The word inflation is everywhere. It’s all over the news and making its way into casual conversations with our colleagues, friends and family.
Wage inflation, raw material cost increases and higher debt interest rates are all impacting small businesses and many are finding it difficult to absorb. Inflated costs will mean many businesses decide between investing for the future of the business or gritting teeth and getting through the now.
It’s a hard decision to make, and there’s no right answer, but we have to be prepared for the outcome.
I believe the best way we can manage this tricky period is through leveraging real-time data to ensure your business is putting its resources in the right spots.
The sooner a business can understand the impacts rising prices or staff shortages are having on their operations, the better it can counteract and respond.
These are the questions you should be asking yourself: what’s happening within my customer base? Who are my loyal customers and why? What are my supply chain risks?
If you’re struggling to answer these questions, it’s a great time to look into what digital tools could help your business. The Government’s Digital Boost website has a wealth of information and is a good place to start. Our data clearly shows digitalised businesses are more productive, and fared better through the pandemic.
If you’re trying to put a finger in the air and guess based on gut, unfortunately, it’s going to make these tough times even harder.
Has inflation already started?
Real data from Xero Small Business Insights show small businesses in the Bay of Plenty are doing well right now.
The region has seen strong growth in sales and steady growth in wages in 2022, a reassuring sign of local businesses responding to the current economic challenges they face.
Small businesses sales are up 10.6 percent year-on-year in May this year, the strongest of all regions across Aotearoa. Small business wage growth is up 5.8 percent year-on-year, tied with Waikato and Hawkes Bay.
Despite this, job growth was relatively flat. So, while those employed in the Bay of Plenty are enjoying decent sales and wage growth at the moment, there appear to be fewer employment opportunities in the region.
While things are looking good now, it’s very likely inflation will begin to have a more significant impact on the Bay of Plenty soon.
The increasing cost of living means locals are likely to tighten their purse strings and reduce discretionary spending. Big and small businesses alike will be more controlled with their spending too.
Small business owners will have to manage the balancing act between growing wage demands and the increasing costs of keeping the business running. A key way to combat this will be having oversight on cash flow, tracking incomings and outgoings, and staying on top of outstanding invoices.
As we enter these challenging times, businesses and individuals need to prioritise supporting local. It’s so important to pay your invoices on time and shop locally when you can. This will help fight inflation by keeping money circulating through the Bay of Plenty small business economy.
