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Now is the perfect time to review your prices / pricing structure

Whilst continued uncertainty over Coronavirus and possible future restrictions are worrying, we believe that now is still the right time for you to review your margins. With inflation hitting an annual 5.4%, a 30 year high, there are no signs of cost reductions in the short to medium term, so you need to consider adjusting your pricing in order to maintain or recover profitability.

Your ‘in’ costs are under pressure due to several factors:

Employee costs and availability

– The minimum wage increase (coming April 2022) – from £8.91 to £9.50

– Restrictions in available labour resulting in higher salaries generally, as a result of several factors:

> overseas workers have left due to Brexit,

> older and skilled / experienced workers have taken early retirement as a result of the pandemic

> students, who would usually plug temporary labour gaps by taking on part time roles, are less likely to have done so

– Employers expect to have to give above inflation pay rises to staff to retain them

– Pay rises are not expected to be matched by increased productivity

Raw materials and overheads

– Firms are still experiencing exceptional price increases and severely restricted supply availability

– The price of wholesale energy has increased significantly, and this is being passed on to businesses

– For businesses importing goods or raw materials, the impact of Brexit continues to bring challenges such as documentation requirements which also has an impact on costs

What steps you should consider taking

– Review your current ‘in’ costs and identify any savings that can be made by switching supplier or obtaining volume discounts

– Look at current productivity and consider how this can be improved

– Consider investing in new technology which will have the further advantage of attracting enhanced corporation tax deductions thus reducing tax burden and improving cash flow

– Review your range of products to understand the sensitivity to price increases

– Look at your competitors pricing to understand their product range

– Speak to your customer facing team to get their views which products might be able to bear a small increase

– Discuss any agreed price changes with your team so that they will feel confident in justifying the increase to customers

– Adjust volume and turnover targets for staff to reflect the impact of the decisions taken

– Monitor the impact of these price changes (KPI’s / closer stock management systems / etc).

How we can support you

– Facilitating discussions around pricing and costs

– Designing both financial and non financial KPI’s

– Assisting with preparing budgets and cash flow forecasts as well as modelling different pricing scenarios

– Preparing monthly management accounts incorporating comparison to forecast so you can track any/all impacts on your business.

Please do not hesitate to get in touch to discuss this, or any other accounting related topic with us.

Working with you…for you.

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