Inflation is continuing to rise in many countries doing business with Australia, or aligned economically or geographically with Australia.
In the US, inflation was recorded just shy of 10% in July 2022. And over the ditch in New Zealand, inflation rose to 7.3pc, its highest in 32 years. Australian inflation is also on the increase, with Australia’s Q1 2022 inflation noted at 5.1%.
Another report mentions plenty of economic storm clouds on the horizon:
- Global supply shocks and strong domestic demand have combined to generate cost pressures that are now being passed on, with significant price rises seen in fuel, food, durables and new dwelling construction (raw materials).
- The Russia-Ukraine war and China lockdown driving inflation
- There continues to be limited spare capacity in labour market
- Monetary conditions tightening around the world
And there’s the black swan events like the re-emergence of covid restrictions in Australia, and impacts of global warming.
For Australian accounting firm owners, inflationary forces, impacted by a shortage of resources in the Australian compliance sector, is going to contribute in an ongoing manner to the efficient and profitable running of accounting firms. Profitable accounting firms are necessary to ensure sufficient time and resources is available to support key profitable clients.
There is still the spectre of a large number of zombie companies that have yet to fail, and it’s these clients that should be approached with caution.
In the meantime, Australian accounting firms must acknowledge we live in inflationary times, and it’s worth considering going proactively onto the front foot to increase accounting fees sooner rather than later. This gives those clients who don’t feel “value for money” time to move over to alternate providers. At the same time it gives breathing space for firms to manage their profitability.
So, consider the likelihood of pricing increases affecting your operational costs, and determine the best time to increase your accounting fees, in order to best serve your clients.