Inflation is a word that brings worries and pressure on not only businesses but even governments. An economy that faces uncontrollable inflation is bound to encounter skyrocketing prices of every commodity. 

As inflation has an effect on everything ranging from petrol & gas to food and drinks, it is inevitable that each industry is also affected. There are many negative impacts, but positive effects are also still being discovered.  These impacts are there in each aspect of the business, leading to price changes or even compromised quality. 

Odoo platform, along with POS systems like Clover and Moneris, keeps track of inventory, sales, etc.; these details give the business a lead to think ahead in times of high inflation. 

What is Inflation? 

Inflation is an economic term that is related to increases in prices. It tells how expensive a particular thing has become in a certain period. This is used to measure cumulative growth in the whole economy of the country or region. 

Inflation is known to increase the price of each and everything. With inflation, human resource gets expensive, and so does everything else, whether small or big.

Inflation is always thought of to be a negative attribute. At the same time, economists say that a certain percentage of inflation is healthy for the economy as it shows progress. If the economy faces low inflation, it indicates that the economy is stagnant; if the inflation is too high, the economy can face a ripple effect.  

Inflation signifies a healthy economy if the inflation is under control. Some first-world countries actually like to create 2% inflation per annum to keep the economy healthy and afloat. 

How to Handle Inflation and The Cause of it? 

 Inflation is there, and you can go back in time and see how much the price of each thing has increased over a particular time. A cup of coffee is ten times the price of what it used to be in the 1980s, and so on. 

Inflation is not something that just happens; it is caused by mainly three situations:

1. Man-made inflation: Some economies think that inflation is a healthy part of the economy, so they tend to create inflation by increasing prices. 
2. Demand-pull effect: In this situation, the demand for a particular thing makes the price of that thing go up. If the demand increases the production of the product, it is bound to create inflation. 
3. Cost-push effect: If the prices of raw materials go up due to scarcity or rareness of the raw material, the cost of the final product is also bound to go up, causing inflation.   

How does Inflation Impact Businesses? 

As inflation is one of the most significant macroeconomic variables, it directly impacts the price and cost of goods and services being produced in that economy. Although not all businesses face the exact impact of inflation, there are a few negative ways and a few positive ways in which companies are affected by inflation.

Positive Effects: 

• There may be old inventory, which will be recorded on the Odoo platform, made on the previous costs, and can yield a higher profit. 
• An increased sales price will mean more revenue for the period. 
• Some businesses want a higher workforce during inflation as it is cheaper and they get more productivity. 
• If you had taken debt on previous rates, the deficit would have become cheaper to pay off. 

Negative Effects: 

• The increased cost of production is the major drawback of inflation.
• The suppliers may become uncertain and want to stop supply for some time. They may want to see if the prices go further up and they can get a better profit for the existing material. 
• Reduced growth of the business. The business should focus on fulfilling the demand with the supply of products rather than expanding and branching out. 
• Foreign exchange also gets affected and increases the cost of production even more. 
• Due to higher prices, customers may stop buying things that aren’t necessary, like; new clothes, dining out, etc. 

How do Businesses Handle Inflations Impact? 

As the price of everything goes up, production costs also increase significantly. This is why businesses stress when inflation becomes higher. Apart from having platforms like Odoo to keep the inventory in check and track all the costs, there are three other ways in which a business can react and handle the impact of higher prices. The ways are: 

1. Shifting the cost to customers is the easiest and most frequently adapted method. The business increases the price of its products when inflation increases the cost of production. 
2. Absorb the costs: Not all businesses adopt this approach; this approach means that the company is ready to decrease its profit. Absorbing the cost means that the business doesn’t increase the price of the products for its customers. Instead, they bear the increased costs and sell the products at the same prices.
3. Increase productivity: The business tries to make more goods in the same amount of raw material so that the increased costs are equalized by more production and prices don’t have to be improved, nor does the business have to absorb extra costs. This method has to be adapted with surety that the quality of the products will not be affected.

Final Word: 

 Inflation is unavoidable; if it doesn’t happen, economists will make it happen. Businesses need to survive and handle the impact of inflation smartly. Businesses now have help from platforms like Odoo that have been known to help reduce operation and production costs. 

The systems, like Clover and Moneris, also keep track of the products being sold to customers and the prices.  This helps with obtaining knowledge about how much the purchase trend of customers is affected due to inflation.

So stay ahead of inflation and keep your business afloat.