Understanding the Impact of Inflation on Small Businesses

Many business owners shudder at the thought of high inflation. Costs creep up, customers tighten their purse strings and margins suddenly look unhealthy. Small and medium businesses feel it first, whether it's due to suppliers bumping up prices, unhinged power bills or climbing wage costs.

During the March quarter in 2025, the annualised Consumer Price Index (CPI) was steady at 2.4%. However, the Reserve Bank of Australia forecasts the CPI to rise to 3.7% by the end of 2025. When you can't balance those increases, it hits cash flow fast.

Let's look at some actionable strategies to protect your business against the impact of inflation and keep your cash flow net positive.

Cost Control and Operational Efficiencies

When prices rise, getting lean is a means of survival. Start by giving your supplier contracts a hard look. Can you renegotiate better terms or lock in rates before they climb again? Don't be shy — suppliers expect these kinds of conversations from time to time.

Next, audit your subscriptions and overheads. If you're paying for things you haven't used in the last three years, consider cancelling them. Every dollar counts in a high-cost environment.

Try to maximise your operational efficiency — even small changes help. Automate anything repetitive, such as invoicing, payroll or stock tracking. It might cost a bit upfront, but you'll save a stack in time and wages later. Inflation loves inefficiency, so tidy up loose ends before they dig deeper into your pockets.

Smart Pricing and Revenue Protection

Raising prices can feel awkward. In business, the trick is doing it without spooking your customers. Small, regular, market-backed increases fly under the radar better than one big hike.

Consider switching to value-based pricing. Charge for the outcomes you deliver, not just the hours it takes. Bundle services, throw in bonuses and reward loyalty. It keeps customers happy while protecting your margins.

And whatever you do, be upfront. Inflation updates circulate on the news, so customers tend to understand. Communicate clearly about what's changing and why: Transparency builds trust and limits awkward explanations later.

Cashflow Management and Financial Forecasting

Cash flow is critical under normal circumstances, but especially during inflation. Update your forecasts like clockwork — factor in rising costs, slower payments and any fluctuations in demand.

Build a cash buffer, even if it's small, to start. Stay on top of your receivables and chase late payers like your business depends on it (because it might). If needed, look into short-term finance options to plug any gaps. And make sure you've got real-time financial data at your fingertips — gut feelings won't cut it in an inflation crunch.

Getting the Right Support

If you're feeling the pinch, you're not alone. At WMC Accounting, our comprehensive, accessible business services can help you navigate rising costs, manage cash flow and keep the lights on without breaking the bank.

For expert support and guidance navigating rising expenses and inflation, get in touch with WMC Accounting today.