6 Ways to Deal with Rising Costs as a Business Owner
Inflation is something that every business owner dreads. In Malaysia, inflation in 2022 increased to 3.3% according to the Department of Statistics Malaysia. This represents an increase over the 2.5% inflation rate recorded in 2021.
Increased costs don’t just mean less profits to the business. It also means customer dissatisfaction as costs are passed on and putting the brakes on expansion plans, among other side effects.
While dealing with increased cost can be challenging, it can be managed without raising prices or compromising on quality. Here are six ways to control rising costs as a business owner.
- Break down your costs
To reduce your costs, you first need to know exactly where your costs are coming from. This involves scrutinizing each and every cost incurred along the supply chain. When you do this, you can take steps to reduce or eliminate unnecessary costs. Can you negotiate better rates with suppliers? Do you have inefficiencies in your operations that are wasting resources? By understanding where your money is going, you can identify areas for potential cuts and savings.
- Diversify your supply chain
By using different suppliers, you can help reduce the impact of increased cost and spread out the risk of inflation. In addition, this strategy also increases your supply chain resilience in case any one of your suppliers fails to deliver. But it is nevertheless important to maintain good relations with your suppliers in order to enjoy favourable terms and conditions.
- Find efficiencies
Rising costs demand a laser focus on efficiency. This means doing more with what the business has. Measures like streamlining workflows, process automation, and outsourcing non-core functions reduce internal burdens and maximize resource allocation. Besides, efficiency is not just cost-saving; it’s a springboard for agility and scalability.
- Prioritize your workforce
If there’s anyone that can save your business in turbulent times, they would be your employees. A team of skilled, engaged staff can help the business by maintaining high productivity, or even pitching in ideas to help with efficiency. It also costs money to replace employees who leave, so try to reduce staff turnover as much as you can.
- Look into government assistance
The SME sector is a priority for the Malaysian government. As such, there are considerable resources available for businesses to cope with inflation.
For example, the Malaysia Digital Economy Corporation (MDEC) provides grants and knowledge programs for digitalization, enabling SMEs to further drive efficiency through adoption of digital tools. The government is also providing matching grants for digitalization through banks and other financial institutions.
- Reduce risk and improve cash flow
In a business, managing credit risk is a crucial method for minimizing losses, especially for businesses that extend credit to their customers. During tough times, making sure that payment comes through is critical for improving cash flow, the lifeblood of the business. Thus, it is important to ensure that customers can actually pay for goods delivered on credit.
This can be done by evaluating the creditworthiness of customers before onboarding them, as well as continuously monitoring existing customers. If any customers become delinquent, it will be necessary for the business to reinforce prompt payment behaviour and collect on the debts to pump the money back into the business.
It may sound tough, but CTOS Credit Manager (CM) makes this process easy with instant access to data and insights on a customer’s creditworthiness. With CM, you can:
- Perform pre-credit screening on new customers with CTOS Reports, getting information relating to their company profile, financial health, banking payment history (via CCRIS), legal cases, bankruptcy status, and trade references.
- Get automatic notifications on your customers’ changing business conditions such as bankruptcy, litigation, directorship, financial status, winding up proceedings and electronic Trade Reference.
- Access to CTOS electronic Trade Reference (eTR) platform to improve debt recovery efforts.
