In January’s blog, we identified a few economic trends that affected several industry sectors in Q4 2023. These trends continue to impose challenges on businesses for the start of 2024 with little growth projected in Q1. There is a general expectation that growth will gradually pick up later in the year as inflation decreases to between 2% - 3%.
Inflation has been cooling consumer demand and business investment both abroad and at home. For the first time in several years, businesses have reported more concern over demand and uncertainty rather than labour and supply chain. The softening of foreign demand for non commodity exports have applied a downward pressure on manufacturing and exports.
The Bank of Canada has been monitoring inflation and has signaled its intention to lowering interest rates later in the year. This will bring some relief to businesses and consumers, but challenges still lay ahead. Some of these risks include:
- Inflation stalling above 2% as wage growth continues to outpace productivity.
- Housing prices could rise higher when many Canadians are facing mortgage renewals and record high-levels of household debts.
- Global conflicts, like in the Red Sea and Gaza, affecting seaborne trade and increase costs.
- Businesses unable to pass higher costs onto customers as consumers have diminished buying power. Between higher costs and lower demand, businesses are facing thinner margins of profits.
Know your People
Constraint labour activity and falling productivity requires creative strategies to promote retention, upskill, and trust. Businesses can hold onto their people by aligning technical solutions with softer skills, like innovation and problem-solving. By building a strong human resource strategy, companies can refocus their time and resources on value-adding tasks for long-term competitiveness.
Know your Operations
Cost containment will be a priority for business across the country. Accounting and finance professionals will pay close attention to cost accounting and leverage analytics to find opportunities for cost reduction. For example, firms may conduct regular vendor review cycles to negotiate better term agreements. An early adoption of an analytical, data-driven approach to operation controls can help to improve risk mitigation, yields higher profits, and leads to more successful deliveries. First, companies will need to know what tools there are and how to proactively deploy them.
Know your Market
The Bank of Canada has been signaling their intention to cut interest rates later in the year. Though rate cuts would provide needed relief for households and allow for the debt market to stabilize, the impact will reverberate differently across provinces and industries. Business resilience stems from understanding market dynamics like material costs, shifting customer preferences, and environment regulations. To build resilience, companies can deploy digital strategies that help them conduct spending analysis, inventory rebalancing, and capital spending diagnostics.
As we look ahead to a better way of doing things, here are some strategies to keep in mind for 2024:
- An increased focus on strategic capital allocation: The importance of applying a rigorous approach to calculating ROI on investment decisions is vital for sustaining growth and prosperity.
- A more stringent balance sheet management: Reviewing financials and identifying issues throughout the month, ensures a smoother month-end process and better management prepared. Businesses can plan better for the future with solid financial statements.
- Optimization of business processes: The deployment of cost-effective business optimization measures, risk mitigation and contingency planning to identify opportunities for enhancing efficiency and increasing profitability. By synchronizing the building of resources and revenue expansion, companies can embed resilience and resourcefulness into their company’s culture.
- Embracing digitalization and AI powered automation: Data analysis through machine learning will improve decision-making in cash flow or automatic revenue forecasts.
- Strategic partnership and outsourcing: Companies can outsource non-core functions and integrate services that organizations cannot rapidly deploy themselves. These strategic partnerships allow access to resources without requiring in-house recruitment.
Companies may not have the capital or resources to invest in new technology. They are in the position though, to begin evaluating their company’s goals, processes, and workflows. This assessment can help them to pinpoint which areas of their business they want to focus and/or improve. From there, they can set clear goals and build a roadmap through a business strategy.
BAASS Business Solutions Inc. is your trusted advisor in designing and implementing a tailored solution. We focus on understanding your requirements and strategic objectives so you can get the results you need. Book a consultation today.