Inflation From An Entrepreneurial Standpoint

I’m sure you’ve read the news that inflation was clocked at 6.5% in the month of December. This was the sixth straight month that it has receded from its 9.1% peak last June.

Does this mean that it’s over? Things are moving in the right direction. Do we no longer need to worry about this and go about our businesses in the normal fashion?

Nope. Not by a long shot. There are a couple of things you need to understand.

The first is how the Consumer Price Index or CPI is tabulated. They take a secret market basket of goods and services, and compare those prices on a month-by-month basis. The problem is that the normal CPI number includes items like energy and food prices that are extremely volatile.

Core CPI which excludes those items has long been considered a better gauge of inflation. That number came in at 5.7% for December, which was down from its high in 2022 of 6.6% in September.

Core CPI is further split into Core Goods which was down to a 2.1% increase in December and Core Services which clocked in at its highest increase for the year at 7% in December. This was a reflection of the still tight labor market.

Anyone producing a service has been forced to give their people substantial raises in order to keep them. As such, the price of services continues to rise.

Let me leave you with this.

My point is that inflation isn’t the same for everyone. It has to be handled on a case by case basis.

Be smart enough not to manage your business based on the headlines.

If you read the beginning of this article and had a breakfast restaurant, you might be inclined to not raise your prices, given the fact that inflation for food overall has gone down. But the national average price for a dozen eggs has gone from $1.72 to $3.58 in the last year.

If you plan on selling anything over-easy or scrambled, you’d better ignore the headlines and pay attention to your individual costs. On the other hand, if you’re an accountant, and you had to give your people across the board a minimum of a five-figure raise to not lose them as I have, well…

You get the point.

Inflation is an individualized thing. Just because the national headlines say that inflation is easing doesn’t mean that it is in your particular case.

We must be ever-vigilant. This means that your monthly financial statements are more important than before.

We all need to watch our numbers like a hawk.

Don’t be afraid to raise your prices. If you don’t, you might be the first of your competitors to file a company bankruptcy and be out looking for a job. What a nightmare. Perish the thought.

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, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,

Sincerely yours,

Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300

www.SalarySolutions.net

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