How Can Accounting Firms Help Businesses to Tackle the Challenge of Inflation?
Small businesses need to be prepared for the soaring inflation for which accounting firms in Dubai can offer key solutions. Inflation is always happening and the SMEs need to understand how it affects their business and must develop robust solutions. Similar to the international situation, the prices in the UAE have been soaring in general.
According to the IMF, the current projections for 2022 of average consumer prices, may increase by 3.7 per cent, up from 0.2 per cent in 2021 and -2.1 per cent in 2020. Furthermore, the EIU forecasts for the UAE a rise in inflation in 2022 above 4 per cent. Now, businesses need to take steps to curb excessive inflation growth before it is too costly for them. Here is how accounting companies in Dubai can help businesses to tackle the challenge of inflation:
Deciding a Strategy
There are generally two different approaches that accounting firms in Dubai can adopt to help you during times of inflation. The first approach is a Strategic action in alignment with the business’ longer-term strategic goals. The second one is a Non-strategic, short-term action to streamline the business by cutting costs, and refining the business operation.
A company must choose the right strategy based on factors such as its current situation, health and the expected impact of inflation on its supply chain, and the resources it has in the short, mid and long term. However, some businesses may need to use a combination of both approaches to mitigate the risks of inflation. Your accountant can help you to determine which approach is ideal for your business.
Major Actions to be Performed
Once the strategy has been determined, accounting companies in Dubai can help the business owners to identify core areas that need immediate focus. Read below to understand the core areas that need immediate focus:
1. Spending review
When inflation is looming large you need to review the spending across all areas of your business. The review must cover pure spending costs and analysis of the cost process. You need to analyse how much control you have over the spending and the cash that goes out of the business. Business owners must also determine if some immediate gains can be achieved by changing suppliers, negotiating new rates, and stopping some costs altogether.
Accounting firms in Dubai recommend that you must review every cost involved in your business. The costs must be streamlined so that your company can operate effectively and achieve business goals and profitability. Even though this review is something that should be performed at all times, you must not forget to do this at a time of soaring inflation.
2. Efficiency analysis
Conduct an efficiency analysis and check if your systems are automated. Automating your processes results in major benefits such as cost reduction and efficiency boost. Cost reduction by way of automation will provide you with savings that can be redirected into other areas of the business, ideally to the most profitable areas. Consult with accounting firms in Dubai to understand how to boost your efficiency by automating the processes.
3. Focus on profit
Identifying more profitable revenue streams should be on the top of your ‘must-do’ list, especially at a time of rising inflation. You must, at least, identify the revenue streams that will withstand the inflation storm. If you focus on such streams, you can effectively build a resilient business model as you go through the next 12 months and beyond. Even though this may not apply to certain businesses, having multiple revenue streams can make a significant difference to your business at the time of inflation.
4. Review Labour and Time Costs
Small businesses must assess whether the labour costs and time costs are utilised most effectively. You must determine whether the business can redirect or focus some labour costs to help it thrive in a different way or a different landscape. Accounting firms in Dubai can help you to assess the commercial benefit of these costs and align them with your business goals.
5. Adjusting the Prices
During inflation, businesses may grapple with the rising costs and will pass them on to their customers. Simply hiking the costs across the board may imperil customer relationships, depress sales, and hurt margins. However, adjusting the pricing during inflation is vital to sustaining the margins when prices keep rising. Some of your customers may start shopping around for low-cost suppliers when you revise your pricing structure. However, such customers are always the ones that are harder to deal with and least appreciative of the value you give them. Instead, you can use this opportunity to gain new and valuable customers.
Consult with Accounting Firms in Dubai before Making a Decision
Accounting firms in Dubai should be your first point of contact when you start feeling the pinch of inflation. They can advise you on the best strategy to mitigate the risks associated with inflation. When it comes to accounting companies in Dubai, it is advisable to hire experienced firms such as Jitendra Chartered Accountants (JCA).
JCA has more than 20 years of experience and we can provide tailor-made solutions for your business. Apart from providing accounting services in Dubai we also assist you with VAT, corporate tax advice, corporate finance, ICV certification, Economic Substance Regulations (ESR), Ultimate Beneficial Ownership (UBO), Anti-Money Laundering (AML) and audits. Dial us today to get access to bespoke accounting & audit solutions.