Like the rest of the world, Australians are likely to continue feeling the impact of inflation, with the RBA expecting it to hit 7.75 per cent this year. This means costs will continue to rise across many sectors, from raw materials and commodities to freight and shipping, all the way to the cost of labour.
Business leaders can take control of rising costs by carefully managing cashflow. Accurate financial data and strong analytical tools can provide a full picture of company-wide cashflow in real time, and help businesses develop plans to better manage the pressures arising from inflation. Such data should provide the necessary insights to ensure business owners are able to forecast expenditure as best as possible.
Here are four strategies entrepreneurs can use to track their cashflow and tackle rising inflation:
1. Adjust prices to offset rising costs
Entrepreneurs are often concerned that they’ll lose customers if they raise their prices. The reality is that owners may keep their businesses in a healthy position by passing the higher costs of goods onto customers. In fact, plenty of organisations have already taken that step.
Using an integrated business management system, business owners can gain clear oversight of their cashflow, from end-to-end, to work out where inflationary pressures are hitting hardest and where additional revenues might be found to help cover growing costs elsewhere.
2. Invest in automation and technology
Many businesses continue to evaluate financial data without the benefit of automation. In fact, approximately 90 per cent of invoice processing is still, to some extent, manual, according to research by the Australian government. This consumes more time than necessary, adding costs like additional personnel, and introduces the probability of human error.
Accounts payable (AP) automation software empowers businesses by reducing manual tasks and freeing up cashflow. Invoices can be submitted, approvals managed, and payments processed through a single platform with minimal human intervention.
Investment in tech and automation may be useful during times of crisis by empowering the business to get a broader view of the business. For instance, employees can focus on receivables, making it more likely that the business can more easily plan and meet monthly expenses.
3. Track lines of credit to avoid unnecessary borrowing costs
In an inflationary climate, businesses should avoid taking on unnecessary debt, and the interest that comes with it. This could mean tightening budgets based on insights to ensure the business continues to perform at a sustainable level.
Having an automated finance system which covers accounts payable and accounts receivable can help business owners and their bookkeepers better track incoming and outgoing payments. With improved payment management processes in place, a business can take advantage of optimal payment terms and avoid late payments.
4. Invest in inventory management systems
Business owners can take charge of their inventory costs if they have access to detailed historical financial data. This can help predict future cashflow requirements, providing a better idea of how much to order and when, avoiding wasting money or lines of credit on stock that won’t sell until the next quarter or even later.
Insight into real-time inventory can help ensure businesses are not over-ordering stock that will take up valuable capital ahead of the time when that capital needs to be spent.
By adopting financial forecasting strategies, business leaders will be in a better position to successfully sustain operations, even in a challenging economic climate.
