5 economic challenges your business needs to prepare for in 2023

In many ways, 2022 was an exciting year for both households and, not least, businesses. We also believe that 2023 will be just as exciting—for better or for worse.

We’ve polished our crystal ball, and in this article we’ll focus on the things we believe you, as a business owner, will be spending time on in 2023. These are trends we’ve already seen emerging in 2022, and which we unfortunately believe will continue well into 2023. Many of the trends we’ve observed could, in theory, affect a wide range of businesses, sectors, and industries to a greater or lesser extent in the long run.

Toward the end of this article, we offer some practical advice on how we believe these problems can be reduced—and perhaps even eliminated.

1) An increase in the number of bankruptcies

In 2022, the number of business bankruptcies in Denmark rose. According to Statistics Denmark, we haven’t seen this level since the financial crisis. As a result of a total of 2,834 bankruptcies in 2022, 13,700 Danes have lost their jobs—the highest number since 2013. Unfortunately, the wave of bankruptcies is expected to continue in 2023—and it is small and medium-sized businesses in particular that will be closing their doors.

The reason for the high number of bankruptcies should continue to be viewed in light of the fact that it has become more difficult to do business in Denmark: high commodity prices, high interest rates, rising inflation, and general uncertainty both at home and abroad.

2) Rising number of delinquent payers

As a licensed debt collection agency, we are unfortunately also seeing the consequences of rising prices, inflation, and the increase in bankruptcies among Danish businesses. The number of delinquent payers is on the rise. Just as with bankruptcies, we will see a growing number of Danes becoming delinquent payers in 2023.

Surprisingly, we have not seen a significant increase in the number of delinquent payers in 2022. This suggests that Danes have been in good financial shape. However, it is not expected that Danes will be able to maintain the same level in 2023, when the crisis will continue. Presumably, more Danes will have difficulty paying their bills, and thus an increasing number of bad payers is expected.

3) Several payment deadlines are missed

As a (perhaps natural) consequence of both the rising number of bankruptcies and the increasing number of delinquent payers, we are unfortunately also seeing more people delaying payments as long as possible. And even more are unable to meet payment deadlines at all. 

Late payments hurt many companies’ cash flow and put them under significant pressure. When customers request longer payment terms, most companies are willing to accommodate them—both to maintain good customer relationships and to ensure they get paid.

As a result of missed payment deadlines, many companies will try to tighten their credit policies, which may make it difficult for customers to buy on credit.

Tight liquidity could mean that many healthy companies are forced to dip into their savings and, in some cases, end up being pushed into a downward spiral.

4) A decline in the number of customers

Historically, when similar economic crises and inflation hit Danes, most people tend to cut back on certain consumer goods. The clothing and footwear sectors, in particular, will be hit hard. As a result of these price trends, many Danes will also check and compare prices before making a purchase. This means that many will be more critical and selective about their spending. At the same time, they will be less likely to make impulse purchases or be tempted by special offers.

5) A decline in revenue

Some industries may not see a decline in the number of customers, but may instead find that customers are spending less—making fewer purchases and opting for cheaper options. This can, of course, have an impact on both the company’s revenue and, consequently, its bottom line.

It has likely not gone unnoticed that both the COVID-19 pandemic and Russia’s invasion of Ukraine continue to affect a great many businesses in the form of rising costs due to increases in energy and raw material prices. This has ultimately resulted in the economic situation we face today. Record-high inflation, tight monetary policy worldwide, general market uncertainty, and supply chain disruptions are crises that will continue to affect us in 2023.

It is clear that the Danish economy has shifted from a tailwind to a headwind if we look back just a few years. If we examine, for example, Danes’ purchasing power, it has fallen to a level last seen in 2018. At the same time, consumer confidence has also declined, and we are seeing subdued real consumption.

All things being equal, it has become more difficult to run a business and meet revenue targets.

The solution to the challenges

At Collectia, we are convinced that 2023 will be a tough year. The only question is who will be affected by the challenges and how long the crisis will last.

Can anyone or anything solve these problems? Probably not. Economic crises like these are often deeply rooted in many corners of the economy—both nationally and internationally.

However, at Collectia, we believe that as a business owner, you should be aware of the above, take a proactive approach, and respond accordingly. You may already be able to find solutions that can mitigate—and perhaps even prevent—some of these challenges. It is essential to have a full understanding of every link in the value chain and to identify all risks that may be related to inflation. We are already seeing many companies adopting more localized solutions and choosing to spread their production across multiple locations to mitigate risks and build a more resilient supply chain.

At Collectia, we have been providing debt collection, accounts receivable management, credit reporting, and business financial services for more than 150 years. This experience has resulted in a wide range of products, services, and expertise that we believe can help your business navigate what may be a challenging 2023.

Qatchr – Credit checks to avoid bad payers

Many people know Collectia as a debt collection agency, but did you also know that Collectia has its own credit check service, Qatchr? As a business owner, this service offers you a wide range of great features, including credit checks, bankruptcy analysis, monitoring, data cleansing, and financial figures for customers and suppliers.

In other words, Qatchr is a service that helps you conduct credit checks and, perhaps most importantly, gain a better understanding of your customers and their financial situation. We believe this will be extremely useful in 2023—and for many years to come.

We’re offering you the chance to try Qatchr for free. That way, you can see if the service is right for you and your business.