It’s easy to see why ordinary consumers dislike the idea of inflation, but employers hate it too.
Not only does it erode your buying power, but it also undermines efforts for employee recognition and retention. It takes much work to prepare for record-high inflation, too - resources that you could use for something else.
Regardless, every employer must prepare for economy-crushing inflation to survive and thrive. Here’s how employers can prepare for record-high inflation and continue going business as usual amid this crisis.
1) Improve Cash Flow By Shortening Cash Conversion Cycle
Cash flow is the lifeblood of any business. Without a steady stream of revenue, you wouldn’t be able to stay afloat.
Cash flow has to be a top priority for any company. However, your cash flow depends on the cash conversion cycle. It refers to the amount of time it takes for you to convert your cash inflows to cash outflows.
For example, if you receive $100,000 in revenue on January 1, you won’t receive $100,000 in cash immediately.
You’ll have to wait a certain amount of time to convert your accounts receivables. In the meantime, you’ll have to spend money to keep your business running. You might need to pay your employees, vendors, or suppliers.
You can't run your business if you’re waiting for enough cash to cover your expenses. That’s why you should shorten the cash conversion cycle. Shortening your cash conversion cycle will involve several changes, such as:
- Improving your billing and invoicing system.
- Reducing the time between invoicing and payment.
- Finding alternative sources of funding.
- Reducing your expenses.
- Reducing your debt.
- Improving your collections.
- Reducing your exposure to currency risk.
Reducing your cash conversion cycle is easier said than done. You’ll have to employ several strategies to shorten the time it takes to turn cash inflows into cash outflows.
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2) Work With Tax And Finance Professionals
Taxes and finances are two of the most complicated aspects of your business. You might have to consult with tax professionals, finance professionals, or both before you file your taxes and financial information.
Working with a financial advisor can be expensive. However, you can save money by outsourcing these services. For example, you can hire an accounting firm to handle your finances. It might seem expensive, but it’s more affordable than hiring an in-house accountant.
Due to employing critical strategies to save money, businesses that work with finance professionals are more likely to survive in record-high inflation than those that don’t.
3) Reconsider Your Compensation Structure
Compensation structures are always changing. Employers must ensure that their compensation structures are competitive enough to attract top talent. However, some employers make compensation structure changes at the wrong time.
For example, making drastic or frequent changes to your compensation structure might unsettle your employees. It might make them think that their compensation structure isn’t stable enough. As a result, they might start looking for new jobs.
That’s why you should refrain from frequently changing your compensation structure. You should hold off if considering making significant changes to your compensation structure.
4) Reform Your HR Policies
Your HR policies impact several aspects of your business, including retention, productivity, and morale. You should regularly revise your HR policies to ensure they align with your company’s goals.
However, you should carefully review your HR policies before making any changes. You should gauge how your employees will react to these changes. If any changes might impact their morale, productivity, or retention, you should reconsider them.
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5) Review Supply And Lease Contracts
Supply and lease contracts are a double-edged sword. They give you access to critical resources but expose you to risk. That’s why you should review them regularly.
You should also review your supply and lease contracts when unanticipated events happen. For example, if a natural disaster strikes, you should review your supply and lease agreements to identify any clauses that might impact your business.
For example, you might discover several unfavorable terms in your business insurance or lease agreement. You might find yourself locked into negative deals with your suppliers or landlord. This will make it much harder to negotiate better deals and terms.
If you have to, create contracts that lock you into current market prices for lease and subscriptions for the next few years. With inflation on the rise, it is more likely that you can save yourself more money if sudden price hikes plague your industry.
6) Don’t Hesitate To Increase Prices
Some employers are hesitant to increase prices. They don’t want to upset their customers or their clients. However, you'll go broke if you don’t increase your prices. Inflation might erode your profit margins, but you'll go out of business if you don’t raise your prices.
Don’t shy away from increasing prices. Yes, increasing prices might upset some of your customers. However, you’ll generate more revenue by charging more. You’ll also save money in the long run because you won’t have to increase your prices frequently.
Regardless, raising prices might be necessary to survive in record-high inflation. Not only will it give you the cash you need to cover your costs, but it will also give you a competitive advantage. A good product or service should still be profitable even if you hike prices. You don’t even have to do the price hike all at once, but rather consider strategies that can help you get more money from your service.
7) Enhance Productivity Through Optimization
Today, efficiency is the name of the game. You can’t afford to waste resources or time if you want to survive in record-high inflation. You’ll need to optimize your operations to maximize your efficiency.
Optimization starts with understanding your operations. You should study your workflows and identify which steps are inefficient.
For example, you might discover that your inventory management process is inefficient. You might find that you’re wasting too much time managing inventory, which translates into unnecessary costs.
Optimizing your operations will also involve making changes to your workflows. You might need to automate certain processes to reduce your reliance on human capital.
For example, you might automate your payroll. Automating your payroll won’t have to worry about calculating salaries and sending payroll to your employees. You won’t need to hire additional employees to handle payroll.
Optimizing your operations can also involve bringing technology into the equation. For example, you might invest in software solutions that can help you automate specific tasks.
LEARN MORE: The Rogue Risk Way
The Rub
Record-high inflation can be crippling. It can destroy your purchasing power and undermine your business, but it doesn’t have to cripple you.
You can thrive if you implement the right strategies as a business owner and a good employer.
At Rogue Risk, we believe a solid commercial insurance program provides the sustainability needed for businesses to take the necessary risks for profitable growth.
If this is the kind of relationship that you would like with your insurance broker, we would love to talk to you.
- You can call or text us at 518.960.6600,
- Click here to contact us via email.
I look forward to introducing you to a new way of viewing your insurance program.
Thank you,
Ryan Hanley
Credits:
- Article by Sophia Young
- Photo by regularguy.eth
