Businesses are paying more for gas, hotel rooms, and restaurant meals. The Washington Post reports that travel costs were predicted to increase in late 2021, and the higher costs would impact the salesforce. Managing Credit Card SpendingĪssume that Treeline Mountain Bikes distributes bikes through retailers and the company employs 10 salespeople who call on retail shops. If inflation increases costs, the higher level of credit card spending must be controlled. Many businesses incur expenses using company credit cards. If the data on all of the documents match, payment is approved. This process ends when the accounting department sends a PO, shipping receipt, and the vendor’s invoice to an approver. The invoice is not processed for approval until the issue is resolved. If the documents do not match, the production manager contacts the vendor. The number of pounds ordered and the price per pound listed on the PO must match the shipping receipt from the vendor. Treeline confirms that each order is received and matches the purchase order. POs for steel should list a unit price of no more than $0.50 per pound, which is the budgeted cost. The budgeted cost per pound must be communicated to the production manager (who orders steel and other materials) and to the COO, who approves each purchase order (PO). Monitoring steel costs becomes more important as the budget increases. Inflation increases the cost of steel by 5% and Treeline increases the steel material budget to $630,000, which equates to 1,260,000 pounds of steel at $0.50 per pound. Treeline has a $600,000 budget for steel, a raw material used to make bike frames. Treeline Mountain Bikes creates an annual budget which includes material costs and labor costs for bike production. As this podcast episode points out, planning is the key to successful business growth.Īs the example below shows, you must control both the price paid for a particular good or service, and quantity purchased. Monitoring the budget is particularly important in periods of inflation. To stay within budget, you need to monitor and approve spending before the dollars go out the door. Many businesses include budgeted amounts in the accounting system so that management can compare budgeted results to actual results. Managing expenses becomes critical as inflation increases, and Stampli’s AP automation and invoice management services make the process much easier. Rising inflation also motivates your customers to comparison shop in order to pay lower prices. ![]() Inflation increases the costs to make and deliver a product or service. Prices for wholesale set an annual record at 9.7% in 2021, which provides further evidence that inflation is still present at all levels of the economy.inflation advanced 7% year-over-year, marking a 39-year high since June 1982. As businesses begin 2022, company management must consider the financial impact of inflation on expenses and profitability.
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