Inflation: How Can You Prepare?
Prices are rising and businesses need to prepare for the consequences, writes chartered accountant Tom Johnson.
The UK has seen significant price inflation recently as broken supply chains coincided with high consumer demand. The supply strains, caused mostly by Brexit and the Covid-19 pandemic, have led to a surge in demand for products and services such as fuel and energy. This has resulted in the Consumer Price Index (CPI) rising by 5.5% in the 12 months to January 2022; the highest CPI 12-month inflation rate since this set of data started being collected in 1997.
Given the situation we confront, it's advisable to start thinking about your business during the year ahead, so that you can identify where to manage costs and find potential opportunities.
Below is a list of some effects we may encounter during this period of high inflation:
- Surge in energy prices
- Potential for interest rates to go up
- Prices for raw materials to rise
- Cost of borrowing to increase
- Higher travel costs due to rising fuel costs
It is imperative you try and negate any consequences as much as possible by having a resilient business model, which ensures your financial position is impacted as little as possible.
You can do this by monitoring cash flow, budgeting and forecasting, while keeping a close eye on operational costs. Doing this will put you in the best possible position to make good long-term decisions and avoid knee-jerk reactions to news and information, which are constantly changing.
It's important not only to have those essential conversations within your business, but also to draw on external expertise which can provide a fresh outlook on the situation. At Page Kirk, we are here to support you, whether you want open lines of communication to provide advice and validation, or you'd like us to coordinate periodic business and strategy meetings. We can provide you with a wide range of management reporting options that best suit your needs, so you always have a clear picture of the current and future financial performance of your business. In these uncertain times of soaring price rises, can you afford not to use the services of a business advisor?
To find out more about how we can help you, call 0115 955 5500 or email enquiries@pagekirk.co.uk.