel valued, and it better prepares them for the future. With The Great Resignation still going strong, keeping your current employees and helping them (they’re also dealing with inflation) is more cost effective than trying to find new talent and onboarding at such an unsure time.

Inflation is affecting everyone. From employees to SMBs to large, well-established companies enterprises, everyone needs to look at strategies to make sure they can weather this out and come out stronger. If you have any questions on how you can help weather-proof your business, reach out to Adam Kae.

Inflation affects small businesses because they have to pay more for their raw materials and labor, and it's hard for them to pass those costs on to consumers. That's why small businesses are feeling the squeeze right now."

- Karen Mills, former Administrator of the Small Business Administration and Senior Fellow at Harvard Business School

CFO Adam's #1 Goal is to MAKE YOU MORE MONEY!

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