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Author Topic: CPI -Who has an understanding  (Read 1415 times)
BoHiCa
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« on: 18/06/2015, 06:04 PM »

Can anyone help me, understand the CPI index and how I can apply this to increase my service fees.
 
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Syklone
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« Reply #1 on: 18/06/2015, 06:31 PM »

CPI - in summary shit gets expensive overtime.

Howso;

- Guy gets bill in the mail. Utilities just went up
- Guy at work asks for money and gets a pay rise
- Boss - shit overheads are getting high and wages went up. Better increase cost to consumer
- Consumer walks in and needs a service done.
- Consumer goes home. Bill turns up in mail.
- Consumer. Shit bill is high.
- Consumer goes to work and asks for raise and gets one
- Boss of consumer. Shit overheads went up and wages increased, better raise costs of services or goods
- Consumer B walks in to buy something. Shits expensive but needs it so buys it.
- Consumer B is low on cash as buying necessities was required and asks boss for a raise.

Rinse Repeat. That's CPI.
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BoHiCa
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« Reply #2 on: 18/06/2015, 07:02 PM »

While I understand the principal of CPI

Looking at the abs.gov.au website which is the figure I would run with?

http://abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0?opendocument#from-banner=LN

is the average of 1.3% or 2.4% Huh?

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cowcar
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« Reply #3 on: 15/08/2015, 07:40 AM »

Most commercial contracts put in a 3% per annum rate in Australia... if you are cheeky, you can push for 5%...
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Mone
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« Reply #4 on: 15/08/2015, 09:29 AM »

Hi Bohica, you could use better accounting practices and work out your COGs(Cost of Goods sold) this can be done for services as well and then work out your profit margin from there and factor in a CPI increase into your profit margin.  Ie. give your self a 50% margin year one and then absorb CPI into that for two or three years then do a single larger increase. To validate this type of decision you can look at an NPV(Net present Value) calculation to show that 50% profit now is worth more to you than a 50% profit in two years.

My point being I don't think you necessarily have a CPI issue but an understanding of what your profit margin is problem.  I am happy to help you work through this if you want Bohica, drop me a line.
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bageled
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« Reply #5 on: 17/08/2015, 02:48 PM »

What Mone is describing in economics is called, sticky prices, or price stickiness.
Effectively keeping your price stable for a long period despite shifting economics, then making a bigger change.
Financial and calander year end are goods times to apply cost increases, though I think any time is a reasonable time. You could start by putting an expiry date on quotes, 30 days is reasonable. When you do increase your prices it's easy to add a line to your invoices, from such and such a date prices will increase.
Personally, I don't worry about CPI. Every financial year end I sit down with my book keeper, and we go over fixed costs, and I use that to adjust how I charge for time. On cost of sales I constantly update my pricing software.
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BoHiCa
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« Reply #6 on: 16/11/2015, 08:36 AM »

Alrighty then, so here i am, after more further investigations

Basically, i have in the lease contracts, CPI increase annually to affect the monthly rent.

Based on the figure below, i can increase the rent by the percentage differnce from one period to the next.

https://www.ato.gov.au/Rates/Consumer-price-index/

So, i have had it explained all i do is minus the last years cpi from this years,

so example 30 June 2014 was @ 105.9 - 30 June 2015 was @ 107.5

then the rent would be CPI increased @ 1.6%

 


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