Rising unemployment and the persistent credit crisis soured the outlook of CEOs, CFOs and other CPAs working in business and industry, according to a quarterly survey by the AICPA and the University of North Carolina’s Kenan-Flagler Business School.
Pessimism was at an all-time high in the survey, which began Nov. 5, the day after the election, and closed Nov. 17. Eighty-two percent of respondents were very pessimistic or pessimistic about the U.S. economy. And for the first time in the survey’s history, which dates back to June 2004, negative sentiment among respondents about their own organizations outweighed optimism.
While customer demand remained the top challenge for businesses, access to and cost of capital and receivables collection rose to take the second and third spots. When asked if the credit crisis was affecting their company directly, 66% of CPAs said their organizations were being impacted in some way. The response was up from 55% in April.
Twenty-eight percent are experiencing problems with collections; 25% are experiencing higher credit costs and/or stricter terms; and 21% are finding that previously available sources of financing are no longer available.
Companies are also changing their strategies to deal with the credit crisis, the survey shows. The most common changes were implementing more restrictive credit and collection practices and getting more aggressive in managing inventory and working capital.
Only 8% of CPAs surveyed expect the U.S. economy to begin improving in the first half of next year. Yet the majority (54%) of respondents don’t support a second economic stimulus package from Congress.
Acting on their concerns, businesses are cutting costs. Forty percent of respondents were implementing capital spending cuts, while 36% already had or were expecting to freeze hiring. Thirty-one percent of survey participants reported layoffs or expected layoffs and/or compensation freezes, and 34% had restricted staff travel or plan to limit travel.
Expectations for revenue, profits and employment showed their sharpest decline in the survey’s history. Half of respondents expect revenue decreases and 55% expect profit decreases. Only 19% expect to be able to hire more employees. That figure was down from 38% in January.
The good news for employees, according to Chris McKittrick, AICPA’s director of members in business, industry and government, is that 61% of companies still plan increases in their average salary and benefit package, excluding health care.
The survey polled AICPA business and industry members. Almost half the respondents (49%) were CFOs, 25% were controllers, and 17% were CEOs or COOs. Sixty-eight percent of respondents came from privately owned entities, 13% from public companies, 11% from government, education and not-for-profits, and 4% from foreign-owned companies. Nine percent came from organizations with annual revenue of $1 billion or more, 21% from organizations with revenue of $100 million to under $1 billion, 44% from organizations with revenue of $10 million to $100 million, and 27% from organizations with revenue under $10 million.
For more on the survey, click here.