Inflation and Expense Reduction

For over two years, businesses and corporations have struggled to deal with the effects of the global pandemic. While it lasted, the global economic landscape changed dramatically. We are dealing with a different kind of pandemic now: rising inflation. 

According to the Bureau of Labor Statistics, the consumer price index for all urban consumers (CPI-U) grew by 7.5 percent in January 2022. According to the report, this is an accomplishment not witnessed since the 1980s. The study also concludes that the CPI increased by 0.6 percent in February, and all signs point to an increase by the end of March 2022.

Rising supply chain challenges coupled with increased consumer demand continue to increase the price of supplies and essentials. And according to the International Monetary Fund (IMF), the Russian war on Ukraine is likely to cripple the global economic growth forecast.

The implications of inflation affect businesses as much as it does to consumers. Companies will struggle with purchasing power, their ability to borrow more from lenders, and a weakening dollar. On top of that, business executives will have to deal with increasing expenses and overhead costs.

So, how do you plan on reducing business expenses in an inflationary market? We explore some of the best options to deploy.

Make Your Monthly Spending More Visible

One of the best ways to weather inflationary costs on your business is to make your spending more visible – if you have not done so. It is essential to review your spending by differentiating them into cost categories, production processes, and business functions. 

This allows you to see where cash is directed and who authorizes those expenditures, making for remarkable accounting. It also ensures accountability and transparency across the board, allowing managers to comprehend the implications of each financing decision.

Identify Strategic and Non-Strategic Spending

When you make your spending more visible across all departments of your business, you will be able to identify all strategic and non-strategic spending.

While it is not out of place to fund components that have no bearing on your business growth, it is essential to prioritize strategic spending over those that are not. After identifying these strategic and non-strategic spending, you will be able to pull back on costs that are not necessary for the long run. 

Review the Drivers of Your Spending

After improving the visibility of your spending and identifying which business costs are strategic, you need to review the significant drivers of such expenditure. Here, you can examine your vendor rates concerning the volume and quality received on supplies. 

This process allows you to review what is really driving your monthly spending and manage it accordingly as inflation persists. 

Leverage Your Business Partnerships With Vendors

No customer ever fancies the idea of paying extra for the same service or product they have religiously enjoyed over the years. Due to rising costs, this will likely happen. However, your customers do not have to feel the brunt of inflation.

Why not consult your vendors and have honest conversations around pricing? Some of your long-standing vendors can tweak their pricing without impacting your revenues in the long run. 

See your vendors as partners and make them feel like they are a part of your business’s success. That way, they would be considerate about increment in charges. Having consultations with your vendors will build flexibility in pricing – so your customers do not distance themselves from your business at the mention of price change. 

Reduce Unnecessary Work

As inflation persists, you should review your work processes and identify which adds the most value and those that do not. You can reduce unnecessary work and deploy more finances into the process that generates the best results. 

Another way you can achieve this is to streamline your operations. You can assign more tasks to some of your experienced employees without physically wearing them off.  Alternate forms of compensation or additional benefits can help. 

Consider Remote Work/Hybrid Office

During the height of the pandemic, some businesses implemented remote working to keep operations running. Studies show that 4.7 million Americans work at least half of the time remotely. 

Running an office full of employees during an inflationary period will increase daily overhead costs. To reduce expenses in the workplace, you can assign remote working or hybrid offices to your employees.

Automate Processes

Another way to reduce expenses is to automate some of your businesses. With the aid of technology, Artificial Intelligence (AI), and tools such as virtual reality (VR) and augmented reality (AR), work has become simpler. 

You should review your work processes and identify which ones to automate to reduce costs. 

Consult An Expense Reduction Expert

An expense reduction expert is what you need to navigate the storms of inflation. They can review your operations and identify costs that seem to cripple your finances. 

Expense To Profit is committed to improving your operations and revenues while lowering your costs dramatically. You need an extra pair of eyes to re-examine your processes, and we are your best bet.

Over the years, we have supported minor and major businesses to stand out, keep up with marketing trends, retain top talents, and maintain satisfied customers.

Reach out to us to see how we can map out strategies to help your business in these uncertain times.