Updated June 15, 2020: Focus on Rebuilding Revenues in Latest PwC CFO Survey

The new installment of a biweekly survey from Big 4 firm PwC gathered the input of 330 finance leaders ending the week of June 8, just as most states were more fully reopening their economies, several potential flare-ups of new COVID-19 cases were threatening to emerge and the U.S. economy officially entered a largely expected period of recession. Against this backdrop, CFOs expressed optimism about being able to start rebuilding revenues, even while acknowledging long-term concerns about what the “new normal” is going to look like.

Worries about a new wave of COVID-19 infections top the list of threats to business recoveries and the financial impacts of the pandemic. Liquidity and capital resources were prominent on that list, but only 42% of CFOs said it was a top concern in this survey, versus 75% in April.

Getting Back on Track

Nearly half (47%) of respondents expect revenue declines of more than 10% this year, but only 13% of CFOs are now looking at declines of more than 25% – a drop from 20% expecting such steep declines five weeks ago. And 11% are now starting to see prospects for revenue and/or profit growth in 2020 as the economy reopens.

Survey respondents noted multiple potential paths to grow their top-line revenues, with 63% of CFOs planning changes to products and services and 41% looking to alter pricing, among other revenue strategies. Meanwhile, as they look to reinvent their businesses, nearly one-third of CFOs (32%) will be focusing on tech-driven products and services.

Returning to the Office Amid a Second Wave?

With a potential resurgence of the outbreak looming, 59% of CFOs worry about a rise in COVID-19 infections affecting returns to work. Nevertheless, most are very confident their company can both provide a safe working environment (71%) and meet customers’ safety expectations (80%). Of course, their staff may have a different view of the situation back at the office, considering that only 47% of employees in a separate PwC workforce pulse survey said changing workplace safety measures – such a face masks, temperature checks and socially distanced work areas – will make them more comfortable returning to the office.

Given this lack of consensus – and considering the relative productivity of remote working for many companies over the past few months – 54% of CFOs are planning to make remote work a permanent option. Meanwhile, fewer leaders anticipate more furloughs (30%, down 6% from the previous survey) or layoffs (24%, down 7% from the previous survey) in the next month, a trend consistent with the slowing number of people filing for unemployment.

 

Updated May 11, 2020: CFOs Forecast Lasting Changes in Latest PwC Survey

The latest CFO survey from Big 4 firm PwC largely reflects the developing general consensus as to how the country will eventually emerge from the COVID-19 pandemic – slowly, cautiously and with eye toward structural and behavioral changes that may very well turn out to be permanent.

The new installment of PwC’s biweekly survey canvassed 288 finance leaders during the period of May 4-6, when an increasing number of states were loosening stay-at-home orders, cases were still on the rise in many areas and unemployment continued its steady upward trajectory. More CFOs agree that the path going forward is going to be a long one. For the first time, more than half expect their company to take at least three months to recover once the virus recedes.

That said, as they approach some new version of normal, two-thirds of respondents are “very confident” their company can create a safe workplace (even if employees aren’t as sure), 68% believe that crisis-driven transitions to remote work will make their company better in the long run and fewer are considering pushing back or canceling planned investments (58%, down from 70% two weeks ago).

Managing Change

Companies seem to be getting a better handle on conducting business in a transformed environment, with concerns over productivity losses due to remote working conditions declining. In fact, 44% of respondents say they’re finding new ways to serve customers, with many noting that social technologies routinely used in our private lives are now being absorbed into operational planning in the workplace. Despite these silver linings, however, 55% still expect their company to suffer a decline of 10% or greater in revenue and/or profits for this year, a slight uptick from two weeks ago.

Cost Containment

Even as costs remain under scrutiny for almost every company, many CFOs believe they’ve done what they can and will wait to see how things develop before making additional cuts. In addition to the aforementioned optimism toward pullback on planned investments, fewer respondents anticipate furloughs over the next month – 36% in the current survey versus 44% two weeks ago. Further, 34% say they are “very confident” their companies are identifying new revenue opportunities – a number PwC believes will increase as demand becomes clearer.

