A new survey shows that continuing economic headwinds could create challenges for small businesses in the next 12–18 months. The 2024 Avalara Accountants Confidence Report, produced in conjunction with CPA Trendlines, queried 347 Main Street accountants providing visibility into the tax, financial and accounting situations of an estimated 86,999 small businesses.
The survey, conducted during the 2024 tax season as accountants combed through clients’ financials, captures a snapshot of accountant sentiment on the business and economic outlook conditions for the small businesses they serve, and shows accounting professionals flashing warning signs around key business issues, leading with clients’ abilities to hire and retain employees, manage costs and price increases, and keep up with technology changes ushered in by artificial intelligence.
The report is the result of a survey of trusted advisors with the clearest view into the financial health of small business clients. The survey was conducted against a backdrop of continued high inflation, heightened interest rates, a looming recession, tightening credit, and pressure to focus on short-term challenges at the expense of long-range planning.
Accountants to small biz clients: cut costs, apply new financial discipline
According to the report, Main Street accountants are providing cautionary advice to small businesses amidst uncertain or deteriorating business and economic conditions. Fully 48.6% of the 347 accountants surveyed believe the outlook for the 86,999 small business clients they represent will turn sour over the next 12 to 18 moths, with only 17.7% expecting change for the better and 33.6% predicting no change.
The survey of working tax, accounting and finance practitioners – including CPAs, bookkeepers, wealth managers, payroll agencies, and tax professionals – also shows 49.7% are forecasting a downturn in the U.S. economy as a whole, with only 16.8% predicting improvement and 33.6% seeing no change.
Main Street accountants bullish only on professional services and “small tech”
The survey demonstrated that the dynamics of the economy are already throwing the spotlight on some winners and losers. Accountants see some of the best prospects in the economy ahead for professional services firms, such as law firms and medical practices, and for the local IT service providers and small tech local manufacturers and distributors that other small business will need to rely on as they retool for the next phases in the economy and in technology. At the other end of the spectrum, they are not so optimistic about auto dealerships, franchising, retail trade, the arts and entertainment industries, and a laundry list of additional business types.
Bearish extended outlook on the overall economy
Accountants offered a broad range of advice to small business owners, urging clients to cut costs where possible and apply new financial discipline in running their company, in addition to embracing technology and adjusting workplace policies to find and keep the best employees. The survey was conducted during an election year, adding another element of uncertainty in tax policy and planning, and government regulatory activities. In written comments, survey respondents advised their clients on a range of areas from cost management to financial discipline and reporting, client and customer relations, tax and regulatory awareness, staff management, and technology and AI utilization:
- “Stay current on employment laws”
- “Get your house in order to prepare for more IRS audits”
- “Keep your employees happy, or you won’t have a business to run”
- “Manage expenses and make yourself unique”
- “Expect big business to be your long-term competition”
- “Raise your prices! If you’re really needed, they will pay you”
- “Take advantage of AI to increase productivity and save time”
- “Look for different methods to accomplish goals and leverage technology to be more productive”
“Main Street accountants have perhaps the most accurate view into the health of small businesses in local economies, so our 2024 Accountants Confidence Report provides a unique aggregate snapshot of how businesses are faring, now and into the near future,” said Sona Akmakjian, Global Head of Strategic Accounting Partnerships at Avalara. “This new data around accountant sentiment also demonstrates the extent to which mom and pop shops depend on the business acumen and advisory of their trusted accounting professional, who must now wear many hats to help clients through headwinds including ongoing staffing shortages, continued inflation, and better understanding technology, including AI, to deal with current and forthcoming challenges.”
Read more about the 2024 Accountants Confidence Report here – use code avlr.
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Tags: Advisory, Small Business
