Accountants think small businesses will face some challenges in procuring fresh capital, increasing their profits, managing payroll costs, weathering supply chain difficulties, and hiring new staff, but business performance may be better than last year, according to a new survey.
The survey, released Monday by the tax compliance automation provider Avalara in partnership with the accounting information site CPA Trendlines, polled 536 accountants during tax season. They found that 70.1% of the accountants surveyed expect "worse" conditions for the U.S. economy in general, and 60.8% of the accountants polled forecast "worse" conditions for small businesses. Few accountants anticipate anything that could be termed "better."
On the other hand, 39% of accountants report "better" performance for their small-business clients this year compared to the previous year, with only 16.2% expecting "worse" performance.
The survey was conducted from March through April against a backdrop of continued high inflation, stock and bond market woes, heightened interest rates, a looming recession, tightening credit and a growing banking crisis.
When asked how 2023 to date compared to 2022 for small business clients, 39% of accountants noted "much" or "somewhat better," while 45% reported "about the same." However, sentiment changed significantly when asked how the economy would shape up for small business clients over the next 12 to 18 months, with 61% indicating "much" or "somewhat worse."
The survey also examined how economic conditions will affect the ability of small businesses to access fresh capital, with 72% of accountants saying their clients' ability to access fresh capital would be "much" or "somewhat worse" over the next 12 to 18 months. Nearly half (49%) of the accountants polled said their clients' ability to raise revenues would be "much" or "somewhat worse."
When asked about their clients' prospects for increasing profits, 61% of Main Street firms expect their small business clients' ability to increase profits will be "much" or "somewhat worse" this year. As for their ability to manage payroll costs, 63% of the accountants indicated their clients' ability to manage payroll costs would be "much" or "somewhat worse."
When asked about their plans for hiring new employees, 60% of firms surveyed said small business clients' ability to hire new employees will be "much" or "somewhat worse."
Accountants were more upbeat about the ability of their small business clients to adopt new technology and automation, with 70% responding "about the same," "much" or "somewhat better" to the polling question.
Accountants are viewing the prospects for the national economy over the next 12 to 18 months with concern and caution, with 70% predicting the economy will be "much" or "somewhat worse."
In written comments, survey respondents advised their clients to "line up any capital or loans needed ASAP," and "hang on to cash and stay on top of A/R." Others recommended, "Utilize technology where possible," "add overhead costs only if assured that the associated revenue is not transitory," and "stay liquid, reduce loan payments."
"Be nimble to respond to changes," said another comment. "Take care of your good employees. It is difficult to find new people and expensive to train them."
"Cash is king," said another survey taker. "Do not be afraid to increase fees."
Small businesses are in need of accounting advice to steer through the uncertain economy. "Our joint survey with CPA Trendlines uncovers a fuller picture of the existing headwinds and economic uncertainty faced by small businesses, from the distinct vantage point of professionals with the most direct view into clients' businesses," said Sona Akmakjian, head of global strategic accounting partnerships at Avalara, in a statement Monday. "Never before have small businesses been so in need of hands-on business advisory from their accountants, from input on staffing to advice on taking lines of credit and dealing with inflation costs. As these clients navigate their way through turbulent times, they'll depend increasingly on their trusted advisor — the pressure is on for accountants to strengthen client relationships, level up their valued advisory capacity, and leverage all available tools and resources to stand by small businesses on the front lines."
Accountants can provide their small business clients with a wide perspective based on their experience. "Main Street accountants have a unique view of economies, both local and, in the aggregate, national," said CPA Trendlines CEO Rick Telberg in a statement. "This year's Accountants Confidence Survey represents the cumulative sentiment of over 500 accounting professionals representing over 100,000 small businesses, speaking from a direct and objective view of clients' debits and credits columns, cash readiness, credit worthiness, staffing situation, and other key metrics of business health. And as these professionals opine on a rocky road ahead for clients over the next 12 to 18 months, they also understand the new expectations placed on them by clients to be better business advisors, roll up their sleeves, and help chart a course through a maze of hurdles to get clients back on terra firma. Never before have small accounting practices been expected to wear so many hats for the businesses they serve."
Read more about the 2023 Accountants Confidence Report
