#Japan #Shinjuku #TKC #Management Indicators #Japanese Economy

TKC's 2024 Management Indicators Overview

The TKC National Council, led by President Takashi Sakamoto, has released its 2024 edition of the TKC Management Indicators (BAST) on June 2nd, providing insightful analyses of over 260,000 small and medium-sized enterprises (SMEs) in Japan. This comprehensive report examines the financial performance and fiscal health of businesses with annual sales of less than 10 billion yen for the fiscal year 2024, encompassing a wide range of 1,196 industries.

Key Highlights from BAST 2024

1. Increase in Profitable Companies: The portion of profitable companies rose by 0.4 percentage points from the previous year, reaching 53.9%. This improvement marks a promising trend for the business environment despite the ongoing challenges.
2. Growth in Average Revenue: For the third consecutive year, the average revenue per enterprise increased, now standing at 239,874 thousand yen, which represents a 3.0% increase from the previous year.
3. Consistent Margin Growth: Operating income has also grown for four consecutive years, reaching 8,809 thousand yen, reflecting a 5.2% increase compared to the previous year.
4. Rising Revenue and Payroll Metrics: There has been a three-year streak of growth in both revenue per employee and labor costs, indicating a robust operational performance.
5. Decrease in Borrowing: The report noted a simultaneous decrease in both short-term and long-term loans compared to the previous year, suggesting improvements in financial management among SMEs.

Detailed Insights

Black Companies Ratio

The overall percentage of profitable companies across all industries for 2024 stands at 53.9%, marking a significant increase. The accommodation and food service sectors reported the lowest profitability, although these industries saw a 3.6 percentage point increase from last year, now at 35.7%.

Revenue Growth

Every industry recorded an increase in revenue for three straight years. Notably, the accommodation and food service sectors experienced the highest year-on-year growth at 10.9%, showcasing considerable recovery post-pandemic.

Operating Profit Trends

In conjunction with revenue increases, the operating profit has improved along with a slight increase in the profit margin from 43.1% to 43.6%. Salary and bonus expenditures also rose, reflecting healthy growth trends in compensation.

Employee Metrics

The average employee count across industries rose slightly to 14.0 names, and there has been a notable increase in both revenue per employee and compensation, emphasizing the upward growth trajectory of SMEs.

Lending Trends

As per the simplified cash flow statements across all industries, cash inflow from financial activities decreased to 654 thousand yen. This decline was primarily due to significant decreases in cash inflow from short-term loans, reflecting healthier liquidity management.

Conditions for Identification as 'Excellent Companies'

The BAST report categorizes companies based on their performance relative to industry averages. 'Excellent Companies' are defined by meeting several key criteria, including a steady increase in profit margins and compliance with specific accounting standards.

Utilization by Financial Institutions

The BAST indicators are not only a valuable resource for member companies but are also leveraged by 363 financial institutions and credit guarantee associations across Japan, further supporting sustainable growth in the SME sector. Financial institutions use this data not just for loan approval processes, but also to benchmark performance aiding in strategic planning for business recovery and growth.

Conclusion

The TKC Management Indicators 2024 reflect a resilient and evolving economic landscape for SMEs in Japan. As companies continue to adapt in the face of various challenges, the insights provided through the BAST serve as a tool for fostering growth and strengthening financial stability across the sector. Moving forward, TKC aims to further enhance support for excellent companies to thrive in this changing environment, reinforcing their commitment to the prosperity of Japan's economy.