Inflation has been in the news for months. In fact, from November 2020 to November 2021, inflation increased at the highest rate since the early 1980s. But most of that conversation is around how inflation is affecting individual consumers. Small business owners are feeling the pinch, too. There are, however, steps that entrepreneurs can take to minimize the effects of inflation on their companies.
The first thing to do is to try and reduce costs where possible. Do you have contracts that will be up for renewal soon? Try and negotiate lower, scheduled price increases over time. If your business has solid relationships with vendors, they may be open to this. If you have management-level employees with contract renewals looming, it’s a good idea to try and negotiate with them now, too.
The second thing to do is to spend where it makes sense. It’s a good time to invest in new technology that could make your business more efficient. That can mean new machinery that will help workers get more done in the same amount of time. Or it could mean automating some of your customer relationship management with a new software suite. Arguably, the time to buy is now, before prices and interest rates go even higher.
One way that the government responds to inflation is to raise interest rates. Private banks quickly follow suit. At the time of writing, interest rates for a 30-year mortgage are about 3.20-3.55%. Currently, the Fed is expected to raise interest rates several times over the next two years. So putting part of your business cash reserves in a checking account that accrues interest is a prudent move. Let the inflation work for you where it can. Increases to interest rates also mean that financing new equipment now, while interest rates are low, will save you money in the long term.
At Alliance Leasing, we finance a variety of equipment for businesses in several industries. Whether you work in manufacturing, construction, or provide services to the public, it’s likely we can help. We’ve been doing this for over 30 years. Give us a call today. We’d love to hear about your plans and find a way to help you.