5 ways small businesses can offset high gas prices

Gas inflation has broken records at a breakneck pace, with the national average gas price surpassing $5 a gallon in June 2022, according to the U.S. Energy Information Administration. At the same time, the consumer price index, which measures the change in the cost of consumer goods and services over time, showed the highest 12-month increase in 40 years.

By the end of the summer, these prices began to decline, according to AAA data, but there is no guarantee that this trend will continue.

Here are five ways small businesses can compensate high gas prices saving money on the pump and elsewhere.

1. Get cashback on the pump

Small businesses that spend significant amounts on fuel may consider applying for gas credit cards for business which offer up to 3% cashback when buying fuel. These cards can be used together gas applications — which help consumers find the cheapest gas in their area — and station-specific member accounts that award points or discounts to consumers.

2. Monitor cost of goods sold

business cost of goods sold, or COGS, includes all costs directly related to the sale of products or services. This greatly affects the profit of the business; a business’s sales must be greater than its cost of goods sold to make a profit.

Julie Oldham, a certified public accountant and consultant at the Michigan Small Business Development Center, says small business owners can’t keep going when their cost of goods sold rises. Money spent on gas is often included in the cost of goods sold for a business based on services and products.

“It goes back to the grindstone,” she says. “Really just being on top of your numbers.” As cost of goods sold increases, your consumer prices must rise to ensure you are still making a profit.

3. Know when to raise prices

Oldham warns that if small businesses don’t raise prices when inflation hits them, they risk going bust. In the service industry, these price increases must be clearly stated on the invoices so that customers understand why they are paying more. Specifically, says Oldham, business owners should create a sub-account under the gas expense section to isolate and control the exact amount spent on fuel.

Oldham is also suggesting that businesses review customer contracts to ensure they include the right to raise prices.

4. Invest time in financial forecasting

“Even if you’re trying to cut your costs … you have competitors,” says Oldham. One of her clients, for example, recently tried to buy an electric van to save money on fuel, but the competition got ahead of her and none were in stock. Financial forecasting can help small businesses make these decisions before price spikes, helping them set goals and assess their future profits.

If your accounting software doesn’t include predictive capabilities, small business coaching organization SCORE offers free templates on their website.

5. Increase the efficiency of your business

Switch to electric car is one way to combat high gas prices, but small businesses can also offset the cost of fuel by making changes to other parts of their operations. For example, Oldham suggests rethinking packaging and shipping processes. — Do you have lighter packing materials? she asks. “How about the smallest containers?”

On the other hand, small business owners can explore ways to make their buildings more efficient in the long run, says Joni Krolchik, senior business consultant at the Michigan Small Business Development Center.

“Now there are a lot of organizations and programs that encourage businesses to explore these options and encourage them to do so,” says Krolchik. “So they may not immediately take advantage of these benefits, but within five, 10, 15 years, it will affect their bottom line.”

The Renewable Energy and Efficiency State Incentives Database can help small business owners find energy-related tax credits, tax credits, grant programs, and rebates in their state. Some local utilities also have small business energy efficiency programs that offer entrepreneurs additional incentives.

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