If you had to list the top few challenges your business is facing in 2023, regardless of your industry, you’d probably say inflation. The economy has been facing historic inflation in recent months, meaning business leaders like you have had to be creative about staying financially strong in these turbulent times.
You might be cutting costs, for example, by adopting a remote or hybrid workforce and relinquishing those costly brick-and-mortar leases. Perhaps you renegotiated all your vendor agreements. Or, if you’re like many companies, you’ve increased prices across your offering of products and services.
There’s another way to hedge the adverse impacts of inflation that you may not have considered. Data and metrics might be the best way to keep growing during difficult economic circumstances. Power BI Reporting and Power BI Report Schedulers can be just the solutions your company needs to not only maintain your financial health but also surge ahead and grow your business during inflation.
What Are Some of the Causes of Inflation?
As a business owner or leader, you’re keenly aware of what inflation is doing to your market. But there is always more than one cause of inflation, and each cause can contribute uniquely to higher costs, reduced market engagement, and the fluctuating values of different goods and services. Understanding the dynamics behind inflation can help you identify key solutions. Power BI Reporting can help, too. But more on that later. For now, let’s look at the primary factors currently driving inflation.
When it costs more to produce a product, prices increase. Factors like wage increases, surges in supply chain costs, and raw material price hikes can all force companies to pass additional costs onto consumers.
Even when the economy is healthy, with growing household incomes and low unemployment, inflation can still happen. In these circumstances, consumers can afford to buy more, thus decreasing the supply of goods and services. And when there are fewer things to buy, the remaining products and services on the market increase in price, which leads to—you guessed it—more inflation.
When the US dollar loves value, inflation goes up. And today’s exchange rates (based on global currency values, imports, and exports) can take another bite out of a currency’s valuation. Increasing export competition means local materials are cheaper, driving prices down. At the same time, the import market experiences higher costs of doing business, nudging the dollar’s value in the other direction.
Increased Money Supply
An inflated money supply drops the value of money overall. So, printing more cash is never the answer to inflation. In fact, with more printed currency in circulation, the balance of dollars to rates of production becomes lop-sided. This creates a situation where it takes more money to purchase goods and services. This, in turn, drives marketplace prices sky-high.
Government Regulations and Policies
Ideally, the U.S. government and policymakers aim to keep inflation as close to 2% as possible. However, political instability, taxation rates, and policy regulation can all help or hurt those inflation-hedging efforts. Fuel costs, for example, when passed on to citizens, will impact inflation rates, as do the existence of subsidies. None of these elements are necessarily within your control as a business owner. However, you can learn to spot these dynamics in government oversight to help predict inflation impacts.
How Businesses Traditionally Respond to Inflation
When the going gets tough for most businesses, two strategies come to mind. One strategy would be to cut costs, which usually leads to mass layoffs. Or, if the business needs to keep the workforce intact, the other strategy would be to increase the price of whatever good or service the business is selling.
How Some Experts Suggest Mitigating Inflation
As you look to stave off the impact of inflation yc your business, you don’t have to resort to traditional business responses. In fact, industry experts and economic analysts suggest there are other ways to maintain financial stability in your organization. As Harvard Business Review points out, today’s business leaders have unprecedented market visibility and agility. This provides the information necessary to devise more creative solutions for increasing inflation.
Get Creative: Bundle some of your offerings at new price points or introduce a high-cost product that makes your existing lineup look more affordable.
Reduce Your Profit Margins: Clean up your portfolio and look to recalibrate your priorities. Reduce your profit margins where it makes sense to do so and realign your expectations and definitions of success.
Shrinkflation: Consider reducing how you package your goods and services. For example, reducing the number of potato chips you put in each bag. Shrinkflation isn’t popular, but it can help you streamline your deliverables.
Using Data to Hedge the Impact of Inflation
Today’s business leaders are exploring how data and metrics can reduce the adverse effects of inflation. This goes back to that improved market visibility we mentioned above. More insights and real-time metrics mean you can adopt new strategies, make quick decisions, and plan ahead, regardless of the economic circumstances.
Power BI Reporting and using Power BI Report Schedulers can help you tap into all the most relevant company and market data so you can:
- Identify spending patterns.
- Cut over-spending where it makes sense.
- Uncover what’s driving your spending.
- Reduce non-essential workloads.
- Limit overall consumption.
- Automate time-consuming and repetitive processes.
If you can leverage increased visibility on your data, you can find ways to tighten your spending. You can also differentiate between profitable and strategic spending, allowing you to cut non-strategic and unprofitable efforts. More importantly, you can use your data to dive deeper into the motivations behind your costs and spending. This will provide you with insights to make smarter decisions about streamlining your operations.
Today’s historic inflation doesn’t have to spell disaster for your company’s financial health. Get creative about how you can reduce your overhead and costs, while simultaneously improving your profit centers. Using Power BI Reporting, you can tap into the incredible power of data and metrics to guide those decisions. With the PBRS solution, you can seamlessly collect, automate, and analyze every moving part of your company in real time. The user-friendly dashboard makes keeping a finger on the pulse of your company’s financial trajectory easy. Find your path through today’s inflation with data and Power BI Reporting.