By Angie Brown, Advisory Leader | Newfoundland & Labrador
With inflation at a high not felt for decades, many businesses are feeling the pressure as the cost of goods and services continues to rise. While interest rates are being hiked to tame surging prices, inflation is expected to remain elevated for some time.
Businesses will need to build resiliency to combat the impacts of this disruptive period. Wage inflation will continue to see businesses paying more to find and retain talent. Higher supplier costs will drive a trickle-down spike in prices, which in turn squeezes the purchasing power of consumers. Profit margins and deal-making may also be affected.
Rising inflation may be a challenge, but doing business doesn’t have to be. Taking decisive action to strengthen your growth plan can help you deal with the pressures of an inflationary period. Here are six strategies to help you deal with the impacts.
Get a better grip on your cash flow.
In times of inflationary pressure, it’s more important than ever to have a solid grasp of your financial situation. Understanding your cash flow and working capital needs should be an essential part of your plan. Do a financial modelling exercise to map out your situation. From there, you can look at various levers to improve your cash flow:
extending payments to vendors
tightening up invoicing and collection policies
divesting yourself of underperforming divisions or assets
prioritizing your resources in areas that are performing well
Reduce your tax burden.
It may also be beneficial to speak with an advisor to look for ways to reduce your tax burden and take advantage of losses. If your company has experienced losses, there may be ways to use the losses to improve your tax situation. A qualified advisor can provide guidance on how to maximize your business’s tax efficiency. But don’t wait too long—some losses have an expiry date.
Reach out to your lenders.
With interest rates expected to continue to rise, the cost of borrowing is set to follow. Now’s the time to review your debt and future capital needs. No matter your situation, a proactive approach is the best approach. Reach out to your lenders sooner rather than later, particularly if you’re considering any of these options:
expanding or investing in new technology
refinancing existing debt
assessing your ability to meet current debt obligations
Refresh your strategies to guide growth.
Exceptional sales and marketing strategies are a must if you’re looking to grow your revenue—but what worked in the past may not work now. Well-designed plans must reflect the current landscape to attract new customers. The same can be said for your goals on pricing. Many businesses are already increasing prices to keep pace with their own rising costs—and this probably includes your competitors. The time is right for a bolder approach, so refresh your strategies to drive growth.
Embrace digital transformation.
Is your technology providing you with the right information to make timely decisions? If you want better access to real-time data or to your financial information, it may be time to upgrade. Consider implementing a digital platform such as a cloud accounting system, an enterprise resource planning (ERP) system, a warehouse management system (WMS), or a customer relationship management (CRM) system to empower your decision making and help you grow your business.
Align your operations.
Needlessly complicated processes can break your bottom line regardless of the best intentions. If your people, processes, or technologies are working in silos, it may be time to transform your practices. Even small changes can make a big impact. Look for ways to simplify your processes to run a leaner operation, reduce costs, and increase profitability.
Angie Brown (CPA, CA, CIA) is a leading business advisor with Grant Thornton LLP in St. John’s. She is an agile professional with over a decade of accounting and corporate finance experience. Angie creates value for her clients through business planning, financial modelling, buying and selling businesses, feasibility analysis and cash flow management. Whether you’re just getting started, expanding a current opportunity or selling your business interest, Angie and her team have the expertise to help you navigate through all levels of change.
Contact Angie Brown at Angie.Brown@ca.gt.com or +1 709 778 8841.