SMB Year-End Tips
Written by: Nancy Harris, vice president and general manager at Sage 50 Accounting–Canadian Edition
Review and revise your business plans
As you wrap up the year, it’s essential you take some time to evaluate which strategies worked well during 2012 and which didn’t, as well as remove or modify the latter from your business plans. However, when reworking your tactics, don’t focus solely on the state of your business, but rather consider the bigger picture and what’s to come. What is the current and projected state of the economy? Do you have any particular concerns about it? How will the economic environment affect the outcome of your planning?
Although the Sage Business Index Survey findings from September 2012 revealed that Canadian businesses were feeling positive about the domestic economy, recently reported news indicates an economic deceleration. Whether it is the economy or an industry trend, situations can shift quickly, so it’s imperative to always strive to be ready for both foreseeable and unforeseeable change. While preparing for the new year, read expert predictions for 2013 and include staying abreast of business and economic news and the creation of an emergency preparedness plan on your resolutions list. Only through adequate preparation can you react and adapt as efficiently as possible to the ever-changing economic environment.
Track spending and chart your budget
According to the recent Sage Small Business Financial Literacy survey findings, nearly one-fifth (17%) of small businesses struggle to identify the costs that affect their business the most. In order to increase financial control and account for fluctuations in the economy in the new year (like the U.S. fiscal cliff, which can also potentially affect Canadian businesses), finding a way to track spending and charting a budget that works for you is an absolute must. Accounting software is your best ally for this task, since it speeds and simplifies the process greatly, but as long as this task is on your priority list, any tool you are comfortable with should do.
Organize your digital and physical workspace
Start 2013 off with a clean slate by keeping only the information and materials you absolutely need. It’s always a good idea to do maintenance and cleanup of on-site and cloud systems at year end. Purge old data and documents, and run diagnostics to ensure your systems are in working order. Also, call your solution provider if you have any outstanding issues. Performing such tasks will increase your business’ efficiency significantly in the new year. Additionally, a clean, top-performing work facility will help decrease the chances of setbacks and missing items, as well as provide a positive impression to transient customers. Clean thoroughly, organize and dispose of outdated and damaged products/items.
Perform computer and software upgrades
After you have finalized all your transactions and processes, things will likely slow down for a few days. Use that time to perform needed computer and software upgrades. These activities can take a bit of time and you will be happy you took care of them once things ramp up again in January.
Update client and vendor information
Efficient client and vendor relations in the new year will largely depend on having up-to-date information about them and your mutual interactions. Go through your database, add any missing information and update or remove superfluous data.
Prep for 2013 tax changes
A number of tax changes are expected for Canadian businesses in 2013. Check your province’s website or with your Chamber of Commerce for any new regulations and prepare your financial documents accordingly.
Evaluate – renew or cancel
While you probably didn’t subscribe to all your services at the start of a new year, you likely have one or two that may need to be renewed near the beginning of the year. Before doing so, it would be worthwhile evaluating whether the subscription is something you need. Did you get a good return on investment from it? Is there a vendor that can provide the same service at a better cost?
Check your customer appreciation and retention strategies
Your business is nothing without its customers. Whether you provide products or services, you won’t survive unless individuals or other businesses maintain interest in your offerings and want to pay for them. Achieving customer satisfaction that keeps clients coming back entails much more than selling a good product or service, so be sure to spend some time analysing your strategy. Do you pay enough attention to your customers’ feedback? Is your team providing outstanding customer service and experience? Do you have a reasonable rewards program for loyal customers? Are you sufficiently connected to your clients through your marketing efforts?
Don’t hesitate to look or ask for help
The Sage Small Business Financial Literacy survey also revealed that Canadian small businesses still struggle with certain areas of their business. Although surveyed small businesses are becoming slightly more comfortable with the business activities they reported being a weakness last year, they still recognized the need to know more about financial planning (67%), tax payments (65%), and cash flow (58%). Such issues are completely normal, but they should be addressed to prevent a negative impact on business. If you have struggled with certain aspects of your operations this year, take the last few days of 2012 to do research, consult with a professional or even sign up for a course.
What’s Causing the Global Supply Crunch?
As the global economy gradually recovers from the impact of COVID-19 pandemic, worldwide supply crunch is intensifying, spreading not only from one country to another, but also from one industry to another.
A year ago, when the pandemic continued to spread, economies around the world were severely hit and there was panic buying among consumers. Today, it is companies that are trying to go on a stockpiling, buying more raw materials than they need to keep up with rapidly recovering demand. The panic buying is fuelling more shortages of raw materials, including copper, iron ore, steel, corn, coffee, wheat, soybeans, wood, semiconductors, plastics, cardboard, etc. As a result, inventories of seemingly every raw material around the world are running low. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said earlier, and he noted that his clients are “trying to get everything they can because they see high demand”.
