Rising oil prices, tighter margins: practical steps for NZ business leaders

If you’re a business owner or leader, you’re likely starting to feel the ripple effects of higher oil prices; at the pump, in freight invoices, in supplier price rises, and in the day-to-day cost of simply keeping your business moving.

For many New Zealand businesses, fuel is both a direct cost (vehicles, machinery, generators) and an indirect cost embedded in almost everything else (shipping, distribution, travel, and the materials that arrive by road, sea, or air). When energy costs jump, margins can get squeezed quickly - especially if your customers are also tightening spending. 

While we’re still in a period of uncertainty, there are some practical levers you can pull. The BDO Business Performance Index (BPI) tracks issues affecting business performance across New Zealand and includes a tip library, with helpful advice on assessing the impact of inflation, cash flow management and more.

Practical tips for businesses navigating the uncertainty

An important first step is often to assess the impact of inflation on your business at a holistic level. Businesses can be hit two-fold during inflationary conditions such as oil price or OCR peaks, with sales generally being impacted by consumers facing increased costs of living along with the increased cost of doing business. As prices change, it's important that business leaders understand the environment they are operating in - and adapt accordingly:

  • Ensure you are aware of all upcoming payments, including tax and assess what spending can be deferred. There are several options available to finance or spread tax payments - speak to your accountant or tax adviser to understand more. 
  • Negotiate more favourable terms with creditors but ensure that you have a clear path to timely repayment. Consider the structure of your debt and how this can be optimised. Avoid simply postponing issues without a concrete plan to address them.
  • Manage risks. When dealing with uncertainty, including political and economic, it’s important to focus on what you can control. Ensure that you understand the risks your business faces, along with their likelihood and potential impact. From there you can take steps to mitigate these risks – or minimise their impact. View more ways to manage risk in our latest BDO Risk Landscape Report.

Need more help?

For more practical guidance, explore the latest BDO Business Performance Index where you can find a tip library. If you need more tailored advice, reach out to your local adviser.