A great 2023 welcome to everyone. I hope this year will focus on productivity improvements over last year.
I realise that for some of us, 2022 had been a pretty good year. However, there has been many businesses who had a tough time of it.
The new year will bring some real challenges, what with inflation maintaining a continuous upward trajectory, there will be increases in interest rates, the changes in industrial relations, increasing energy costs and supply chain uncertainty will pose further challenges to the profit margins of businesses.
Inflation and corresponding interest rate increases will reduce individuals spending, as discretionary income will become tighter Share Now and households will spend less, reducing revenue opportunities. Coupled with the increase in business costs impacting on the costs of production, profit margins will take a hit.
These challenges will impact across the whole business industry spectrum. The changes to the coal and gas pricing mechanism could also impact on resource sector. However, the range of supply-chain industries not associated with the resource sector will be most impacted and these industry sectors will have short to medium cashflow issues.
These changes will impact on business profits and as taxes are based on business profitability, individual taxes and transaction taxes This will result in a decline on government revenue. As revenue could decline this could result in spending constraints on government projects. There is an alternative where government can borrow to implement their pump-priming initiatives. However, this will impact on availability of cash within the economy and could result in changes to the money demand/supply problem and can increase the cost of money (Interest rates), further impacting on business costs.
On the positive side, the supply chains are making an adjustment to global constraints resulting in a number of re-shoring or onshoring project to reduce risk, and there will be opportunities in this area. Defence has been a big driver in this space and will continue to do so into the foreseeable future, and as the world becomes riskier, we are attempting to reduce the sovereign risk in our defence capability.
This will enable businesses to fill gaps within our manufacturing capability both as a direct or indirect supplier. Alternatively, as supply chain capable businesses move to fill these gaps, businesses that do not have this capability can look at filling the spaces just vacated.
However, for this to work and to improve out onshoring capability, businesses will need to review their operation environment and look to improve productivity. Unfortunately, from what I see from both State and Federal Government there does not appear to be a lot of financial support in this space. In fact, some of the recent initiatives from both state and federal has in fact reduced productivity, namely in the areas of energy costs and industrial relations reforms.
I would encourage businesses to look at how they can improve productivity and their resource use. These initiatives will reduce costs of production, reducing the price your customers pay, thus encouraging more local productions of goods and services.
Part of this improvement will include improving business processes, and I will be running a short online webinar:- https://www.eventbrite.com/e/process-mapping-improved-productivity-tickets-463998551157 on process improvement starting 10:00 AEST 18 January 2023.
Other analytics a business can look at improving financial performance is to do a financial performance benchmark that will identify areas where the business in competitive and where there are areas a business can improve.
We offer a free financial performance benchmark and registration to this service can be accessed through our web page:- https://www.ctocsolutions.com.au/
If you want any assistance on ways to analyse your business and improve productivity, please do not hesitate to contact me though the portal on our webpage.
Looking forward to catching up over the next 12 months and discussion how we can improve our operations
Good luck
