At a glance
- Inflation expected to remain at 2-3% through 2026
- Accountants can provide extra value by shifting from compliance to strategic advisory
- Businesses need robust cost management and flexible pricing strategies
Inflation continues to pressure UK businesses with rates stabilising at 2.6% in the 12 months to November 2024 – the highest level for eight months. KPMG forecasts inflation will continue to hover around 2-3% during 2025 and 2026, before meeting the Bank of England’s target of 2% in 2027.
While SMEs grapple with compressed margins, retailers battle rising supply costs and manufacturers face increased input prices, accountants are uniquely positioned to help clients weather these challenges. By expanding services beyond compliance to include strategic planning and risk management, firms can both support their clients and protect their own practices from economic headwinds.
Practical strategies to mitigate risk, fast
As prices rise, so does the cost of doing business. To avoid price and offboarding conversations with clients, seek proactive opportunities to help them mitigate the impact of inflation on their business.
Start by suggesting a comprehensive cost management review, taking into consideration contracts due for renewal, possible renegotiation with suppliers to secure better terms, or exploring alternative sources. Increasingly, technology-driven solutions are helping automate and streamline operations and reduce overheads.
Supply chain assessment offers another avenue for risk reduction and more predictable costs. Consider helping clients explore diversification of suppliers, such as overseas options or multi-source strategies to reduce dependency, and a review of inventory management practices for greater flexibility.
“Businesses that access support feel more confident than businesses that don’t and this helps build the all important resilience required to keep going and growing.”
Emma Jones, founder, Enterprise Nation
As margins tighten, pricing strategy becomes crucial. Clients are likely considering raising prices to protect their margins and remain competitive – offering advice around flexible pricing models, like cost-plus or value-based pricing, may also be valuable.
Maximising tax efficiency will also be popular, so it’s worth setting up a process for reviewing and optimising your clients’ tax liabilities frequently to conserve cash flow.
Encourage them to take advantage of R&D tax credits, capital allowances or tax deferral opportunities where possible. Additionally, advising on the structure of investments and business operations, such as incorporation or pension contributions, can help protect clients against the financial squeeze of inflation.
Position yourself as an advisor
You’re more than just a number cruncher and the higher your perceived value, the less likely clients are to end your contract during tough economic times.
Ensure your clients see you as a strategic partner by not only helping them navigate the complexities of inflation, but also plan for a sustainable future.
Encourage your clients to engage in long-term strategic planning to build resilience and ensure they are well positioned for both current and future economic climates. This could include scenario planning and stress-testing business models to prepare for future challenges.
In the short and medium term, you could also add value by offering financial forecasting and budgeting services.
Inflation presents unique challenges for comprehensive financial forecasting, particularly in maintaining accuracy. Help clients adjust their forecasts and plan for various scenarios by including inflation impacted factors and adjusting for the real value of assets and liabilities. Regularly revising forecasts ensures clients are prepared for financial shortfalls and can adjust quickly to changing conditions.
Similarly, detailed, flexible budgets that account for rising costs across key categories such as labour, raw materials and utilities can empower businesses to make decisions confidently and maintain profitability despite increased costs.
Building resilience
Inflationary cycles will come and go, but Emma Jones, founder of Enterprise Nation, says businesses that have a product or service with an enthused audience, healthy profit margins and a strong team will be better equipped to weather future storms.
“My advice…is to embrace new opportunities such as selling to government and trading overseas, whilst managing money, and getting access to support in the form of strong peer groups, trusted advisers, and mentors,” she says.
“Businesses that access support feel more confident than businesses that don’t and this helps build the all important resilience required to keep going and growing.
“I’m optimistic about the future for the small business sector. Record numbers of people are launching new ventures, with 47% of adults saying they want to become their own boss in 2025 (StartUp Ambition Report) and so long as this intent is matched with quality support and guidance, the UK can keep building on its reputation of being a most enterprising nation.”
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