5 ways your small business can cope with rising inflation

So, uk inflation has reached soaring highs and the pressure is real for business owners.

It can be anxiety-inducing thinking about energy prices rocketing, interest rates spiking - not to mention a possible looming recession but it’s best to focus on what you can control.

We don't believe that there is a one-size-fits-all solution for small businesses to navigate this challenging period BUT we do believe that knowing your numbers will give you the visibility and information to make the right cost and price-related decisions for your business.

Here are our top 5 suggestions to get you in the best position to confront these challenges:

1) Invoice promptly – this will improve your cash flow which will be under pressure from higher costs.

Tip: If slow customer payment is a big issue, consider automated invoice reminders with apps such as Chaser.

OR consider adding a payment service to your invoicing (i.e. a Pay Now button with a link to pay by credit/debt card instantly) so it is quicker and convenient for customers to pay you.

2) Keep on top of your bookkeeping – ideally weekly. Why? Because this gives you the most up-to-date information so that you can evaluate your cost base in close to real-time.

This ALSO means you can take any necessary action swiftly. Perhaps there are unused software subscriptions or non-essentials that could be cut back? Or perhaps you need to shop around for that insurance premium?

If you find it difficult to keep on top of your bookkeeping (we totally get it) - hiring a professional can mean a huge weight is lifted off your shoulders and that it’s done more efficiently and more regularly.

3) Take a close look at your profit margins – these are likely being squeezed across the board but some service lines may now be too low-margin or just not profitable.

You may need to revisit your pricing strategy or withdraw a less profitable service offering.

Tip: Setting up Xero tracking categories can help you see how various parts of your business are performing.

4) Consider your funding plan - are you self-funding your business? If so, do you personally have sufficient cash to sustain it? If you’re not sure - your accountant can help you with this.

If you'll need a small business loan, consider if now is a suitable time for you to fix borrowing costs if you are concerned that interest rates will rise further.

5) Make a fresh budget and track against it.

Tip: Even setting up an Account Watchlist in Xero can be simple but very effective. This can show you visually on your dashboard how your marketing spend (for example) is doing against your budget.

Also, you could ask your accountant for help with cash flow forecasting. This means you'll have better idea where the pinch points could be and how much of a buffer you have.

It's not an easy time and there are no easy answers but we hope these suggestions will give you the clarity to take the right next steps for your small business.

We’ve included lots of Xero tips in this blog as we love Xero here at Beaver & Bee - there is lots of useful functionality to help you track your business better!

Do contact us if you’re looking to learn more about Xero or the services we offer to get you feeling more calm and in control of your limited company’s finances in these tricky times.