The impact of inflation is felt by all Arizonans. Currently, diesel gas prices are over $5 per gallon. According to the Rate Inflation, in August 2022, the rate of inflation was 8.263%.
As a business owner, I’ve felt the effects over the last 2 years as my shop hourly rate went from $100 an hour to $150 an hour and my shop labor payroll almost doubled. With little evidence that inflation rates will drastically decrease anytime soon, here are tips to help keep your business’ budget in check.
Analyze Current Costs and Prices
Conducting an audit of ongoing expenses is a beneficial way to analyze where spending can be decreased or eliminated. Insurance and discretionary spending are common areas where businesses unknowingly lose money.
Assessing insurance policies to ensure that you are not over-insured or duplicating coverage is a great way to decrease expenses. Looking for insurance packages and shopping around for providers can help guarantee you are getting appropriate coverage for the best price.
As inflation increases, it is important to focus on essential spending. Purchasing new equipment may seem like a good idea, but it’s better to wait until prices decrease if possible. Leasing equipment may also be a cheaper option to investigate.
Calculate the rate of inflation against current prices to determine if your product/service will still sell if you raise the sale price. If you run a “need business” rather than a “want business,” your product will likely survive an increase. Finally, try not to raise prices just to lower them – think about the longevity of your pricing and if you feel that your product/service is worth the new rate.
Reevaluate Work Week and Business Structure
Decreasing costs can start with evaluating your current payroll. While you might not need to lay anyone off, you can temporarily reduce salaries and hours to help limit expenses. Additionally, allowing employees to work hybrid for at least part of the week can decrease electricity bills or utility costs which add up over time. Being creative when reviewing your payroll may help the business save money.
Renting an office space can get expensive and while you may be tied up in a lease right now, it is something you can reconsider in the future. Additionally, if employees are working remotely, you may be able to negotiate your way out of the lease or sub-lease your space.
Working with local suppliers can be financially beneficial for your business and the community. Regional distributors are often more flexible and can help reduce supply chain costs. Materials can be delivered quicker, and they do not have to be stored in warehouses for long periods of time. Additionally, local sourcing can reduce or eliminate minimum buys which will ensure you aren’t purchasing more than what you need therefore saving money.
Whether you operate a small or medium sized business, taking the time to assess current business practices and adjust spending can help your company remain profitable. Investigating areas to decrease expenses and taking action to minimize excess spending across the board will help keep prices down while inflation rates continue to rise.