Inflation may no longer dominate the headlines, yet a Consumer Prices Index (CPI) rate of 2.6% in March 2025 still chips away at margins for cafés, consultancies and retailers alike (ONS, 2025). To stay profitable, owners need accounting strategies for small businesses that work in real time – not once‑a‑year after the accounts are filed.
We work with professional services, hospitality and retail firms across Croydon and beyond. Their concerns are similar: prices are rising faster than invoices can be updated; wages and National Insurance bills have jumped; suppliers refuse to extend credit. Below, we set out practical, plain‑English steps you can apply today.
Why inflation still matters in 2025/26
- 85% of UK small firms say their costs are higher than a year ago (FSB, 2025).
- From 6 April 2025 the employer National Insurance secondary threshold fell to £5,000 a year and the rate increased to 15% – a direct payroll cost hike (HMRC, 2025).
Even modest CPI growth compounds quickly. A 2.6% price rise every year cuts a £100,000 profit to £90,000 in under four years unless you act. The accounting strategies for small businesses described below focus on protecting that profit.
Review your pricing regularly
Many owners set prices once a year, yet suppliers revise theirs every quarter. Build a rolling review into your diary – we suggest monthly for volatile inputs such as food and weekly for high‑volume retail lines.
- Benchmark against competitors, but base decisions on your own cost base and value proposition.
- Move away from a single headline price towards menu pricing or service tiers. Clients accept choice more readily than a blanket increase.
- Use margin analysis from your cloud bookkeeping platform to spot loss‑making products early.
A disciplined pricing routine is the simplest accounting strategy for small businesses, yet it delivers the fastest return.
Tighten control of overheads
Small shifts in overheads erode cashflow. Adopt a zero‑based approach: assume every pound of spending must be justified anew.
- Energy contracts – fixed deals taken out during the 2022 spike may now be uncompetitive. Compare brokers before renewal.
- Software licences – remove unused seats and check for annual plans paid monthly at a premium.
- Premises – consider co‑working or sub‑letting unused space; both are exempt from business rates if handled correctly.
Our monthly management accounts highlight overhead drift early, giving you time to correct course before year‑end.
Renegotiate supplier terms
Suppliers feel the same inflationary pressure, yet many will trade margin for guaranteed volume or quicker payment.
- Group purchasing – join local trade associations for access to collective discounts.
- Early‑settlement rebates – if cashflow allows, paying five days early may shave 2% off the invoice.
- Multi‑year agreements – fix prices for 12-24 months to dampen volatility, but insert reopeners if CPI falls below target.
Good supplier dialogue is more than tact – it is an essential accounting strategy for small businesses, locking in predictable input costs.
Refresh budgets and cashflow forecasts: Accounting strategies for small businesses in action
Historic budgets anchored to last year’s numbers mislead when prices shift every month. Move to a rolling 12‑month forecast that updates after each month‑end close.
- Scenario modelling – test best, base and worst‑case inflation assumptions.
- Sensitivity checks – quantify the profit impact of 0.5 percentage‑point wage or rent rises.
- Visual dashboards – share key metrics with managers so decisions are grounded in current data.
We build forecasts in Xero, linking them to live bookkeeping records, meaning that clients can instantly see the effect of a 1% price increase or a £10,000 cost cut, empowering timely decisions.
Strengthen cash reserves
Inflation reduces purchasing power, so cash buffers must grow just to stand still. Aim for at least two months of operating expenses on deposit. Sweep surplus funds into notice accounts yielding 4%+; after tax and inflation you still gain real value.
If reserves are thin, secure a committed overdraft before you need it. Banks lend more readily when forecasts, KPIs and management accounts show control – all deliverables of solid accounting strategies for small businesses.
How we can help your business
Our team blends bookkeeping, forecasting and tax advice into one joined‑up service. We:
- Automate transaction capture, giving you up‑to‑date gross profit reports.
- Prepare rolling forecasts that flag cash gaps up to a year ahead.
- Advise on tax‑efficient pay structures to offset the higher 15 % employer NIC rate.
See how this works in practice on our site, or ask about our tailored inflation support package.
Wrapping up
Inflation may be off the front pages, yet it continues to erode margins in the background. Left unchecked, even a modest 2% price rise can wipe out several years of hard‑won growth. The good news is that small adjustments – weekly price checks, tighter overhead control, firmer supplier terms and live cashflow forecasting – compound just as quickly, only in your favour.
We see this every day in Croydon cafés that now turn early‑settlement rebates into extra stock, recruitment agencies that use rolling budgets to free up cash for marketing, and retailers that split product lines into clear price tiers so customers can still buy with confidence. None of these wins relied on exotic financial instruments; they sprang from disciplined bookkeeping and data that owners could trust.
If the numbers in this blog feel familiar, remember that you are not alone. We stay alongside clients through the full cycle – from setting up cloud software to presenting management accounts around the board table. Think of us as a financial co‑driver, spotting the potholes before they shake the chassis.
Need a sounding board? Talk to us about accounting strategies for small businesses today – let’s keep your numbers moving in the right direction. Contact us today for assistance.