Inflation is today one of the great problems of the economy. According to the latest data fromthe National Statistics Institute(INE), the CPI (Consumer Price Index) stood at 10.2% in June, one and a half points more than in May. The European Report on Intrum Payments 2022 warns that 55% of Spanish companies will see their growth hampered by it.
The increase in prices, especially that of electricity and fuel, negatively affects everyone’s pockets: businessmen and workers. What can the latter do to cushion the effects of inflation on their businesses? In this post we give you the keys.
Measures of companies against inflation
Reducing payment terms, establishing new salary policies, resorting toalternative financingor monitoring supply chains are some of the measures that small and medium-sized companies can adopt to combat inflation.
Grant Thronton‘s studyEl Pulse Express de la Medium Empresastates that 37% of businesses have or are developing action protocols to deal with this new crisis. According to the report, which consults 400 executives of companies with between 50 and 500 employees,84% of entrepreneurs consider increasing the value of their products or services. Of all of them «55% of entrepreneurs intend to increase prices in exactly the same proportion as costs, while 12% plan to increase their market share assuming the loss of margin and increasing prices in less proportion than costs. Less than a third (29%) of the companies consulted in this study will increase their prices above production costs”, they assure from the firm.
To deal with the rise in the price of energy, which is the main factor in the increase in business expenses,almost three out of four companies have already renegotiated the contract with the supply companyand an additional 17% plan to do so in the short term .
New salary policies
With inflation, the purchasing power of workers is significantly reduced. Employees pressure companies to increase their salaries, but many of them do not have enough capital to make this increase a reality. The solution is to develop new wage policies that involve benefits without having to raise wages. Flexibleremunerationis a solution to consider in times of crisis.
Shorter payment terms
At a time like this withsuch high inflation, the longer the payment period for customers, the greater the negative effects of this on the company. It is essential to improve billing efficiency. For this, it is necessary to seek thatthe average period of collection from clientsis less than the average period of payment to suppliers. For example, you can establish a discount policy for prompt payment or volume.
Monitor supply chains
Disruptions in supply chains can cause irreparable damage to business. That is why it is so important that companies have a response plan that includes seeking greater security in supplies. And how to do it? Well, turning to suppliers to establish longer contracts with them and buy products that have guaranteed supply. You have to look for the ones that will best resist and take it into account when rethinking scenarios, alternative actions and making decisions.
No experience to fight inflation
The Intrum European Payments Report 2022 says that 51% of companies do not have the experience or the necessary capacity to fight against inflation. Spain is the second European country with the most companies unable to face the consequences of rising prices.
The managing director of Intrum in Spain,José Luis Bellosta, says that inflation “will have a direct impact on the ability of companies to meet their payments on time, and therefore the increase in delinquencies, which represents a real risk for the growth of the business network. This represents a huge challenge for companies.”
