Helpful Resources for CFOs to Navigate Inflation Challenges

With inflation on the rise, it’s vital for CFOs to conduct a detailed analysis of internal and external business processes and develop accurate financial forecasts so high-level executives can make the most informed decisions about how to progress.

Prices are rising at a faster rate than we’ve seen in almost 40 years, and there’s growing concern that this won’t slow down anytime soon.

How to prepare for inflation depends largely on your (and your CFOs) ability to gather concrete data across every level of your business, identify weaknesses and develop mitigation strategies.

It’s vital that you understand when and where these challenges commonly arise so you can do everything in your power to overcome them.

Key Business Challenges During Times of Inflation

• Material and labor shortages/supply chain disruptions 
• Higher overhead costs 
• Lower consumer spending 
• Higher interest rates 
• Disruption to pricing strategy 
• Disruption to investments 
• More competition 

Let’s take a look into solutions CFOs commonly turn to during times of economic unrest so you can best understand how to prepare for inflation. 

CFO Solutions to Inflation

1. Integrate up-to-date technology systems
2. Develop strategies for different inflation-related scenarios  
3. Focus on hiring concrete finance talent  
4. Foster company-wide communication & collaboration

1. Integrate up-to-date technology systems 

In order to gain an understanding of which areas of business are subject to inflation, CFOs focus on putting the right technology in place.

Employing the use of up-to-date technology systems is instrumental in overcoming inflationary pressure. Not only does it provide insight into price changes and supply chain disruptions — it can also be used to automate certain business processes, saving time and money.

However, without integrating the right procedures to back up your tech, you won’t be able to make the most of your data.

During times of inflation, it can be beneficial to revamp your business goals and KPIs. For example, instead of pouring money into developing new products, it may be better to switch your focus to customer retention or production optimization.

How to prepare for inflation involves integrating the right systems and backing them up with the right processes to show you exactly where problems can arise. Only then will you be able to conduct data-driven analysis to obtain a detailed view of how your business will be affected.

How technology helps overcome inflation: 

• Provides insight into inventory, supply chain disruptions and supplier price changes 
• Allows for automation of processes, saving time and potentially leading to more revenue 
• Drives better communication and fosters collaboration

2. Develop strategies for different inflation-related scenarios 

After gathering the necessary data, CFOs develop strategies to tackle different scenarios caused by inflation.

Let’s take a look at the topic of margin erosion as an example. Margin erosion occurs when businesses are subject to price increases for things like labor or materials but haven’t yet increased the cost of their goods or services.

These price increases can be detrimental to businesses if they don’t have the proper foresight to overcome them.

One way to mitigate this issue is to switch your suppliers and purchase any necessary materials or services at a lower rate — but during times of inflationary pressure, that might be hard to find.

Sometimes, the best and only solution is to pass these costs on to your customers.

As such, there’s an increased need to focus on properly communicating these shifts across all channels, or else you run the risk of driving your current customers — and stakeholders, investors, future partners, etc. — far away. If you keep your people in the loop ahead of time, you’ll be met with less friction when these price increases inevitable arise.

This scenario is all too common during times of inflation. Unfortunately, it’s only one of many. 

How to prepare for inflation depends largely upon your ability to develop strategies to address various scenarios, including everything from supply chain disruptions to price increases to investors pulling funds. 

Key scenarios to consider:

• Supply chain disruptions
• Global stock changes
• Investors pulling funding
• Change in suppliers or vendors
• Switching to offshore labor

3. Focus on hiring concrete finance talent

Inflation and labor market concerns go hand in hand — especially as compensation is listed as one of the main reasons employees decide to quit their jobs.

As prices increase across the board, CFOs often find themselves needing to offer higher salaries and more competitive benefits packages in order to continue to attract great talent.

Sometimes, it may be beneficial to turn to offshore labor or automation versus hiring to save time and money — however, as modernized as today’s technology is, it still doesn’t compare to what a human brain is capable of.

Especially for consulting-based and people-focused industries, finding a strategic partner for your growth is a great path to consider when you’re looking to overcome inflationary pressure.

While it may seem more costly up front, turning to professionals for guidance in things like process optimization and strategic planning can put you in a much better position down the line.

How to prepare for inflation is tied directly to your business model and staffing needs. Whatever the case, focusing on bringing great people onto your team is a must — because if you don’t, your competitors will.

Tips for hiring great candidates:

• The Biggest Mistake You Should Avoid
• Don’t Be Cheap
• Hire Fast
• Consider Culture

4. Foster company-wide communication & collaboration

During times of inflation, things can change at the drop of a hat — that’s why CFOs make sure they have concrete communication processes that foster company-wide collaboration so everyone can make the most informed decisions on how to progress.

Without proper communication, you run the risk of having your entire company make the wrong decisions, driving away current and future investors, suppliers or partners, and in short, becoming one of the many businesses that are crushed by the clutches of inflation.

How to Create Company-wide Communication Processes:

• Leverage technology to foster cross-department communication and increase productivity
• Create Standard Operating Procedures (SOPs) and robust training programs to ensure all employees understand the duties required for the job
• Ask for feedback and provide praise when deserved to cultivate a collaborative and supportive company culture

Final Thoughts on CFO Solutions to Inflation Challenges

Overcoming inflationary pressure and continuing to do business in a changing world brings many challenges — but if you focus on gathering the right data, optimizing processes, adopting new technology and communicating everything to your team, you’ll be best prepared to navigate any issues along your path.

If you’re looking for guidance in deciding which technology systems are right for you, finding an interim CFO, conducting strategic scenario planning, or anything else concerning how to prepare for inflation, our experts at Bridgepoint Consulting would love to become your next strategic partner.