Heading Back

As they ponder what a return to the office may look like, CFOs are getting more concrete about how their companies will prepare, as evidenced by rising numbers since the last survey in three of the top areas of expected change – reconfiguring work sites to promote physical distancing, changing workplace safety measures/requirements and changing shifts or alternating crews to reduce exposure. Even so, a separate PwC survey of 468 employees found that 51% who have been forced to stop working or forced to work remotely say the fear of getting sick would prevent them from returning to the workplace if their employer requested it tomorrow. In other words, no matter what protective measures companies put in place, they’ll likely still have to sell the idea of a return to the office to a worried and skeptical workforce.

“The shutdowns showed many companies that they can work virtually better than they thought,” the study concludes. “These leaders are seeing the results of being able to move quickly and decisively during a crisis, even while away from the office, and they’re making connections to the longer-term health of their companies. Ultimately, however, the longevity and success of remote work will be driven by the opportunities businesses create for employees to interact, learn and be part of a community. For some organizations, culture also drives innovation and can deliver higher returns, outweighing the costs of on-site work.”

 

Updated April 28, 2020: CFOs Weigh the Risks of Reopening and the Potential Economic Impacts in Latest PwC Survey

As the country begins contemplating when and how to restart the economy amid the ongoing COVID-19 pandemic, the latest CFO survey from Big 4 firm PwC published on April 28 shows the level of concern among corporate leaders holding steady.

The new installment of PwC’s biweekly survey series took the pulse of 305 finance leaders for the push-pull week of April 20, as coronavirus cases in many states had started to level off, several stay-at-home orders were further extended and plans for reopening certain businesses began to take shape. Against this backdrop, 72% of respondents continue to believe COVID-19 has the potential for “significant impact” to their business operations, down only slightly from 74% two weeks prior. What has emerged in recent weeks, however, are more serious discussions about companies returning to some semblance of pre-lockdown operations.

“U.S. finance leaders are focused on shoring up financial positions, as U.S. businesses head into a period of even more operational complexity while they orchestrate a safe return to the workplace,” according to the study. “Back-to-work playbooks put workforce health first, as companies set course for a phased-in return to the workplace that will not be uniform across the U.S. or internationally. Returning employees and customers are going to experience a work environment that will differ in marked ways as a result.”

To illustrate the potential changes that lie ahead, 49% of respondents say remote work is here to stay for some roles, as companies shift to alternate staffing and reconfigured worksites that promote social distancing. Meanwhile, 77% of surveyed CFOs expect to see new safety measures like testing put into place, and 50% are planning on higher demand for enhanced sick leave and other policy protections for employees.

But companies are also beginning to realize that the business recovery from the impacts of the virus will take longer. As measures of manufacturing and service activities continue to drop and demand continues to shift, 48% of CFOs believe it will take at least three months to return to normal, up from 39% in the previous survey.

In terms of the financial fallout they expect from the pandemic, 53% of respondents are projecting a decline of at least 10% in company revenue and/or profit this year. And as cost pressures intensify, 32% of these CFOs expect layoffs to occur (up from 26% two weeks ago) and 70% are considering deferring or canceling planned investments, mostly in the areas of facilities and general capital expenditures, but not as much in investment programs considered important to future growth such as digital transformation, customer experience or cybersecurity/privacy.

As the recovery from COVID-19 slowly evolves, the study advises leaders to remain committed to the spirit of open communication and people-first policies.

“With most firms expecting to bring people back on-site in phases, leaders will need to help employees adjust to a changed environment while still managing the well-being, engagement and productivity of all workers. Purpose-led communication will continue to be critical to keep people informed, and leaders should demonstrate empathy while helping employees adjust to what will likely be an extended transition period.”

 

Updated April 14, 2020: PwC Survey Finds CFO Concerns Growing As Pandemic Continues

Big 4 firm PwC, in its third survey since COVID-19 stay-at-home orders took effect, finds that CFOs are increasingly worried about financial impacts, recovery time and cost-cutting, including layoffs and furloughs.

