Right now, businesses around the country are reviewing their 2018 performance to strategize and plan for growth in 2019. But what are the factors and challenges impacting today’s economy that businesses should consider?
We asked a panel of experts for their predictions and advice in five key areas: The economy and funding, healthcare costs, engaging employees in payroll and tax changes, scaling for growth and harnessing the power of technology.
1. Businesses with strong foundations will attract funding
Using the economy’s performance toward the end of 2018 as an indicator for 2019 yields a mixed perspective. For example, the economy grew at a 3.5% annual growth rate in the third quarter. On one hand, it’s a drop from the 4.2% growth rate in the second quarter. On the other hand, it keeps the economy on track toward the administration’s 3% annual growth target.
Another key indicator for businesses in 2019: business investment grew by 0.8% in the third quarter after an 8.7% gain in the previous quarter. Spending on new structures fell by almost 8% after increasing by 14.5% in the previous period. “That’s probably telling us that growth in Q4 will be a bit slower paced,” said Ben Ayers, senior economist for Nationwide Insurance told the Washington Post.
As expected, the mix of positive and negative indications brings about a mixed bag of predictions for 2019. While Bloomberg Businessweek sees the possibility of the economy’s longest run without a recession as a catalyst for global growth in 2019, UCLA forecasters say economic growth will plummet over the next two years as the stimulus of tax cuts and spending increases wanes and interest rates rise in a new report from Anderson School of Management.
Ian Moyse, Director at Cloud Telephony Provider Natterbox, sees these indicators as neutral for businesses seeking funding. “Businesses with a strong IP, growth track record or business offering will continue to be able to gain capital – the fundamentals don’t change. Investors are going to become more critical of fundamental criteria and look to de-risk their selections in a time of heightened market risk, but often this is a time to invest for growth,” Moyse predicts.
2. Technology and innovation will help reduce healthcare costs
Healthcare cost predictions for US businesses in 2019 vary according to the size of the business, but both medium and large sized-businesses are turning to expanded telehealth options and technology successfully to reduce their overall healthcare expenses.
In a new study of 1,566 employers, health benefits consulting firm Mercer projects that US health benefit costs per employee will increase 4.1% next year – slightly higher than inflation and less than the double-digit increases seen in years past. Even still, some employers are taking more proactive steps in controlling costs by shifting more of the cost of healthcare to their employees through the form of higher co-payments and deductibles or less attractive plans.
Deploying innovative strategies
Some companies are working with their insurance providers to offer more choices and easier to understand healthcare options delivered through user-friendly online platforms instead of actual doctor visits. They’re also using technology to target employees with specific unhealthy behaviors, like smoking, and health issues to offer more directive services. This cuts down on trips to the hospital and contributes to an overall lowered cost of care.
“The improvement in the underlying medical plan trend is encouraging because those savings are not solely coming from shifting cost to employees,” said Tracy Watts, Senior Partner and Mercer’s Leader for Health Reform. “It suggests that there is a ‘quiet revolution’ going on in organizations as they deploy more innovative health benefit strategies and that these have started to pay off.”
Moyse advises businesses to join the wave of innovative health benefit strategies in 2019. “Look at what innovators are doing. Businesses of all sizes understand that structuring differently, encouraging agile and flexible work environments, and utilizing new technology such as cloud, the Internet of Things (IoT), artificial intelligence (AI) and the like aid not only their own staff but also enhance employee engagement.”
3. Enhanced self-service tools will educate and engage employees
The Social Security Administration (SSA) announced in October that starting January 1, 2019, the maximum earnings subject to the Social Security payroll tax will increase by $4,500 to $132,900—up from the $128,400 maximum for 2018.
Employees whose compensation exceeds the current $128,400 maximum will see a decrease in their net take-home pay if they don’t receive an annual raise that makes up for the increased payroll tax. To prepare before the end of the year, employers should:
- Adjust their payroll systems to account for the higher taxable wage base. We’ll explore how technology can help with this later in the article.
- Notify impacted employees that more of their paycheck will be subject to payroll withholding.
- Consider the increased taxes that must be paid for impacted positions.
- Expect questions from employees about their share of the extended tax hit.
Todd Black, Sage Global Director of Product Marketing for People & Payroll, expects businesses to find ways to use data technology to both educate and engage employees with this and similar payroll tax activities in 2019. “Businesses will use more modern collaboration to address things like this,” Black predicts. “In 2019, we’ll see more of a focus on this part of the employee experience to help employees stay aware of these types of changes and what they mean without the need for additional staff to answer questions. Automation, AI, and other data intelligence will add new layers of self-service around how companies communicate payroll tax updates in a way that’s digestible.”
