How does inflation affect accountants?

There is a lot of talk about inflation – but usually, we think about the costs of energy, food, and the like. However, inflation also has a significant impact on small businesses in the service sector, especially accountants. And it's crucial that they maintain a high level of efficiency.

Why Does Inflation Have a Special Impact on Accountants?

This will be explained further in the article. But first, let's focus on what's common to all small business owners. The first obvious aspect is the cost level. With general inflation, the operational costs of running a business naturally increase. In certain industries, the pressure on prices is higher than in others – so if inflation is 10% annually, the change in prices for different goods and services can vary considerably. It's worth considering the notion that statistics can also be a political tool; the on-the-ground reality might be quite different. Increases in raw material costs, supplies, subscriptions, services, and electricity can result in significantly higher expenses for an individual entrepreneur, more than just a 10% increase.

The second aspect that's common to all entrepreneurs is undoubtedly the labor cost

With general price increases, there are also adjustments (e.g., commuting, meals), pressures from social partners for minimum wage corrections, negotiations on salary ranges, etc. At the micro level, individual entrepreneurs also face "pressures" – employees need higher wages to maintain their standard of living. Entrepreneurs (including accountants) can certainly benefit from using automation tools that significantly speed up work and thus save on labor costs.

The third aspect is borrowing costs

When deciding on financial leverage – using borrowed money to finance and launch projects, activities, expand business – interest rates can be a crucial factor. With inflation, the era of low-interest rates ends, and financing, in general, becomes more expensive than before.

There are many more aspects to the impact of inflation

and let's now address accountants at this point. Accountants are also the ones who need to deal with inflation in terms of content. Accounting recording and revaluation during inflation gain new dimensions. In terms of recording, for example, care is needed in material and goods acquisition (inventory accounting), where acquisition costs often change, affecting the value of inventory. But the revaluation or revaluation aspect is even more important. According to Slovenian Accounting Standards (SRS), assets in the books must reflect the real state. As long as inflation is below 5%, these discrepancies are relatively negligible, especially where, for example, working capital is used up more quickly. However, when we enter the realm of double-digit inflation, things get more complicated. To ensure real data in financial statements, it's necessary to revalue several accounting categories at the end of the year. The specifics and methods of doing this go beyond the scope of this article – but it's important to pay attention to these additional tasks.

And while we're on the topic of these tasks, it's certainly worth considering that this means extra work. Since accountants are already quite busy, have a lot of work, and their service prices usually don't leave much room for maneuver – the solution is undoubtedly in greater efficiency. So, accountants should definitely use tools that will help them work faster, simplify processes, and improve certain aspects.