Supply shortages have driven prices up significantly, with the impact of rising prices for some key raw materials being significant. The prices of various industrial raw materials such as crude oil, plastics, and chemicals are rising. Some of the impacts of higher raw material prices have already begun to be reflected in consumer goods. Reynolds Consumer Products Inc., the maker of the namesake aluminium foil and Hefty trash bags, is planning another round of price hike, and this will be the third for the increase this year alone. Food prices are also climbing. The price of palm oil, the world's most consumed edible oil, has risen more than 135% over the past year to record levels; soybeans have topped USD 16 a bushel for the first time since 2012; corn futures prices have touched an eight-year high, and wheat futures prices have risen to the highest level since 2013.
Changes in factory orders due to the impact of the pandemic have also tightened supply in some markets and pushed up prices for raw materials. Some knitting enterprises in Dongguan, Guangdong, said that affected by the pandemic, about 40% of the orders have come back to China from countries such as India and Southeast Asian countries, while the factory utilisation rate has increased by about 30% to 40%, and now it has reached 100%. In Jiangyin, Jiangsu, a bedsheet enterprise adjusted its production capacity to accommodate a USD 20 million order from Southeast Asia. Increased demand from the textile industry has led to tight supplies of raw materials. In Wujiang, Jiangsu, where polyester filament yarn is the most in demand, the shortage of raw materials this year has been unexpected, especially in the current off-season, when there is not much stock. In Suzhou, also in Jiangsu, the export of polyester filament yarn increased by nearly 60% from January to April, while the price increased by 40% to 60%. Compared with the same period last year, the price of filament yarn increased by RMB 2000-3000/ton.
Remarkably, this hoarding frenzy is pushing global supply chains to the brink of collapse. Inventory shortages, transportation bottlenecks, and price increases are nearing critical levels, raising concerns that strong global growth could fuel inflation. The supply disruptions in the past are simply incomparable compared to the severe inventory crunch of 2021. Industry insiders predict that both large and small enterprises will be affected by this supply shortage.
Why are current supply shortages so acute?
Researchers at ANBOUND believe that instead of having one single factor, there are multiple reasons for the emergence of complex systemic problems.
First of all, there is the recovery in demand as the pandemic is brought under control. This year, as vaccination rollout efforts have brought the pandemic significantly under control in the United States and some European countries, the economy has begun to show significant momentum for recovery. This trend prompted a near-simultaneous recovery in most markets around the world. The collective recovery of global markets has led to a near-simultaneous increase in demand, exacerbating the mismatch between supply and demand. In the case of commodity futures, the capital was collectively bullish on commodities under such expectations, significantly driving up the prices of commodities (mostly upstream commodities) and spreading to midstream and downstream commodities. It should be noted in particular that the surge in demand for certain specific commodities under the pandemic has also exacerbated the supply-demand mismatch in some industrial chains. For example, the increase in the need of remote, online working and studying has increased the demand for all kinds of electronic products, leading to a surge in global demand for semiconductor chips, which affects several chip-requiring industries.
Another reason is that the pandemic has disrupted the global supply chain system, causing distortions in supply and demand in certain industries, which are transmitted along the supply chain, causing a wider supply crunch. As ANBOUND previously pointed out, the spread of the pandemic has dealt multiple blows to global supply chains. During the pandemic, China, as the "world's factory", was affected by the pandemic and its production side was disrupted. Then, the demand side of developed countries was suppressed by the impact of the pandemic. This is followed by the fact that the malfunctioning of the global supply chain system has exacerbated global supply distortions. To cite an example, the severe shortage of containers due to disruption of the supply chain has exacerbated the global supply distortions.
In addition, enterprises began to collectively increase their inventories, leading to the increase of inventories in the industrial chain and supply chain, amplifying the demand for all kinds of raw materials, intermediate products, and supporting products. In the past, in order to save costs and improve efficiency, many enterprises advocated zero-inventory production and tried to reduce the inventory in the production link, thereby reducing the capital occupation. However, the smooth operation of zero inventory production depends on the efficient global supply chain system. Once a problem occurs in the global supply chain system, it can lead to chaos in the whole supply chain system. The 2011 earthquake in Tōhoku, Japan has caused the shutdown of some key auto parts plants, which once led to the global auto supply chain being affected. Likewise, the global spread of the COVID-19 pandemic since last year has damaged, distorted, and even disrupted global supply chains.
Finally, geopolitical factors have also contributed to the tight supply of global commodities, resulting in the artificial disruption of part of the industrial chain and supply chain. For example, the U.S.-driven crackdown on chip supply to Chinese enterprises and related sanctions have seriously disrupted the global semiconductor industry chain.
How long will the supply crunch last?
Overall, the global supply crunch is due to a variety of reasons, including increased demand from the post-pandemic economic recovery, distortions in global supply chains caused by the pandemic, collective stockpiling by enterprises around the world, and geopolitical disruptions. However, this does not represent a significant expansion of aggregate global demand, but rather a distortion of the existing system as it is disrupted and broken. Judging from the current situation, this tight supply situation will last for a long time, leading to the price rise of raw materials and components. Therefore, both enterprises and governments need to be prepared for this scenario in the medium- and long-term.
Mr. He Jun is Partner, Director of China Macro-Economic Research Team and Senior Researcher. His research field covers China’s macro-economy, energy industry and public policy.