Inflation is plaguing many developed nations as the second quarter of 2022 continues. With most estimates putting the figure somewhere between eight and ten percent, it’s the highest in four decades.
That means businesses, especially small and mid-sized ones, suffer the most. They’re the organizations, unlike giant corporations, that can’t afford to absorb losses year after year. What’s the solution for owners?
Luckily, there are several tactics entrepreneurs, founders, and primary managers can use to lessen the impact of inflation. Not all the responses are equally effective, and some are not very consumer-friendly.
But they all have at least a chance of stifling the rising cost of operating in an iffy economy. Two of the most potent weapons in the good fight are carrying less inventory and utilizing intelligent fleet management techniques and programs.
Other ways key managerial people fight high costs is by converting to a telecommuting arrangement for employees and raising the prices of goods and services sold to the public or to other businesses.
Here’s an overview of the wide range of strategies that have a decent chance of taking the bite out of the ever-rising cost of operating a company.
Less Inventory
Inventory is costly. Not only is there storage cost for every item, but there are other overhead expenses, like insurance, security, and accounting. Plus, inventoried items decay over time, get lost, are stolen, break, and otherwise lose their value with each passing day.
That’s one reason businesses are working hard to order materials only when they need them and to minimize the amount of inventory on hand at any given time.
Some of the advantages of low inventory levels include better organization and more physical space, on top of the financial benefits.
Smart Fleet Management
Any organization that uses vehicles, particularly trucks, to earn profits can leverage the power of fleet management systems to keep costs down and meet the many legal requirements of the transport sector.
Having HOS tracking is a central part of transportation compliance. Fortunately, fleet systems include ELDs (electronic logging devices) that are adept at keeping tabs on HOS (hours of service) as well as RODs (records of duty) for every driver on the job.
There’s now an industry-wide rule that mandates all vehicles to carry ELDs as a minimum requirement for tracking drivers’ hours behind the wheel, breaks and other uses of time.
The main advantage of fleet programs is that they also have the potential to bring costs under control by monitoring vehicle repairs and minimizing fuel use.
Higher Prices
As much as corporate leaders hate to admit it, a common way to negate the effects of rising operating expenses is to raise prices.
Whether an organization is a retailer or wholesaler, a modest price hike can go a long way toward bringing in enough revenue to offset inflation’s effects.
However, decision-makers must be careful not to raise prices to the point that sales drop off. In past recessions, merchants learned the hard way that significant price increases often lead to lower income in the long run.
Shared Office Space
Gone are the days when even smaller companies could afford stand-alone offices complete with all the amenities. Today’s leaner organizations look to survive in the smallest possible spaces.
In addition, many are finding ways to improve business performance by opting to take advantage of one of the hottest trends in commercial real estate: shared space.
As the digital age allows for more round-the-clock companies to thrive in a 24/7 online environment, lots of new owners and solo entrepreneurs find financial relief by sharing offices with one or two other renters.
It’s a timeshare type of arrangement in which each owner gets eight hours per 24-hour shift. Accountants, massage therapists, insurance professionals, and sales firms are discovering the financial rewards of renting this way.