4. Automation and real-time data will drive growth
Ultimately, business growth is the goal, but rapid business growth comes with challenges like the efficient use of staff, scaling business systems, and processing and using data. Moyse advises year-end is a good opportunity to review and optimize your business processes so there are no glitches in productivity.
“I recommend a review of processes and technology to identify key wins through change,” he says. “Many businesses that have grown organically on old tech did what was right for the time and are now labored with legacy time-consuming and costly manual processes.
“Changing to fast, agile, and efficient is not easy, but it’s essential to empower scalability. High-growth firms aren’t stuck with ball and chains around their ankles holding them back. They typically have built efficient automatic processes, and are using new cloud technology with a light human touch to focus on the frictionless.”
Creating new revenue sources
Research agency IDG conducted a study in association with Sage that gives insight into how other executives view the issues within their business and what they see as the solution. For example, when executives were asked what they would do with 10 extra hours per week, the second most popular answer was “improve internal processes.” The top answer was, of course, drive new revenue streams.
Putting in place structures and processes now to handle this – and to stop problems that have arisen in these areas – can save an enormous amount of effort later. Here are key areas for business leaders to focus their optimization efforts in 2019:
- Automating manual processes: Make better use of your people by reducing their workload and offloading the trivial repetitive tasks, and freeing up their time and creativity for tasks that continue to grow the business.
- Data analytics and intelligence: Ensure not only that everyone can see the data they need when they need it, but also that the data is “live” – that it’s up to date. This allows a predictive approach to opportunities and problems.
- Improving accessibility: Make sure data is shared across departments and that it’s available to all 24/7, across all kinds of technologies.
- Integration: Ensure that the systems you set up today can be integrated with third-party solutions in the future, and they can easily integrate with your customer and vendor systems, too.
In our survey, 63% of business leaders said they were pursuing predictive data analytics capabilities in their financial software this coming year, with three in four saying they wanted real-time access to financial information.
When we asked business leaders which areas they considered automation to be most valuable, 40% said financial reporting, and data entry and administration and/or customer service and management tied at 34%.
At the heart of their revenue growth efforts were a number of efficiency plays that business leaders considered as essential. Improving sales performance was the highest-ranked activity, which was deemed either ‘critical’ or ‘very important’ by 67%.
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5. Integrated technology will enable agility and flexibility
With so many business solutions available, it can be difficult to decide where to invest and how to prioritize. Again, the most effective strategy when managing new technology is to employ an integrated solution as they:
- Give businesses greater choices from best-of-breed IT solutions
- Bring disparate databases and applications together under the same platform so you can create a single view across the business
- Offer more flexibility to meet business goals using the most appropriate tools
All of these can save time for business leaders and their teams as they bring the right technologies into play to solve specific problems. Over half of the leaders in our survey said that integrating systems or data sources was important for improving operational agility and flexibility.
“Technology is often a speculate-to-accumulate game with businesses investing for change and to become more agile, customer friendly and faster to market. Look at how you can use new affordable tech to empower your employees, delight your customers, and disrupt your market and competitors and do it now. Fortune favors the brave and today’s game is to disrupt or be disrupted,” Moyse advises.
Starting integration with CRM
The strategy employed by most businesses is to start with a customer relationship management (CRM) tool. Your business will likely already be using one of these – Salesforce is a popular solution. Your CRM can be the basis of a highly effective software stack. On top of the CRM you can integrate an accounting or inventory management solution to help you manage all points of the sale with one piece of technology.
For example, with integration, your salespeople can issue an invoice and then it’s saved straight into the accounting system without any additional work. You’re tracking it immediately and you’re notified when it gets paid or if it’s past its due date. You can also see your cash flow and account activity in real time.
Businesses will continue to demand more from data analytics and intelligence in 2019 with savvier dashboards and reports. Almost 60% of the business leaders we surveyed said they need real-time data to effectively serve their customers, with 52% saying that predictive data analytics will also benefit their company.
Always-on improvement for success in 2019
The number one contributor to a more efficient and profitable business in 2019 is constant process improvement. Never stop exploring and refining, and keep technology front-of-mind as a possible solution. For successful businesses, improvement isn’t sporadic, it’s continuous.
Looking to increase productivity and profitability in 2019? Find out more about Sage 50cloud