The economic storm is battering companies nationwide, and small businesses are not immune to its fury.

While some businesses are being forced to close their doors, others are getting creative and finding ways to be stronger and smarter - and are turning to CPA firms for guidance and assistance.

Seeing a need in the marketplace and an opportunity for new client services, many CPA firms are developing new services or even advisory groups or task forces to help distressed small businesses navigate the complexities of restructuring, workouts, cash flow projections and other services.

"Everybody was panicking, so we felt we had to jump in there and help them figure out what to do," said John Shank, a founding shareholder and a head of the TurnAround Services Committee (TASC) Force at Birmingham, Ala.-based Barfield Murphy Shank & Smith.

Like Barfield Murphy Shank & Smith, which launched its TASC Force in January to deliver turnaround services to struggling small businesses, many firms have identified a need to streamline their expertise and help clients. Judging by market conditions and the outlook of the small-business environment, such services will likely be in demand for some time.

According to the results of a survey conducted in September 2009 by the National Federation of Independent Business, optimism remains hard to find among small businesses. Their biggest problem: poor sales. Weak sales and price cuts are to blame for much of the weakness in profits, according to the survey. "About 40 percent expect real sales volumes to decline in the coming months, in contrast to about 25 expecting gains. Only 7 percent think the current period is a good time to expand, near the survey low," stated the NFIB poll.

Furthermore, credit markets are expected to remain difficult. Overall, loan demand has been weak because of postponement of investment in inventories and record low plans for capital spending. Plus, continued poor earnings and sales have damaged the creditworthiness of many potential borrowers.

"Credit markets are expected to remain difficult for those wanting to borrow, but with inventory investment and capital spending plans near historic lows, it is clear that loan demand (not the supply of credit) is weak," the NFIB noted. "Legislative activities in Washington undoubtedly dampen the outlook with talk about health care mandates, cap and trade, card check and new taxes on all sorts of goods and services."

TO THE RESCUE

While the forecast looks gray and cloudy at best, Barfield Murphy Shank & Smith found a silver lining in the clouds and formed its TASC Force, which is comprised of about five experts, including two who are experts on financial modeling, and who can help small-business owners analyze financial issues and identify opportunities to produce results. Services include business health checkups, financial benchmarking, human resource management, credit underwriting data assistance, cash flow projections and cost control.

Don Murphy, a founding shareholder and a head of the TASC Force, noted that what has made this recession especially difficult is the tightening of the credit market. "A few years ago, we would have helped [a small-business client] move lenders, but now there is nowhere to move them, so we have to help them through it," he said.

The TASC Force is currently working with about three or four small businesses. It is a win-win situation for Barfield Murphy Shank & Smith, as it not only fills in some of the firm's lost billable time, but also helps further position the firm as an expert and trusted advisor.

"It is [services] we've had the capacity to do but we felt that we needed to name it and define it," noted Shank, when asked about the thinking behind the TASC Force's formation.

Also serving small to midsized businesses that have found themselves in distress is Wipfli, a CPA and consultancy firm based in Milwaukee. In mid-January, the firm created its Troubled Economy - Surviving and Thriving (TEST) Task Force.

"The purpose was to create a team that is on call to react to any crisis situation like a fire department," explained Karen Monfre, a Wipfli partner and financial leader for the TEST Task Force.

The TEST Task Force brings together a multi-disciplinary team from its accounting, tax and consulting practices to quickly and efficiently assess a company's situation. Once an assessment is complete, the team works with the client to adjust the current business strategy or to create a new strategy to address the current business situation. It can then help the client with tools, technology and processes to support the new business strategy.

Wipfli is also trying to be proactive in terms of education, and recently held a webinar on how clients can build their bank relationship. Bank financing is obviously a critical issue for any business, but Monfre has noticed that the need has been significant among small businesses.

"Many small businesses have grown a lot and funded that growth through debt and they are now in a highly leveraged situation," said Monfre.

Earlier this year, New Jersey-based Wiss & Co. announced the formation of an economic advisory group. The group provides business owners, chief executive officers and chief financial officers with advice on how to weather the economic conditions, and draws on the expertise of its corporate recovery and various industry teams. For example, the group can help businesses identify areas they should be addressing to strengthen existing operations, help them to adopt certain best practices, and assist in evaluating opportunities.

HELP FROM FIRMS SMALL ...

Phil Brumbaugh, founder and owner of a small CPA firm in Des Peres, Mo., may not have a large enough practice to assemble an expansive task force or advisory group, but that hasn't stopped him from assisting troubled small-business owners.

Brumbaugh, who worked as a turnaround consultant in the late 1980s and early 1990s, still does some consulting today through his five-person firm, Philip G. Brumbaugh CPA, CVA, but is largely involved with his current client base.

"We are not currently working on a specific turnaround engagement, but I am talking with companies and do get revenue from the meeting," he said. "It is not a high-revenue business."

