What is Inflation?
Inflation is the rise of prices, which as a result, leads to a decrease in the number of goods or services purchased.
The rate at which purchasing power drops can be reflected in the average price increase of a basket of selected goods and services over some period of time.
The rise in prices, means for example; a box of eggs that may have cost 98p, may now cost £1.18. Effectively, it buys less than it did before.
In contrast, we have deflation; prices decline and purchasing increases.
What is the current inflation rate in the UK?
UK inflation edges down to 10.5% in December 2022.
The governor of the Bank of England has said there could be a “rapid” fall in inflation in Britain amid a drop in global energy prices over recent weeks but warned that a shortage of workers could still pose major risks amid the cost of living crisis.
What are the types of Inflation?
There are three main types of inflation:
- Demand-pull inflation: Demand-pull inflation happens when demand outweighs production capacity. Put another way, there is more demand for goods than the current supply is able to meet. Therefore leading to price increases.
- Cost-push inflation: Cost-push inflation occurs when production costs make it more expensive for companies to produce the same goods. As a result, market prices rise to reflect the increased cost of production.
- Built-in inflation: Built-in inflation occurs when workers demand higher wages to combat rising living costs. This type of inflation can cause a feedback effect wherein companies must raise prices continuously to meet the increasing labour costs.
So how can I make sure my business stays profitable during inflation?
Streamline and Automate Processes
Can time consuming tasks be automated to reduce admin time? Is there software that can be deployed to automate business processes like scheduling, order taking, billing or collecting payments?
Having the likes of a workforce management software in place can help to significantly reduce the time managers have to spend on mundane tasks such as scheduling and payroll. They could be out on the floor helping their teams, in return, this leads to reduced labour costs, faster, improved scheduling and workforce productivity. A more engaged team and faster payroll. The benefits of automating are endless.
Every employee is crucial to the success of a business. The more engaged a team is, the more productive they will be.
What do you do to ensure your employees are engaged?
Reevaluate your Outgoing Expenses
Are there services you no longer use or require?
Suppliers that are a bit over your budget and you could get cheaper goods elsewhere?
Now is the time to look at all your outgoing expenditure and examine whether you really need it or not, or if there is a good alternative. Of course, don’t sacrifice quality just to cut down on expenses, as this could affect income on the other end.
Stock Up on Inventory
There’s nothing wrong with a little emergency stock up? Hell, it might pay off!
Doing so can mitigate the risk of you running out of certain items that may be a huge part of your service or a popular item on the menu.
Supply chain challenges have not been unknown to many industries including, hospitality, manufacturing, retail.
As stock becomes more and more scarce, prices will start to rise, so stocking up may have to be an option for you.
Raise Your Prices
Okay, this is a tricky one as it can go either of two ways.
It can work, customers are happy to continue paying for the services or goods you provide, your business stays profitable and all is well.
Or, price increase may put customers off using your services or purchasing goods from you anymore.
So, use your common sense here and don’t go crazy on price increases, be realistic and only consider the items that are actually causing an increase in costs to buy in in the first place.
Inflation can be an opportunity
All this talk around inflation can be an optimal time for you to get things in order. An opportunity to reexamine your entire portfolio.
As of August 2021, interest rates were still at near-record lows even as inflation has spiked in recent months.
One of the best ways to combat inflation is to consistently ensure that you’re properly diversified and fully invested in your business.
Free up your workers and make each person much more effective at creating value with Bizimply.
Schedule a call with us below and see how you can manage your workforce and inflation by automating manual processes.