The impact of unfavorable macroeconomic indicators on your business

27.02.2024

The article by PKF expert (Grażyna Sadowska- Malczewska – Managing Partner of PKF BPO).

How to use accounting in management? We answer questions about your business.

As Bill Gates says, decisions based on superficial intuition can be costly for entrepreneurs. In recent years, challenges such as the pandemic and the conflict in Ukraine have shown how volatile and unpredictable economic conditions could be. Continuous macroeconomic changes and economic uncertainty require not only vigilance but also strategic risk management from entrepreneurs.

In PKF, we understand that financial management goes beyond basic accounting and HR. Therefore, we are launching a series of publications on management accounting and controlling, as well as the role they play in making important decisions and optimizing operations.


Part 1. The impact of unfavorable macroeconomic indicators on your business.

What are the macroeconomic indicators for 2023 and how do they translate into the operation of businesses?

Macroeconomic indicators are crucial for the operation of businesses, especially in the face of difficult years for global economies.

Accumulated inflation has reached almost 35% over the past four years, with an annual rate of 11.4% for 2023, which has an adverse effect on the economy. The growth in inflation leads to higher prices and salary pressures, forcing companies to further increase their prices to maintain profitability. This vicious circle may cause liquidity problems and affects costs of funding, while economic uncertainty drives exchange rate fluctuations.

Below is a summary of the main macroeconomic indicators for 2023 as well as their impact on the standing of businesses.
 

MINIMUM SALARY

AVERAGE MONTHLY SALARY IN THE CORPORATE SECTOR

CHANGES IN RAW MATERIAL AND ENERGY PRICES

INTEREST RATES

PLN EXCHANGE RATE

GDP

Effects of adverse macroeconomic conditions

In 2023, Poland saw a record-breaking increase in the number of corporate bankruptcies, reaching nearly 5 thousand companies, the highest number since 2016. In particular, the crisis hit the transport, manufacturing and construction sectors, partly due to the delayed consequences of lockdowns. Businesses should monitor not only their own financial situation but also the standing of key accounts in order to prepare for potential payment backlogs.

How to identify, respond and manage risks?

 In the face of difficult macroeconomic conditions, in order to be able to effectively respond to changes and secure one’s own operations, it is necessary to implement risk management systems based on a continuous cycle of operation, which is presented in the diagram below:

Ongoing monitoring of financial indicators and evaluation of consequences of macroeconomic and market changes, including the standing of key accounts, as well as competitor and supplier actions, provide effective risk control. The risk management system in place allows to quickly adapt to the upcoming changes, make the right strategic decisions and create competitive business.

What are the benefits of ratio analysis?

  1. It allows to assess the financial standing of the business
  2. It presents relations and connections between individual items of financial statements, which translates into information about individual business processes
  3. It allows for benchmarking against your competitors
  4. It allows to analyze trends
  5. It identifies red flags and allows for an early response to the risk in your organization
  6. It allows for effective long-term development planning

Should you want our expert to look into the ratio analysis in your organization, do not hesitate to contact us. Discover the full range of our capabilities at PKF BPO!

In addition to accounting, HR and payroll services, we also offer comprehensive management accounting and controlling solutions. Should this topic be of interest to you or should you have any doubts as to what financial data are crucial for the current situation of your business, please consult our management accounting and controlling expert free of charge.

This is a perfect opportunity to obtain professional support and answers to your business-related questions.

WOULD YOU LIKE TO INCREASE THE EFFICIENCY OF YOUR BUSINESS? Contact us!

Contact with Us
Grażyna Sadowska-Malczewska
Grażyna Sadowska-Malczewska
Managing Partner of PKF BPO +48 606 859 613

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