How to cope with the cost of living crisis as a business?
With food and fuel prices surging, inflation is at its highest rate in 30 years. In February 2022, the Consumer Prices Index (CPI) inflation stood at 6.2% but at the time of writing this (9th August 2022), inflation is currently 9.5% and the target for the country is 2%.
The cost of living crisis in the UK is affecting most businesses and households in the UK. With that in mind, businesses will need to find ways to stay afloat to ensure that their business continues to pay their bills, pay their employees, purchase stock and ultimately be able to make a profit.
How has the cost of living crisis affected businesses?
Rising costs are posing the biggest challenge for businesses and according to a survey conducted by BDO, nearly a third of their respondents are looking for additional finance in response to inflationary pressures.
Additionally, some businesses are planning to reduce their offering as they’ve seen a reduction in consumer demand. Meanwhile, others have switched to a cheaper supplier to reduce costs.
Rising prices, energy costs and increasing inflation aren’t the whole palette of challenges that businesses are faced with, the UK is faced with a skill shortage. Over a quarter of business owners said finding workers with the right skill set is becoming one of their biggest challenges.
In May 2022, it was reported that accommodation and food services were looking to fill 164,000 job roles and professional services were looking to recruit 131,000 new people. Paired with the high demand for health and social care workers and HGV drivers, it looks like the majority of sectors are affected by the shortage.
With such a shortage of workers, companies are becoming highly competitive with their recruits to persuade potential employees to choose their company and outbid their competition.
What can businesses do to cope with the cost of living crisis?
There’s no quick fix for your business however, there are ways to cope with the cost of living crisis and steps towards improving your cash flow.
Raise your prices
Research conducted by the BBC presented that three-quarters of businesses are increasing their prices to mitigate rising utility and wholesale costs. If you decide to raise your prices, bear in mind that some customers will understand, while the increase may leave some customers looking for alternative options.
Cut down on expenses
One way of avoiding price increases is to review your expenses and see if there is anywhere that you can reduce spending. For example, if you pay for office space based on how many days a week you are there, could you reduce it from five days to three days a week and your employees work from home the other two days?
Switch your energy supplier
As you’re well aware, energy prices are increasing so it might be worth looking around and seeing if you can save some money by switching suppliers.
Alternatively, you could look into ways of producing your own energy and invest in green energy. In the long run, you could save thousands of pounds and will become self-reliant. There is a large range of green energy options: solar panels, biomass boilers, air source heat pumps, wind turbines and more!
To purchase solar panels, for example, upfront can have quite a big impact on your business’ cash flow therefore you could look at finance options.
Seek business funding
If you’re looking for an injection of working capital to boost your cash flow or looking for funding for your growth plans, commercial finance can be a route that you could down. Depending on what your plans are, you can use a business loan to support your cash flow or if you’re looking to purchase a new piece of machinery to improve your efficiency then asset finance is available.
Using a commercial finance brokerage like ourselves, we work with a large panel of lenders and can arrange a large suite of finance options.
Fill your job vacancies/skill shortage
As stated above, there is a shortage of workers in the UK and there is some big competition for new recruits but finding someone to fill the gap in your workforce can mean that your team is at full capacity and efficiency.
Finding the right person for your team can lead to more strain on your cash flow however, the addition of a new team member should lead to your workforce being better and more efficient. With that extra person, more work will be completed or extra work that one team is dealing with will be removed from them and allow them to focus on their main tasks.
If you’re unable to find cash flow to take on new employees, cash flow finance might be an option to explore. The funding can be arranged to help you meet payroll and other day to day bills.
On the other hand, if you’re not sure if this is the right time to hire people, we have spoken to HR specialists Wurkplace about when is the right time to hire people.
Whatever your needs and plans, get in touch with our team to find out what is available for you and your business. Call us on 01270 443510 or complete our contact form and we’ll be in touch when it’s best for you.