Sustaining Businesses During Times of High Inflation
Inflation, or periods of rising prices, is one of the biggest concerns for investors and business people today. Inflation destroys the purchase value of your currency, whether at home or abroad. In the worst case, hyperinflation occurs when a wheelbarrow full of bills is not enough to buy a loaf of bread.
Huge government debt increases the prospect of inflation coming back from the dead and eating into your business. However, you can fight back with one of five anti-inflation techniques.
1. Pay attention to expenses
Any expense management function must start with high-resolution spend visibility. It helps managers understand exactly where and how funds are being used. In an age of inflation, developing repeatable, end-to-end and responsive spend visibility by business process, cost category, business unit and function is critical. All subsequent productivity attempts build on this foundation. It enables the appropriate level of accountability across the organization and ensures that all decisions are made with a full understanding of the financial implications. Distinguish between strategic and non-strategic spending: In any disruptive situation, executives are more likely to make decisions that jeopardize the company's long-term strategy. Severe cuts that don't align with a company's strategy are rare and thus won't deliver the best return on investment or improve profitability over time. Instead, make a clear distinction between non-strategic and strategic cost reduction, as well as brand and fiduciary duty to protect employee and customer experience. Use consistent, readily available financial data to prioritize higher ROI initiatives. An effective cost management system should drive a company's strategy and allow it to outperform its competitors in large-scale strategic spending.
2. Examine the factors that affect the expenditure:
The next level is building a better understanding of the true cost drivers in an inflationary economy, increasing visibility and really understanding how spending aligns with strategy. Examine rates and consumption (quantity or volume) and underlying factors for major cost categories. At this stage, organizations can develop detailed, traceable plans related to specific cost category drivers. It paves the way for many possible moves.
3. Reduce consumption
Businesses can change their approach to the inflationary climate, increasing the visibility of spending and the ability to identify factors. For example, companies can ensure better spending even if better products cannot be purchased due to manufacturer pricing and supply chain pressures. Issue towers or issue czars are one way to do this.
4. Eliminate work
With labor costs and bottlenecks rising, the most effective solution is to eliminate tasks yourself. Companies that excel in this area adopt a fresh attitude, also known as redesign from scratch, to reshape the way people work. With precise levers to minimize unnecessary work and automate, this approach pushes companies to analyze what processes are being performed and how they are being performed.
After eliminating labor, the ultimate strategy is automation. Robotic process automation, intelligent document processing and workflow are examples of technologies that can reduce the burden on people and increase productivity. For example, when key employees may be engaged in more strategic tasks (such as data analysis and insight generation), they spend too much time manually entering product and item data (e.g., package dimensions, box dimensions, dimensions, website photos) .