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How Small Businesses can Cope with Inflation

Inflation has become a growing concern as it continues to rise across the globe, making people worldwide struggle to cope with the increase in the cost of living. Small business owners, in particular, bore the brunt of the inflation's effects on their organizations. With interest rates at the highest level in two decades, businesses are in need of mitigation.


Cost of living (COL) is the money needed to cover basic expenses such as housing, food, taxes, and healthcare. Although the average cost can vary depending on geographical location, an increase in COL rates is a worldwide phenomenon. For example, Thailand's inflation rate was stable in the last decade, remaining between 1-3%. However, in 2022, the figure increased to 7.9%, according to the Bank of Thailand. This sharp surge was likely caused by the situation in Ukraine and the pandemic, which significantly impacted consumer spending. A similar case is found in Australia, where oil, groceries, and even plane ticket prices soar. This exacerbates the country's ongoing predicaments, including the recent bushfires, droughts, floods, and the lingering aftereffects of the pandemic. Shane Oliver, the chief economist of AMP Capital, a Sydney-based finance firm, said the inflation rate correlated with Australia's pandemic restrictions and the conflict in Ukraine; the two events coincided, leading to a cost rise.


The increase in COL and inflation are things that impact businesses everywhere. However, smaller organizations were hit hard; for SMEs, 95% of revenue goes to expenses and taxes, leaving a mere 5% as profit. Specifically, supply chains were disrupted, leading to increased costs. However, as coronavirus restrictions have loosened and recovery has begun, the situation has been improving. Fuel and energy costs have already started falling back down again, and as organizations and businesses reopen their doors, more individuals return to run the firms, improving efficiency. Intrinsically, small companies can also cope with inflation by prioritizing cash flow, shortening supply chains (prioritizing local suppliers), increasing automation, and focusing on employee retention.

Now that the world has begun recovering from the pandemic and supply chain disruption, the business world is slowly reverting to how things were. Until then, the key to coping during these rough patches is to focus on the current resources and how to properly and efficiently utilize them.

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