Brumbaugh has several hundred clients, and many are down between 10 percent to 50 percent in sales. "This recession is more severe and the effects are much broader. I have some clients who used to call themselves 'recession-proof,' but they are showing cracks," said Brumbaugh. "[But] people have been very proactive on their own in analyzing and controlling costs."

Brumbaugh updated the firm's Web site about a year ago to further promote his services and expertise in business turnaround and restructuring in light of the economic downturn: "Phil's approach is very practical and based on real experiences with various clients over many years. It includes frank discussions about your business and its viability. It also includes financial analysis of key success factors about your business. Products and services are analyzed for profitability and positioning. Employment levels are reviewed. Capital and debt structures are reviewed. Banking relationships are considered," the Web site states.

Otto Chase, president of Everett, Wash.-based Danta Chase & Co. CPAs, said that he also helps small businesses, as well as individuals, in distress. Chase typically works with between five and 10 companies at a time. They usually haven't filed taxes, so the first order of business is to get the clients into compliance. Chase reviews the tax bill and the mitigating circumstances and negotiates the penalties with the Internal Revenue Service.

It is a service that came about two years ago as referral work from an attorney specializing in tax law. "As the economy has turned south, it has become a source of revenue, especially during the down season," said Chase.

He said that 2008 was the firm's "best year ever," and while revenue is down a bit for 2009 - about 10 percent - it's better than expected.

"It is mostly mental. Taxpayers are saying they can't afford to pay taxes or pay a preparer, so they just don't file," said Chase, when asked about how the economy has fueled the demand for his services.

... AND LARGE

Plante & Moran, a super-regional CPA and business advisory firm, launched a new Liquidity Stress Test in early August. The test can be downloaded for free at http://stresstest.plantemoran.com and is designed to help companies understand their cash requirements so they can more effectively manage cash flow during the downturn and plan for profitability when the economy is on the upswing. It downloads to a business's desktop computer and takes a couple of hours to fill out. Once complete, it determines a company's liquidity for about six months out.

Plante & Moran has listed some business tips and recommendations, as well as contact information, within the download in hopes of driving new business. Since its launch, the stress test tool has been downloaded more than 300 times.

Tim Weed, a partner in Plante & Moran's restructuring and operations improvement group, said that the benefit is that the tool can serve as an early warning for businesses.

"The tool is to say for a company how big might their cash deficit be and when will it occur and what solutions might be thought up to help," Weed said.

Meanwhile, national firms Crowe Horwath and Grant Thornton have each recently launched solutions for companies filing for bankruptcy.

Public accounting and advisory firm Crowe Horwath has bundled its existing services into a suite of financial advisory services dubbed Fresh Start Accounting. One of the key benefits of the suite is that clients filing for Chapter 11 bankruptcy now have a single point of contact at the partner level to help them navigate the complex process.

Fresh Start Accounting services include bankruptcy and insolvency services like interim management, re-organization plans, recovery alternatives and exit strategies; accounting and consulting services using fair value measurement to help achieve a "fresh start" balance sheet; tax services to account appropriately for net operating losses, valuation allowances, re-organization value, etc.; and assistance identifying the adjustments that are necessary to convert assets and liabilities to current fair values.

"There has been a tremendous rise in bankruptcy filings, but [Fresh Start Accounting] was born out of us proactively saying, 'How can we help clients mitigate the stress?'" said Mary Ann Travers, a partner in Crowe's audit and financial advisory group.

While businesses of any size can take advantage of Fresh Start Accounting, Travers said that she has seen a need among small businesses because they may not have the experience that a larger business may have and are already dealing with a host of attorneys and financial advisors and may find the process to be quite complex and overwhelming.

Grant Thornton's Corporate Advisory and Restructuring Services (CARS) team announced in August 2009 the launch of its Integrated Case Solutions. The team is led by new Grant Thornton director Alan Dalsass, and is designed to provide information and claims management services to distressed companies in bankruptcies or negotiated workouts. Prior to joining Grant Thornton, Dalsass led the restructuring services division at BMC Group, a bankruptcy claims and information management firm.

ICS is actively working with five companies at the moment, and Dalsass said that it expects to at least double that number by the end of the next quarter. The typical client is $100-million-plus in size, but Dalsass said that it is very scaleable and could service smaller clients.

In addition to offering pre-filing, post-filing and post-confirmation restructuring support, services also include situation-based, customized data management solutions, claims negotiation and settlement, and secure data rooms for M&A and litigation activities.

While it remains unclear when the storm will pass and the skies will clear, many industry observers agree that opportunities do still exist and those businesses that are persevering are walking away having learned valuable lessons.

Said Wipfli's Monfre, "You can't rely on a bank or investors to bail you out and you have to go back to the core basics. I'm a strong believer that there are strong opportunities in every market."

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