As a business owner, you should be concerned about interest rate rises impacting the cost of doing business. Higher interest rates often curtail spending and slow growth plans, which results in lower cash flow. The increased cost of capital is also likely to mean that your business costs will rise as well. So how can you prepare your business for falling demand and rising costs?
Your first step is to make sure your accounting strategy is primed and up to date. Understanding and managing your finances is key.
Identify which products and services provide the best revenue streams and profit margins. You may want to focus on these and optimize prices to reflect your higher business costs. Just don’t cut quality or value—which is a sure way to lose customers at a time when you really can’t afford to. Also, are you sending out invoices promptly and following up on outstanding accounts? Slow or late payments can adversely impact your cash flow.
Are you leveraging your relationship with your lenders to help manage existing debt and offset interest increases? What are you doing to pass along costs to your customers, all while staying competitive in the marketplace? Is your business interest rate sensitive or do you have a plan to negate short term impacts from interest rate increases?
These are questions every business leader should be asking themselves as we look to the economic changes in the ever changing economy. Higher interest rates are likely here to stay and having a solid plan of action is the first step to ensuring your company thrives in times of change. If you are unsure, ask a financial advisor like a bookkeeper or accountant for tips. Even better yet, consider a fractional CFO to help you with big picture strategies and planning.
Your staff and your customers are your greatest assets. Make sure you’re looking after your employees and that they’re performing well—lower productivity can also impact your cash flow. Make sure you’re providing value and solutions for your customers. Consider rewards or special promotions for your best customers, which can spur sales in tight fiscal times.
You may also want to consider outsourcing non-core business functions to reduce costs. You could also obtain the services of an accountant or financial advisor on a consultancy basis. This way, you benefit from their expertise at a time when your business may really need it, without increasing staffing costs. Alternative lenders can offer financial and advisory services for companies as well as capital and credit. They can even help with acquiring distressed assets which can help you secure and grow your customer base.
With the right kind of planning and tapping into the right resources, your business can weather the impact of rising interest rates. Don’t be afraid to ask questions. Our team at the Funding University can help. Just email us at info@thefundinguniversity.com and one of our experts can help with a free consultation.
You can also register as our guest for the Funding Strategies Conference webinar on July 20th, “Smart Strategies for Working Capital Under Stress” where we will discuss strategies to address changing interest rates and the acquisition of working capital. This is part of our Funding Strategies series of online discussions with leading financial experts to help business owners learn smart ways to finance their businesses. Register now using Early Bird promo code, CAPITAL23, and attend for FREE. A $29.99 value!
Sources:
Forbes: Business strategy for the high-inflation economy: https://bit.ly/3IP08yC
Forbes: Small business opportunities to boost profit and productivity: https://bit.ly/3N6wA1V
Growth Force: How to survive when inflation is high: https://bit.ly/3N41WX6
Small Business Chronicle: How do interest rates affect businesses?: https://bit.ly/3ILe6kU
Smart Asset: What happens when interest rates rise: https://bit.ly/43D0Wie
Wells Fargo Small Business Resources: What rising interest rates mean for your business: https://bit.ly/3OMd7oo
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