As a business owner, you’ve probably experienced some of the fallout from the pandemic, and other economic factors, since 2020. As 2021 nears the end, now is an excellent time to look toward forecasted cost increases in 2022. After all, to be forewarned is to be prepared. Kiplinger releases an annual report highlighting cost increases for businesses, which many entrepreneurs value. As such, Edgewater CPA Group highlights some of its significant predictions in this article for your review.
Inflation may as well be a four-letter word since it brings as much disgust and annoyance. However you feel about it, inflation is here. Kiplinger projects that it will run at 3% still by the end of 2022. Government spending, economic factors, and supply and demand all play a role in inflation. On the other hand, they anticipate unemployment will dip by the end of the year, too.
Office Space and People
Wage pressure will continue to mount, especially in food and beverage, retail, travel, shipping, construction, and manufacturing. Expect average pay increases around 3.5%. Consequently, payroll taxes should rise along with the base wage. Moreover, office leases and rent are likely to realize a slight increase as companies bring employees back to the office. Demand for some sectors, such as warehouses and retail, may be higher than in other industries.
Unsurprisingly, healthcare costs are on the rise. In fact, employer-sponsored plans could jump up 7%. Moreover, prescription medication should increase by 7% and dental insurance by as much as 4%.
In addition to health insurance, there’s also property and other insurance. For instance, commercial property insurance is expected to increase 5-10% for companies in high-risk zones. Director and Officer insurance could see hefty increases of over 50% due to ongoing litigation (and even higher for nonprofits). Casualty and cyber insurance will also increase, but at lower rates. The retail industry, still struggling due to the pandemic, can expect 10-15% increases if they use point-of-sale systems. However, you could get a break on cyber insurance if you can demonstrate improved security.
Finally, many companies will experience increases in legal and accounting costs in 2022.
In terms of travel, you can expect domestic airfare costs to rise as much as 20%. Hotel rates will increase but at a much lower rate. Additionally, car rental companies continue to experience low supply and high demand, so expect increases there. Finally, experts at Kiplinger predict that gasoline, diesel, and natural gas will all increase in price, too.
Shipping forecasts deliver a mixed bag of news. First, rail containers should improve. Also, many ocean freight costs should ease throughout 2022. However, access to containers and chassis will still fall short. Airfreight rates are contingent upon passenger travel as cargo stores aboard commercial flights. Judging by the increased frequency of canceled flights due to airline labor shortages, airfreight may not decrease.
Professional Tax, Bookkeeping, and Financial Services
With so many cost increases for businesses, it’s nice to have an expert to rely on. At Edgewater CPA Group, we serve Carmel, Evansville, Indianapolis, and Fort Wayne businesses. Our professional services include bookkeeping, business tax strategy, controller services, and more. Contact us at (317) 207-9269 to schedule a consultation.