Although inflation is now on a downward trend, the sharp cost rises over the last 18 months are baked in. Energy prices are increasing again and the overall economic outlook isn’t very encouraging.
The good news is that by acting now to manage these increases you can stay on top of these costs. And with a proper financial plan, you can keep your business turning a profit.
A rise in the National Living Wage and Minimum Wage
The rise in the National Living Wage and the National Minimum Wage (NMW) recommended by the Low Pay Commission was accepted by the Government in November 2023. This increase means that the NLW rises by 9.8% to £11.44 from 1 April 2024.
The size of your overall wage increase will depend on the age of your employees and whether they’re currently working as part of an apprenticeship scheme. However, the increase in your payroll costs is definitely something to factor into your financial planning for the year.
The new NLW and NMW rates from 1 April 2024 are:
Time to review your pricing?
Is it time to put your prices up? Ideally, your business should increase costs by a tiny amount each year, rather than by a big jump every five years, for instance. Small increases help prevent price shocks for customers, and keep your business in line with the rest of the market.
Can you also cut costs?
If you don’t think increasing your prices is an option, or you still need to make more of a change, you may need to cut back your spending. We look at your business line by line, so we can help you identify areas where you might be able to trim the fat.
I use the Profit First System in our business to monitor the impact of changes like this on our cashflow and to ensure that any increases in costs do not have to come out of my profit or worst still I have to take a pay decrease to cover staff wages.
How can the Profit First Cash Management System help?
Profit First is a simple yet powerful system that can transform your small business finances. By prioritising profit, adjusting expense management, and staying on top of cash flow, you can achieve increased profitability, improved financial stability, and reduced stress. Implementing the Profit First system yields a range of benefits for your small business:
- Improved cash flow
- Increased profitability
- Reduced financial stress
- Better decision-making
- Greater financial stability
- Achievement of financial goals
Talk to us about managing your business costs
Keeping on top of rising business costs in 2024 will be a challenge. But with the right mindset, planning and forecasting, you can stay one step ahead of the curve. We can help you prepare a financial forecast for the next year or two to help you take control in the current economic headwinds.
Disclaimer: This post How the increased minimum wage will affect your business costs contains links to products I believe to be useful to the reader, from which I may earn a small commission, but won’t cost you any extra.