6 ways to manage business costs in these inflationary times

The raging hike in prices, low supply of power, heightened fuel/diesel queues, foreign exchange rates rising, disruptions in supply chains due to looming conflicts in Russia and Ukraine, and many others have impacted businesses and heightened inflationary pressures.
Inflation is a decline in the purchasing power of a currency.
These pressures have a rippling effect on the economy and impact businesses differently. Businesses have to learn how to turn financial pressures into business opportunities by managing costs and channelling savings into productive areas.
1. Assess Expenses
Take a serious look at operating expenses and business costs. Evaluate and determine areas where business costs can be reduced and savings made to create a buffer for other increasing costs.
- Can raw materials be sourced elsewhere for a better deal?
- Can wages be adjusted?
- Can contracts be negotiated for a fixed rate to safeguard against future price increases?
- Can non-essential expenses be put on hold or reduced?
2. Evaluate and Eliminate work
Reexamine work and determine what is necessary and adds the most value.
Look at the work that needs to get done, can it be outsourced at lower cost, can some processes be merged, Can staff be assigned with more roles and responsibilities, can product or business lines be closed or redesigned?
3. Automate Processes
Business automation tools use technology to reduce the manual processes of day-to-day business transactions. Business processes like operations, marketing, accounting, workflow, human resources can adopt technology to enhance productivity.
Automation can promote stability, increase workforce productivity, reduce disruption in supply chain and increase revenue.
Companies can use the productivity gains and cost savings from managing business costs to invest in automation tools.
4. Establish Spending Process
Having a well-defined process will enable business managers to understand who spends money and where and how much money is spent. It allows the right level of accountability and the impact of decisions made on the business’s profit.
Ensure there is requisition and approvals for purchases and expenses Set spending limits for units or departments, and escalate amounts above the limits to the higher approval authority
5. Reduce Consumption
Companies can adopt techniques to reduce expenditure by seeking alternatives in inflationary times. For instance, with the disruption and pricing issues in the supply of diesel and fuel, businesses can seek alternative use of solar energy. This will reduce the recurrent cost of diesel, fuel or electricity. Investment in the alternative solar energy source is an asset to the business that also has tax savings benefits.
If companies can’t buy well due to supply chain and producer pricing pressures, they can make sure that they spend better.
6. Assess supply chain risk
Managing the supply chain in inflationary times is crucial to the sustainability of business operations.
- Determine whether your business depends on a single supplier
- Establish alternate supply chains for getting goods or services
- Consider storing critical supplies with low holding costs
- Review heavy, perishable, or hazardous materials that are difficult or expensive to keep and store in manageable sizes.
- Setup domestic alternatives instead of foreign suppliers
- Keep an eye on long lead time and plan purchases that can cover up the timeframe for supplies.
- Review and set safety stock and reorder levels
