Rising cost of doing business: practical solutions to think about
Getting paid on time and tinkering with the business model could limit the cost impact.
21 September 2022 • 4 minute read

Understand client payments terms
Late payments can worsen the cash flow situation when inflation eats away at revenue. It can take more than 90 days for a small business to get paid by a larger corporate; meanwhile, the startup business is using valuable cash resources to pay for people, materials, shipping and all the related costs of running a business. Furthermore, calling customers chasing payment wastes time.
Terry Corby, Chairman of Good Business Pays, says: "It's important to understand new clients that you're about to take on. As nice as it might be to work with big companies if you are a small one, some have horrendous payment records, horrendous terms and conditions built for large contracts and other large companies with 90-100 day payment terms or 60 days plus."
Some businesses have bad reputations for late paying, and a little research can indicate how quickly you might get paid. The Good Business Pays website allows you to type in the name of your client company and find out the average time it takes to pay an invoice and the volume of late payments.
Know your clients' accounts payable team
Another tip is to try and make friends with somebody in the accounts payable department. "It sounds like a small thing, but it can make all the difference," Terry says. "If you or someone in your team build a relationship with a member of the accounts department, it can make or break things.
"Quite often, the supplier makes small mistakes on the invoices. Every company has its own rules about how to complete an invoice. If you complete it incorrectly, it is the easiest excuse for the company not to pay and may not even tell you it is wrong. You probably won't find out until you chase it up, by which time you have lost a month. So having a relationship with the accounts will help you manage that."
Should you raise your prices?
It may be tempting to raise prices to cover the increasing costs. However, startups need to consider how that might affect their relationship with their customers, who will also have the same problems. Applying optional or additional fees to specialist services costing the business extra time or resources could be one way of recouping rising costs rather than raising prices across the board.
Adapt the business model
Changing price structures could also mean changing the business model. Terry says, "Can you provide products or services slightly differently?" For example, Selfridges recently announced that it expects 50% of revenues to come from resale, repair or rental by 2030. "Selfridges recognise their customers are looking for something different and they haven't got the money to spend that they used to; customers are looking for different solutions from both a cost and sustainability perspective."
Some businesses may have little choice but to scale back their growth plans to survive the cost crisis, but being a small business allows more flexibility. Terry says: "Think about growing by changing something you do that makes your life easier – less time intensive. Or provide a product or service in a better, faster or different way."
Adapting the business model might require some investment. While that might seem counter-intuitive as costs increase, if that machinery or software purchased reduces your operating costs, it will improve your margins in the long run.
Can a subscription model help at this time?
The subscription model is increasingly popular and attractive for ensuring repeat, predictable payments and can also improve company valuation. However, unless your business provides an essential service to customers, it may be the wrong time to move to a subscription approach during the cost crisis. Businesses and consumers look at their bank statements to shave off unnecessary expenses in hard times. They may prefer to pay for goods and services as and when they need them.
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