Stem the Increase of Rising Costs

March 18, 2022

Inflation and supply chain bottlenecks have both significantly ramped up over the past 12 months, causing rising prices and headaches for millions of small business owners. Here are some ideas to stem the increase of your business’s rising costs:

Identify supply chain weaknesses

A small business’s supply chain can be surprisingly complex. Here are several areas of your supply chain that could be susceptible to inflation:

• Items that are affected by a just-in-time inventory system.
• Inventory or supplies that are only available through one vendor.
• Any materials or services that comprise 10% or greater of your cost of goods sold.
• Vendors who normally require longer lead times.
• Items that require special transportation or storage.

Strategic use of offers

One way to offset rising costs is to increase your revenue, either by raising your prices or raising your volume to garner more efficient unit costs. Here are some suggestions:

• Raise prices but extend terms to great customers.
• Offer additional services that cost more but have higher value.
• Offer discounts to steer customers to lower-cost order delivery.
• Price your products assuming the next volume cost break. If demand is there, your next supplier order will take advantage of the higher volume and get you lower unit costs.

Control your costs

Conduct an audit of your expense accounts to identify opportunities to cut or control existing costs:

• Saving a nickel here and a dime there can quickly add up. Conduct an audit of your expense accounts to see if there are opportunities for decreasing costs.
• Comparison shop to ensure you’re getting the best value with competitive prices.
• Create a monthly budget to help you stick to a spending plan.

Please call if you have questions about how to review your financial statements to uncover ideas for stemming the increase of rising costs.