We have reached the end of the summer period and in one way or another everything is back to “normal” as far as professional and business activities are concerned.

The year 2022 is being characterized as a particularly uncertain year, due to the economic effects that the world is suffering due to the rise in prices of raw materials, energy, inflation, loss of euro/dollar parity. Consequently, the economic outlook in general is not particularly easy, since all this will have an effect on the economy in general (GDP, unemployment, interest rates and inflation), as well as affecting the economy of companies in particular.

But how does it affect or is affecting the Economic situation described above to the Income Statement and the Management of your Companies?

Obviously it will depend to a great extent on the business sector, but to begin with we are already seeing how clients with whom we are working are losing margin points due to energy costs. Some clients are affected more than others depending on whether they are service or production companies, but energy is having a significant effect.

If a company also has commercial relations with the USA, it is clear that the exchange rate will affect the income statement since the dollar/euro parity has increased to the detriment of the euro.

In addition, we have inflation, our material costs go up and this in theory will have to be passed on to the customer, but it is not always so direct, and sometimes it may not be so easily passed on to the customer. Therefore, we have another effect that can cause us to decrease margin.

Another relevant factor is the rise in interest rates, since this rise will affect the companies’ investment policies. In reference to investments, these must always be accompanied by the best policies and the best decisions, since an investment made at the wrong time can trigger economic and financial problems for the company.

All the aspects that we have mentioned in this article and that affect both the Income Statement and the Management of your company can cause economic problems and, depending on the situation of the company, can lead to financial problems (balance sheet).

Therefore, it will be necessary to manage all the economic factors mentioned to minimize the impact they may have on the Company and thus reduce the risks to remain competitive.

But this will involve working with different areas of the company since it affects a large part of the business value chain. From Purchasing, production to Business Strategy, including Sales and Finance.

We Can Help

As a Consulting Company that we are, and also specialists in Finance and Business Management, we would like to explain first hand what we do and how we do it to help our customers to overcome the situation that is giving us the current environment, for this we propose a session that you can schedule here.