The inflation numbers for the month of June were reported yesterday, and they weren’t good. The Consumer Price Index on a year over year basis rose to an adjusted inflation rate of 2.7%
May’s numbers only showed an increase of 2.4%. The majority of the pricing increases came from durables like furniture and major appliances.
Economists are saying that these inflationary numbers are proof that the ultimate effect of increased tariffs is taking hold. Of course, the majority of the tariffs won’t be in place probably till the end of this month.
Market makers are talking about the TACO Effect, which stands for Trump Always Chickens Out. This refers to the fact that the President always seems to say that he’s going to impose the blanket tariffs, but then at the last minute will back things up either three months or three weeks.
But the tax bill has now been signed into law and the tariffs are how the tax savings are going to be paid for. So the reality of tariff increases will probably hit foreign importers on August 1st.
That is not to say that the price of goods will increase immediately. Given the length of most Supply Chains and how they work, it will probably be another 90 days before we start seeing the full extent of the changes.
And let’s not act like this will only affect entrepreneurs selling imported goods. The rest of us selling services will need to adjust our pricing as well because our employees will need raises to afford basic necessities like groceries and housing.
But just about everyone is going to need to raise their prices and deal with the ultimate effects.
If you’ve read me for any length of time, you know that I’m all about planning. Those who fail to plan, will always plan to fail.
Put your contingency plans in place today. The only thing better than that would be if you had thought all of this through yesterday.
What would you do if your sales went down by 15% because you needed to raise your prices by 20% to cover your increased labor and/or materials costs? What would you do if the effects are less than that?
What will need to be done if it’s more?
Will you need to put additional financing in place? If that is a possibility then you better do it now while your financial statements still look good?
What will happen if the Federal Reserve needs to again raise interest rates to try to get inflation back under control? How will that affect your enterprise?
No one wants to get caught flat footed. If you’re going to need to lay off people, then figure out who goes first, second, or third. If there are other cuts that can be made, figure out what level of sales decreases or Cost of Goods Sold Increases will necessitate that change.
Be ready. This train has already left the station.
Let me leave you with this…
I took one of my longer term clients sailing last Saturday. It was a beautiful afternoon, with East/Southeast winds that took us on a southerly tack past downtown to the southside and back.
After buttoning up my sailboat. we went to dinner at a lakefront spot. My client, we’ll call him Don, got a parking spot while I needed to continue my search for one.
There’s normally a 45 minute wait for a table at this joint, so I called Don and in perfect Chicagoese said, “Trow da guy a Jackson. The 45 minute wait for a table will evaporate like Caesar’s Ghost.”
So Donnie walked up to the guy taking names for the waitlist, palmed him a $20, and was seated immediately. When I came in, I walked past all of the Yuppies, Tourists, and other unfortunates that were waiting in line and took my seat.
Donnie immediately said, “You know C, that’s one of the few things in Chicago that hasn’t gone up in price. You can still get a decent table without a wait for twenty bucks.”
I then realized that navigating the water we’ll all find ourselves in over the next six months will be a lot like that experience.
Some of the issues we’ll face will have old solutions, like palming someone a few dead presidents. Not everyone knows how to do it, so knowing how will always give you a leg up on your competition. Other situations will be hard economic choices with price hikes and possibly layoffs.
But the business you save, may be your own. So the sooner you get your head wrapped around it and the choices you’ll need to make, the better off you’ll be.
As always, I’m here if you have a question.
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 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
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