Inflation is rising faster than at any time in recent memory. Businesses must deal with rapid cost increases by managing cash flow efficiently and communicating effectively with customers and suppliers. The benefits of inventory reduction must be balanced against the need to maintain critical stock for top customers.
“Inflation has taken root. Businesses everywhere are dealing with annualized cost increases of nearly 7%—the fastest pace in 40 years and significantly higher than the 1.8% average of the past decade. The resulting upticks in operating costs can cause serious damage to the bottom line.
The challenge is all the greater for its unfamiliarity: It has been 30 years since inflation was much of a player in company planning.
Experts do not see relief any time soon. They point to a number of root causes, one of which is energy.
Of all the steps businesses can take to mitigate the bottom-line effects of inflation, the most important is better management of cash flow. Inflation tends to accelerate the drain of money from company coffers, and throttle the flow that comes in. If left unaddressed, these battling trends can gut profits and threaten business survival.
Experts advise looking at the coming months with an eye toward estimating what will happen to cash balances.”