Are you ready for the impact of inflation?

Consumer price index (CPI) figures, recently released by the Australian Bureau of Statistics, show the cost of goods and services rose 2.1% over the March 2022 quarter, lifting the annual inflation rate to 5.1%.

Price hikes in the cost of transportation due to fuel increases, in non-discretionary goods or services (purchases to meet a basic need such as food, shelter, healthcare), and shortages of materials and labour in the building industry, are now filtering through to Australia’s small business sector.

With the Australian Securities and Investment Commission showing a huge increase in the number of registered businesses - up from 1.68 million in March 2009 to 3.03 million in March 2022 – this means many small businesses are experiencing severe price hikes for the first time.

Wage increases

Small businesses are being advised to consider budgeting for a 5% wage rise this year, to manage the impact of rising inflation. Surging inflation means workers’ pay packets are falling behind in real terms, and in today’s competitive labour market, many workers may seek the chance to apply for a better paid opportunity.

Interest rates

As well as the impact of rising inflation, businesses should also be aware of potential interest rate rises.

With underlying inflation well above the band targeted by the Reserve Bank of Australia, economists are suggesting the central bank could lift interest rates in the short term.

This would see lenders hike their own interest rates, making it more costly for businesses to borrow in order to expand or upgrade.

Speak to your accountant

Cashflow, invoicing and debt collection are all areas to focus on to keep the business as stable as possible. Keeping on top of your figures is absolutely key right now and planning ahead is vital, to model how inflation will impact your own business.

If you need any help or advice with the financial aspects of running your business, contact us today on 08 6245 7506 or complete our contact form. We’ll be glad to help.

Last updated: 9th July 2022