Inflation has recently increased by the largest amount in 40 years in the United States. That means higher consumer prices for groceries, fuel, and everything else. An estimated 45 percent of households are currently struggling financially due to inflation. Businesses are impacted too.
Inflation causes customers to have less to spend on products and services, and the cost of doing business increases. Plus, when employees’ salaries are shrunk by inflation rates, that means they’re, in effect, incurring pay cuts. That can lead to lower job satisfaction, reduced engagement and productivity, and increased turnover costs.
Below, we discuss two big ways medium-sized businesses can significantly increase cash flow even during extreme inflation.
The Inflation Rundown
Inflation is the rate at which a currency’s value declines during a particular period and the effect of the decrease of its purchasing power in causing rising costs. Currently, because the dollar has lost a significant amount from its usual range of value, consumer prices have increased as product and service suppliers compensate for the devaluation. Various factors contribute to inflation. But, in the most general terms, it is caused by the money supply in a country increasing faster than the economy or by consumer demand becoming stronger than supply can meet.
How Outsourcing Can Help To Address Rising Costs
Inflation impacts a company’s ability to spend as necessary to pursue its mission and achieve its goals. One way to significantly offset the effects of inflation and significantly increase the cash flow is by outsourcing. Delegating management of various non-core operations to outside business services providers can be a highly effective strategy for overcoming the challenges caused by severe inflation. Outsourcing can financially strengthen a company in a range of ways:
Experts In Every Role On Your Extended Team
As a medium-sized growing business, you may not be able yet to provide the payor advancement opportunities necessary to attract and retain top talent. Especially in professions that do not involve the core skill set that directly serves your business's central operations. Outsourcing empowers you to have top talent with the education and experience to excel for you.
Outsourcing is usually the most affordable and effective way for medium-sized businesses to maximize productivity while using as few precious financial resources as possible for critical non-core functions such as IT, accounting, marketing, payroll, etc.
Potential to Cut Overhead Costs
Labor is naturally the biggest expense by far for most businesses. Plus, there’s the cost of having an employee occupying a workspace in the office. If they’re not directly helping generate revenue by performing core functions, then consider the cost-benefits of keeping them onboard at all.
Pay Only For Services You Need
Choose a well-established professional services provider that offers customizable programs, allows you to utilize only the functions you need, and can scale services as you grow.
Cheap Alternatives In Automation
Today you can automate workflow management, document control, digital mailrooms, customer relationship management (CRM), virtual accounting, telecommunications management, and nearly all of your company’s non-core departments through outsourced providers with updated tech stacks.
Optimized Off-Site Departments
Outsourced professional services upgrade departmental performance to surpass the best in your industry. You also have more secure operations with more efficient full-service teams at lower costs than for developing and running the same functions in-house.
Expert Insights for Strategic Planning
Top-quality outsourced professional services providers bring a wealth of expert insights that can very often be highly useful in strategic planning and in streamlining functions to stay afloat during extreme inflation.
Minimizes Fraud Risk
Outsourcing with a trusted professional services provider can help protect your business from the financial losses and severe damage to your reputation that happens with fraud cases. Internal fraud happens more than you would think, so having an outside party reviewing your books would greatly minimize that risk.
Collect Revenues Faster To Increase Cash Flow
Getting your invoices paid faster means having more free capital to pay debts or invest in improvements to increase efficiency and promote growth. More timely revenue collections enable more accurate projections and provide top decision-makers with better data sooner in company financial reports. Collect invoice payments faster by implementing some of the following:
- Consider technologies such as Enterprise Resource Planning (ERP). Integrate and automate business processes with your ERP system to enable customers to pay online.
- Send invoices immediately after delivery of products or services if possible, to collect payments as soon as possible.
- Make your invoices easy to read by skimming for customers to see quickly how much they need to pay, how to pay, and what happens in case of late payment.
- Send automated email or SMS payment reminders the day after the due date. Make additional follow-ups, perhaps with automated voicemail messages. These calls are delivered faster and save the expense of employee hours for collections.
- Follow up on delinquent accounts with live phone calls to provide options and attempt to work out payment plans or other compromises for financially struggling customers.
Combine Outsourcing and AR Upgrades to Raise Cash Flow
You may decide to implement all or just some of these strategies or combine a wider range of methods to get the outcome you want. Measure your cash flow improvement results to determine what is working well and what more you need to do. If you opt to outsource accounting or other services, thoroughly vet your preferred service before contracting. Keep incorporating new AR practices, technologies, and strategic approaches until you realize the level of cash flow increase you need to meet your operational and growth goals.
Why Choose AccountingDepartment.com?
AccountingDepartment.com is one of the United States’ largest outsourced accounting services providers. We offer full-charge accounting department services for small to medium-sized companies with annual revenues between $2 million and $50 million and funded startups. Our clients moved to outsource for better accounting, DCAA-compliant accounting services for government contractors, and more reliable and responsive investor reporting services.
We remove the burden of developing and managing Accounting, including Bookkeeping, Controller services, AP, AR, and more, by providing an expert team of CPAs and other accounting professionals who understand the special accounting needs of growing businesses.
For information about outsourcing one or more of your accounting department functions, contact AccountingDepartment.com for assistance from a friendly, knowledgeable professional.