Insist on a fixed-rate loan instead of an adjustable-rate loan so your cost of borrowing will remain constant regardless of economic conditions. Some potential good uses of loan proceeds in the face of inflation include real estate and machinery, bulk-discount inventory, or acquiring competitors or suppliers.
You may also want to consider converting term loans or other debt with an adjustable or variable rate to a fixed rate while interest rates are still low. This will help cut down on debt service payments and improve monthly cash flow. These recommendations may not make sense in every situation, and there are additional administrative costs to file for a change in accounting method to adopt LIFO.
If you have any questions about capital planning, a change in inventory valuation methods, or any other tax issues, please reach out to your Warren Averett advisor, or have a member of our team reach out to you.
So, what can manufacturing companies do to protect their businesses from a rise in inflation? Here are two actions you can take. Evaluate adopting the LIFO inventory valuation method Using the last-in, first-out LIFO method of accounting for inventory has positive results in an inflationary environment because it allows you to deduct a higher cost of goods sold COGS by using inflated current costs rather than lower historical costs. They need cost programs that allow them to grow top-line revenue and reduce their dependence on volatile labor markets while improving employee retention.
Successful companies deploy six tactics to achieve these goals. High-resolution spending visibility is the foundation of any expense management capability. It enables managers to fully understand where money is spent and who spends it. In an inflationary period, it is critical to establish repeatable, end-to-end, actionable visibility of spending by cost category, business process, function, and business unit. This is the foundation for all other productivity efforts.
Instead, clearly distinguish between strategic and nonstrategic cost-cutting, the protecting of signature customer and employee experiences, and fiduciary requirements, for example. Use consistent, accessible financials to prioritize higher ROI investments. Managers must identify where investments should be pulled back and cost savings realized; where you can more selectively trim costs to improve the return on operating expenses; and where you can boost growth through greater investment in the strategic capabilities needed to achieve differential results.
It helps leaders agree on such basic decisions as which capabilities need to be best in class — built to enable and sustain competitive advantage — vs. It positions a company to make better decisions about deploying increasingly scarce resources to reinvigorate its strategy and maximize shareholder value in times of economic disruption.
That includes investments in people, for example. For companies like Walmart and Target, for instance, the decision to invest to allow employees to pursue debt-free education is a strategic investment to differentiate the retailer in the competition for labor. With improved visibility and a clear sense of how costs align with strategy, the next step is to develop a more robust understanding of the real drivers of cost in an inflationary environment.
Dissect the rate prices paid and consumption quantity or volume , including the underlying drivers, for critical cost categories. This step enables companies to create granular, trackable initiatives linked to a unique driver of a broader cost category. It sets the stage for a host of possible moves. Among the biggest: establishing a preferred vendor program to increase buying power, reevaluating the right make-vs.
These steps can deliver real, near-term savings. With increased spending visibility and the ability to isolate drivers, companies can tailor their approach to match the inflationary environment. One way to do this is to set up a spending czar or spending control towers.
Restaurants, hotels, housing, tourism, fashion retail and any other form of street vending and business that needs interaction between people have suffered due to government restrictions and safety limitations. For many companies, increasing production and supply has not been or is not synonymous with a good turnover: Not all that glitters is gold.
Are we willing to emulate the great productive Chinese system? Statistics show what can result from mixing a crisis with an increase in production volumes. We just have to take a leaf from those who have always won the inflation war: individuals and entrepreneurs who had taken out loans and discovered that higher prices make their debt worthless by comparison.
They were able to pay it off until it blew away. What actions should leaders take in light of this data? Learn to interact with the rest of the world, have smart control, fully digitalize, do a spending review and aid the sharing economy to promote sustainable economical development. Forbes Business Council is the foremost growth and networking organization for business owners and leaders.
Do I qualify? This is a BETA experience. You may opt-out by clicking here. More From Forbes. Nov 12, , pm EST. Nov 12, , am EST. Edit Story. Apr 20, , am EDT.
0コメント