Economic prosperity may be right around the corner. But some CPAs don't have too many corners left to turn. And that's not good.
by Rick Telberg
At Large
Taken together, the voices of CPAs across the nation could be summed up as: "It was the best of times; it was the worst of times."
The profession's outlook for the economy seems as divided and polarized as the electorate is about the choice for president in this election year.
Just listen to a pair of managing partners, both at small, local CPA firms: One reports, "Unemployment in my area is at 3.4 percent or virtually full employment." And the other says, "Unemployment in my area is consistently above 10 percent." Can you guess which CPA is in a so-called Red State and which is in a Blue State?
There's a middle manager in a large public accounting firm who's exultant about the economy. "It's an excellent time to be an accountant," he says. There's another, in Dallas, who, never without work before, has now been looking for a job for almost a year. You'll recognize her at the unemployment office and in the food stamp line. "I'm the only one in a suit with an M.S. degree," she says.
Indeed, my soundings from over 700 accountants suggest barely more than half expect business conditions to improve over the next 12 months, with the rest split between predicting more of the same or some backsliding. Compare that with a study from the National Federation of Independent Business, a Washington small-business lobby, which predicts "the best economy in 20 years."
Nevertheless, some clear majorities of accounting and finance professionals see good signs for some business metrics in their own firms or companies, namely:
1. Revenues;
2. Profits;
3. Demand from clients and customers;
4. The ability to raise prices or fees; and
5. Expanding the business.
The biggest and darkest clouds on the economic horizon are, just as starkly:
1. Lack of affordable health care;
2. New or problematic government rules and regs;
3. Constricted access to new financing;
4. A need for more staffing at the same time as pressure remains to cut payrolls; and
5. Tight capital spending budgets.
To Bernadette Hardcastle, managing partner at her own local CPA firm of Knopp & Hardcastle in Corpus Christi, Texas, it's like a 1980's flashback. "Overall the economy is improving slowly, but there are areas of the country that have not improved and probably won't for a while."
Some companies are taking advantage of some special market opportunities. "Currently our business is playing on the market; we purchased low and we're selling high," says Shelly Munger, distribution division accounting manager at Meridian, Idaho-based Hoff Cos. "Next year we probably will not have that luxury because imports will have increased their pricing by then. However, we hope to have gained more market share over the course of this last year."
One solo accountant is capitalizing on work other companies are leaving behind, even at the expense of other accountants. "As more and more people are put out of work by larger companies downsizing and outsourcing," she says, "the opportunities for small businesses providing outsourcing activities and/or innovative products and services increase."
While other industries may be struggling, Tim Watson, managing partner at Benford Brown & Associates, in Chicago, is having a great year. He credits it, ironically perhaps, to Enron, Andersen and Sarbanes-Oxley.
"The demand for auditors and experienced accountants has gone through the roof," says Watson. "The work has doubled and the supply of people has essentially remained the same. As a result, even small firms like mine are getting involved in Sarbanes-Oxley engagements and many other projects that have resulted from the major shifts in business and clients between firms."
James Lewis, audit director at Lincoln University in Pennsylvania, might agree, but grudgingly. "The outlook for smaller CPA firms is very good as they experience the continuing trickle-down effects of Sarbanes-Oxley," he says. "But locally, other business is very dependent on the continued housing boom, and any increase in interest rates over one-half of one percent will likely cause a slight downturn."
Fragile as it may be then, hope springs eternal among CPAs. But with their trademark professional skepticism, they won't get too hopeful. History, they know, has all too often confounded the prognosticators.
