Across the world, inflation is running high, thanks to factors like pandemic disruptions, monetary stimulus and supply-chain issues.

You’ll be starting to see the effects of inflation at the supermarket, the fuel pump and in your business.

Eroding your buying power

Inflation increases prices, which eats away at your buying power. For business owners, that means you’ll encounter higher costs from your suppliers. Materials are more expensive, transport has become more costly and everything, from office supplies to utilities, is rising in price.

In addition, your staff may be asking for pay rises. To keep up with inflation, your income needs to increase by at least the same amount as inflation and to achieve that could mean a seriously large wage bill increase for your business.

Rising interest rates

By setting the Official Cash Rate (OCR), the Reserve Bank tries to keep inflation at a sustainable level and react to high inflation by raising interest rates. This, in turn, slows the economy and puts a handbrake on inflation. As a business owner, you’ll see this reflected in a higher cost of borrowing and if you have a home loan, this will be true as well.

Inflation does have some positive side-effects for your business. First, it tends to push up the value of big-ticket assets such as property. Second, it makes debts seem smaller – the amount of debt stays the same but hopefully your income rises.

It’s time to raise your prices

The rise in prices means you’re spending more so it may be time to consider raising your prices. If you’re wondering how much you need to increase prices in order to keep up with inflation or maintain your margins, give us a call. We can work with you to find the best price for you and your customers.