September 28, 2022

Unitranche

Supportive Business Potential

Cash Flow Is the Only Way to Fight Inflation

Inflation Is Affecting Everyone. Here’s Why Cash Flow Is the Greatest Antidote.

Toby Guinn Sr., Founder & Director of Business Development, Global Merchant Partners

The business community hasn’t yet moved beyond the pandemic, and now inflation is taking a staggering toll on small and medium-sized businesses (SMBs). Thanks to rising costs, more SMBs have raised prices this year than in any other since 1974, scrambling to offset skyrocketing expenses. With business owners losing confidence in the economy by the day, they want to know what they can do to mitigate mounting pressure.

History tells us that increasing cash flow should be the weapon of choice to combat the damaging effects of inflation. The most proven means of increasing cash flow include:

Switching to the Zero-Cost Credit Card Processing Model
SMBs alone can’t be expected to shoulder the revenue-eroding effects of inflation. To nobody’s pleasure, customers will inevitably pay higher prices to help keep the businesses they support afloat.

Adding or increasing the surcharge for each credit card transaction is one way SMBs can chip away at rising business costs. Because these surcharges are opted into when choosing a form of payment, they may be easier for your customers to swallow than a product price increase.

In the zero-cost credit card processing model, business owners keep 100% of every credit card transaction because the customer pays the processing fee. The business owner only pays a fee when customers choose to use debit cards, and the fee on each debit transaction is significantly lower than that for credit cards. The impact of switching to this model for businesses is immediate.

Pay Close Attention to Productivity
In lean times, businesses must examine what each employee brings to the table. The more value an employee delivers for their salary or wage, the further a business owner’s dollar goes. Investing in the most productive employees while making difficult decisions about the least productive will, in the long run, benefit your entire organization—including the employees.

Automate Where You Can
The human element is a critical piece of any organization. With that said, your organization’s longevity is tied directly to your competitiveness. As market-leading organizations implement automation to shave costs while enhancing productivity, you owe it to yourself and your employees to do the same—even if it means losing a few jobs in the short-term.

When done right, automation provides rejuvenating cash flow for organizations, which may allow them to pass savings onto the customer.

Review Subscriptions and Service Contracts
Are your subscription models and service contracts keeping pace with your own rising costs? As your cost of doing business increases, you must re-evaluate your deals with customers and suppliers or risk overlooking costly leaks in your organization’s balance sheet.

Address Your Debt
There is always a cost for debt. There are, however, benefits to certain types of debt. Review your outstanding liabilities, working with your accountants to ask: Is this good debt or bad debt?

Where possible, eliminate the debt that’s costing your organization the most money during these inflationary times.

Revisit Your Pricing Strategies
As economic conditions change, your prices will too. However, it’s important to know your customer and competitor base and be familiar with their financial circumstances. Rather than implementing wholesale, indiscriminate price hikes, you might:

  • close pricing gaps between you and your competitors,
  • eliminate ineffective or unnecessary promotions,
  • funnel price increases to customer segments and products where the effects are least acute (like on luxury goods)

You may implement other intelligent pricing measures based on the specific nature of your operations.

Focus on Cash Flow
More than 80% of small business owners believe inflation will continue to rise for the foreseeable future, and it’s critical that you inflation-proof your business now. Freeing up cash allows your organization to remain dynamic in these uncertain times.

Global Merchant Partners has been in the business of increasing gross profit, cash flow and retained earnings for its clients for 14 years. If you’d like advice on how to increase cash flow immediately by using zero-cost credit card processing, give us a call today at (877) 230-0012.