12 Percent PPN Rise: 7 Key Strategies for Businesses to Adapt and Thrive

The Indonesian government has officially increased the Value Added Tax (VAT) or PPN rate to 12%, effective next year. Essential goods, such as basic food items, are excluded from this hike.

This PPN increase is expected to have a significant impact on various sectors of the economy, affecting both consumers and businesses. Therefore, companies must quickly adapt to survive and continue growing amidst these changes.

Here are several strategies that companies can implement to mitigate the impact of the PPN increase, including leveraging the services of headhunter companies in Indonesia to find the right talent to help innovate and adapt to these changes.

1. Decline in Consumer Purchasing Power

The PPN increase will automatically raise the prices of goods and services consumed by the public, which may reduce consumer purchasing power, particularly in market segments sensitive to price changes. Companies should conduct in-depth analyses of consumer behavior and identify the segments most affected. One strategy to address this is adjusting products or services to remain affordable without compromising quality.

2. Evaluate Operational Efficiency

Companies must immediately perform a comprehensive audit of their operational efficiency. This audit aims to identify areas that can be optimized, including resource usage, time, and costs. Reducing waste and improving productivity can help mitigate the impact of the PPN increase on the company’s profit margins. This process will also allow companies to focus on activities that contribute the most to revenue.

3. Delay New Projects and Investments

The PPN increase may cause economic uncertainty, leading companies to be more cautious with large expenditures. To maintain cash flow, delaying new projects or non-urgent investments could be a wise decision. This also gives companies time to assess the impact of the PPN increase on their financial projections and ensure more prudent investment decisions in the future.

4. Evaluate and Revise Operational Cost Structure

Revising the operational cost structure is crucial to ensure companies can survive the increased costs caused by thePPN hike. The first step is to map out all operational costs and identify potential savings, such as reducing energy costs, renegotiating contracts with vendors, or increasing automation in production processes. Effective cost efficiency will help companies maintain more stable profit margins.

5. Adjust Service Prices

One of the most direct ways to address the PPN increase is by adjusting the prices of products or services. Companies need to consider how to raise prices without losing customers. This can be done gradually so that consumers can accept the price changes without feeling a sharp increase. Additionally, it’s important to communicate the added value customers will receive, such as quality improvements or product innovations, so that they feel the higher prices are justified by the benefits.

6. Control Non-Essential Expenditures

To maintain financial stability, controlling non-essential expenditures is crucial. This includes reducing business travel expenses, saving on office facilities, or cutting back on ineffective promotional activities. By focusing on activities that have a direct impact on revenue, companies can minimize the financial impact of the PPN increase and maintain healthy cash flow.

7. Freeze Hiring or Open Recruitment for Strategic Positions

An important decision companies must consider is their hiring policy. Given the potential impact of the PPN increase on financial stability, there are two options to consider:

• Freeze Hiring: Halting or postponing recruitment could be a prudent choice if the company sees a significant decline in consumer purchasing power and operational efficiency becomes the priority. By reducing new hires, companies can control labor costs and allocate resources to more urgent needs.
• Recruit Strategic Positions: Alternatively, companies might consider recruiting for strategic positions that can have a major impact on profitability, such as sales, marketing, or operational efficiency experts. If the company identifies roles with a high ROI, investing in the right talent can yield long-term benefits, even during difficult economic times.

In response to the 12% PPN increase, companies must take strategic steps, such as adjusting prices and controlling costs. By collaborating with outsourcing services like RecruitFirst Indonesia, you can ensure the recruitment of the right talent to support growth amid these changes. Contact us now for targeted recruitment services.