In today’s economy, it has become vital for discerning businesses to effectively adjust to the ever changing market conditions, including inflation. As Kavan Choksi Business Consultant points out, inflation is not something new. In fact, inflation has always been a reality for businesses, and there are strategies for navigating such situations successfully.
Kavan Choksi Business Consultant marks a few strategies that can help businesses to deal with inflation
Inflation involves the continuous and accelerating rise of prices of goods and services. It takes place when the supply of money increases faster than economic growth. Inflation is typically measured as the percentage rate at which prices for consumer goods rise each month. Inflation is one of the most common economic challenges that businesses face. Here are a few strategies that can help businesses to deal with inflation:
- Get spending visibility: High spending visibility is important for proper expense management. It allows managers to gain a better understanding of where their money is being spent, and who is spending it. In an inflationary period, it particularly becomes vital to establish repeatable, end-to-end, actionable visibility of spending by business process, cost category, business suit and function. This allows for the appropriate level of accountability throughout the company, and makes sure that all decisions are made knowing the full impact on the P&L.
- Differentiate between strategic and nonstrategic spending: In any disruptive environment, odds are high that the executives would make choices that hamper the long term strategy of the company. It is common to make broad-based cuts during inflation that are not aligned with the long term goals and strategy of the business. As a result, the company may not yield optimal return on investment nor maximize shareholder value in the long run. Hence, it is prudent to make a clear distinction between strategic and nonstrategic cost-cutting. Consistent and accessible finance should be used to prioritize higher ROI investments.
- Unpack the drivers of spending: After gaining gauging how costs align with strategy, it would be important to develop a more robust understanding of the real drivers of cost in an inflationary environment. One must dissect the rate and consumption for critical cost categories, in order to develop granular initiatives linked to a unique driver of a broader cost category.
- Reduce consumption: Having increased spending visibility and the ability to isolate drivers would help businesses to customize their approach as per the inflationary environment. For instance, even if a business is not able to buy better due to producer pricing and supply chain pressures, they can at least make sure to spend better.
As Kavan Choksi Business Consultant says, in addition to following the tips mentioned, businesses should leverage automation to deal with the impact of inflation. Technologies like intelligent document processing and robotic process automation (RPA), for example, can free up the workers and make each employee more effective at creating value. Apart from ensuring better labor cost savings over the long term, automation can also promote stability in an organization.