The impact of inflation on small businesses
Inflation can hit small business hard, but there is things you can do to prepare and minimise the impact of tough economic conditions.
Every quarter, the Australian Bureau of Statistics (ABS) announces what’s known as the Consumer Price Index (CPI). This is how we measure price rises, otherwise known as inflation.
It’s calculated by looking at the total cost of an average Australian household’s shopping basket compared to the same quarter in the previous year. In September, price rises climbed to 7.3 percent year-on-year. This is particularly high, as the Reserve Bank of Australia (RBA) is trying to set interest rates to see inflation sit between 2 and 3 percent.
Inflation largely impacts small business in two ways:
- Business costs rise
- Customers spend less as they tighten their wallets.
What can you do to minimise the impact of this?
Understand your cashflow
To make informed decisions on spending and price changes, you need to have a clear understanding of your incoming and outgoings funds. You need to know your numbers.
Create a plan
Creating a budget and having a plan to keep your business running through a disruptive time is important. Xero has some guides and templates on their support website and we can help you in a variety of ways dependent on your time and budget.
Make it easy to collect payment
Look at automating invoice payments and reminders using your accounting software and payment platforms such as Stripe or GoCardless.
Stay close to your advisor
Keep in touch with your accountant who can assist you with all things numbers related as well as systems or processes that will help you run your business more efficiently.
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