American Inflation Rates

Given the budget impasse that will head into yet another week of arm-twisting, one of the news items that isn’t getting much press is the problem of inflation.

Normally, the monthly inflation numbers range between 1.2% and 1.4%. To explain this better, let’s use an example.

The inflation increase in the month of January 2021 was 1.4%. This meant that between January of 2020 and January of 2021, there was a 1.4% increase in overall prices.

That number for the last three reported months of June, July, and August of 2021 ranged between 5.3% and 5.4%. The last month where our inflation numbers were inside the recognized range was January 2021, the month that the new administration took office.

Energy prices have skyrocketed. Gasoline over the past year is up 42.7%. New vehicle prices are up 31.9%. Even groceries have increased 3.7%.

Inflationary periods hit small businesses harder than any other sector of the economy. The Russell 2000, which is a stock index made up of 2000 smaller businesses on the exchanges, hasn’t moved in the past seven months. On April 1st it opened at $2225.29. Seven months later on October 1st, it closed at $2,217.47. The DJIA over the same period only showed a 2.87% increase.

It’s hard to make money in inflationary periods.

It all comes down to simple accounting. If the prices you pay for goods and services are going up, and you don’t increase your prices to cover the increases, you will lose your profits.

Accounting becomes more important in these periods. Watch your numbers closely. Don’t be afraid to raise your prices. If you don’t, this year will probably turn into a loss.

Let me leave you with this.

We are continuing to get calls from clients asking about their income tax refunds. People are actually acting as if we can do something about the IRS or the State not doing their jobs timely. I have to ask you a question.

Exactly what do you think we can do?

The people at the taxation services don’t normally work too hard to begin with. Given the fact that everything is now remote, very little is getting done.

I realize that this isn’t an optimal situation, but there just isn’t anything that we can do. Think about it.

You call my offices pissed that you haven’t received your refund. What can I do? I can call. After I wait on hold for an hour that I have to charge you for, I get someone on the phone and ask about your refund. They look it up in their system, and say something like it’s being processed.

Okay. Great. What have we accomplished? Am I then supposed to tell them to work faster? Should I yell? Should I scream? Should I shake a boney fist at the phone?

Tell me what I can do? Please understand that we aren’t in charge of sending you your refunds. Be patient. They’ll come.

We’re all going to get through this. Let’s get through it together.

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Accounting and Tax Work, we can help. I’m here and I remain,

Sincerely yours,

Chris Amundson
Accounting Solutions Ltd.

Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.