The macro economy has the business community buzzing. From rising inflation and persistent supply chain bottlenecks to staffing challenges and lingering effects from the pandemic, commercial businesses must factor both external and internal influences, risk points, and industry trends into their commercial credit strategies in 2023.
Global economic growth is predicted to slow down as we enter 2023. Inflation continues to plague businesses and individuals alike, with rates at 7.7% as of October 2022. The Federal Reserve continues to raise interest rates. Supply chains remain in a state of disarray. Given the consistent economic turbulence, many experts caution we are headed for a recession.
There’s still time to get ahead of the situation, though. Like any emergency, you can’t simply evacuate and hope for the best; rather, you must have a plan and resources in place to weather the storm. Investing in research and development (R&D) as well as digital transformation processes and solutions is a great start. Automation of manual or tedious tasks with the help of artificial intelligence (AI) can free up more time for employees to focus on more complicated, nuanced initiatives.
From a commercial credit perspective, economic uncertainty can significantly impact your clients’ ability to make payments or take out or extend credit to others. In many cases, uncertainty leads to tighter budgetary restrictions to ensure sustainable cash flow while the economy recovers. This is important to keep in mind as you monitor and strengthen your own finances.
Focus on values
What are your core values as a business? Aligning team members with these core values will help bring a sense of purpose and community, which in turn strengthens the team during times of difficulty or uncertainty. Now is a good time to reassess your values and examine how closely you uphold them.
Your company values will shine through in all interactions, whether internally with staff members, or externally with customers and partners. By demonstrating commitment to your core values, you’ll elicit a sense of strength that will not only drive customer and employee loyalty, but payment adherence as well.
Rising commercial credit debt has contributed to the rise of inflation. The more people spend and accumulate credit debt, the higher inflation will climb. In response, many banks and lenders are opening up options to subprime borrowers — a controversial strategy.
Buy Now, Pay Later (BNPL) is expected to grow in 2023. BNPL has slowly risen in popularity in B2B transactions. How it competes with credit cards, though, has been the subject of much discussion. The way it relates to and competes with credit cards is yet to be seen, but it is certainly a trend to watch for commercial entities.
2023 is poised to be a tumultuous year with undeniable uncertainty. Strong, resilient businesses will have a plan in place that includes investments in technology and team members, as well as a stronger focus on their values and the external and internal influencing factors that could impact their business. Partnering with a commercial credit and collections leader like MSCCM is another great way to strengthen your financial foundation and ensure you have the right resources to support your commercial credit and collections needs.