5 ways small businesses can offset high gas prices

Gas inflation breaks records at record pace: National average gas price rises more than $5 per gallon by June 2022, according to data from the US Energy Information Administration. At the same time, the Consumer Price Index, which measures how prices of consumer goods and services change, showed its biggest 12-month increase in 40 years.

Those prices have started to decline as the summer winds down, AAA data shows, but there’s no hope the trend will continue.

Here are five ways small businesses can compensate. High gas prices Saving money at the pump and elsewhere.

Small businesses with high fuel costs may want to consider applying. Commercial gas credit cards Offering up to 3% cashback on fuel purchases. These cards can be used together Gas applications – site-specific membership accounts that help consumers find the cheapest gas in their area – and provide users with points or discounts.

A business Cost of goods soldor COGS, includes all costs directly related to the sale of products or services. It strongly affects the bottom line of the business; For a business to make a profit, its sales must be greater than the goods it sells.

Julie Oldham, a certified public accountant and consultant with the Michigan Small Business Development Center, says small business owners can’t afford to stay in business when the cost of goods sold rises. Gas expenses are often included in the cost of goods sold for service and product-oriented businesses.

“It goes back to the grindstone,” she says. “It’s really just about being on your toes.” As the cost of goods sold increases, your consumer facing prices must increase to ensure you are still making a profit.

If small businesses don’t raise their prices when they’re hurt by inflation, Oldham warns, they risk going out of business. In service-based businesses, this price increase should be clearly stated on invoices so that customers understand why they are paying more. Specifically, Oldham says, business owners should create a subaccount for gas expenses to identify and track the exact amount spent on fuel.

Oldham also suggests businesses review customer contracts to see if they include the right to raise prices.

“Even if you try to keep your costs down … you have competition,” Oldham says. For example, one of her clients recently tried to buy an electric van to save money on gas, but the competition beat her and none were available. Financial forecasting helps small businesses set goals and estimate their future profits, allowing them to make these decisions before prices get upset.

If your accounting software doesn’t include forecasting capabilities, small business training firm SCORE offers free templates on its website.

Changing to one Electric vehicle It’s one way to combat high gas prices, but small businesses can offset higher gas prices by making changes in other parts of their operations. For example, Oldham suggests reviewing packaging and shipping processes. “Do you have any lightweight packing materials?” she asks. “What about the smaller containers?”

In contrast, small business owners can explore ways to make their buildings more profitable in the long run, says Johnny Krolczyk, senior business consultant at the Michigan Small Business Development Center.

“There are a lot of entities and programs that are coming to light right now that encourage businesses to explore and do those options,” Krolczyk says. “So they may not get those benefits right away, but over five, 10, 15 years, that affects their bottom line.”