This survey of 313 finance leaders covered the week of April 6, when unemployment claims surged and attention turned to the federal stimulus package as deaths from COVID-19 mounted.

The top concern of respondents is the financial impact of the coronavirus as a recession looms and cash flow tightens. The survey says 75% are worried about the pandemic’s effects on results of operations, future periods, and liquidity and capital resources. A potential global recession is feared by 70%.

Also, CFOs are far less optimistic about the time it will take for their businesses to recover.

“Hopes that the outbreak will dissipate quickly are receding,” according to the PwC COVID-19 CFO Pulse Survey. “Only one in five respondents now believes they’ll be back to business as usual within a month once the outbreak ends. In contrast, during the week of March 9, as shelter-in-place orders started taking hold in the U.S., 66% of U.S. and Mexico respondents estimated that their companies could recover within a month.”

CFOs also noted that since so many changes are taking place now, with employees working remotely and customer interactions changing, that recovery will be complicated, as they try to predict what a new normal will look like after the outbreak ends.

As cost pressures increase, workforce reductions in May are anticipated by 26% of respondents and 41% expect furloughs. “This marks a significant change. Two weeks ago, only 16% of leaders in the U.S. and Mexico expected layoffs, while 44% expected furloughs. Separation of the workforce, or layoffs, is typically considered a means of last resort,” the survey says.

In another effort to cut costs, 67% of the U.S. leaders surveyed say they are considering deferring or canceling planned investments in the following areas: facilities/general capital expenditures 82%, workforce 67%, operations 55% and IT 53%.

To cope, nearly half (49%) of finance leaders surveyed say their company plans to take advantage of various government relief programs, most notably the $2 trillion CARES Act, which covers loans, loan guarantees, grants, assistance payments, contracts and tax incentives. Among the leaders who expect to make use of these measures, 81% expect to defer tax payments.

PwC is conducting a biweekly survey of finance leaders in the U.S., Mexico and 19 other territories. The next set of results will be released April 27.

The PwC survey says that finance leaders are making tough decisions as they prepare for a recession. “Helping people feel more prepared and informed by being transparent about the health of the company is crucial. Company leaders who are forthright about the decisions the leadership team is making — and how the workforce may be affected — can build trust by helping people stay informed, even if the news isn’t good. Trust and transparency are also a key part of stakeholder management. The situation is uncertain, and nobody can be sure what will happen, but providing regular updates means stakeholders won’t be caught off guard.”

 

March 17, 2020: PwC Study: CFOs Anxious About Massive Coronavirus Impact

Fifty finance leaders in the U.S. and Mexico are very concerned that the coronavirus pandemic may lead to a global economic downturn, according to a new survey by Big 4 firm PwC.

That No. 1 concern, cited by 80% of those surveyed March 9-11, is followed by worries about consumer confidence (48%), financial operations (48%) and workforce productivity (42%). The CFO Pulse Survey also revealed that every CFO or finance leader says their business is impacted by the coronavirus.

“We don’t think it’s a time for companies, or others, to hold onto original plans for 2020,” says U.S. Chair Tim Ryan during a media briefing, according to CFO.com. “It’s clear that the virus will change the plans of almost every company.”

Companies that are ready will feel fewer impacts, he adds. “Those that have been working very hard to control things like cost structure and liquidity will fare better, and those that weren’t will be more adversely affected.”

Most of the respondents predict the crisis will impact their revenues and profits, with 58% expecting a decrease and while 40% saying it’s too difficult to assess now. The leaders are considering financial actions as a result of the outbreak, with 62% planning cost containment measures, 44% adjusting guidance and 32% deferring or canceling planned investments.

Optimism was reflected in the survey as well, with 66% of respondents saying “business as usual” could return to normal in less than a month if the COVID-19 were to end today. Another 24% said it would take up to three months.

“The longer-lasting effects of the outbreak on consumer habits are difficult to predict, but some companies are already updating strategies in the face of temporary – and potentially permanent – changes in some markets or business models,” the survey report says.

PwC is conducting biweekly surveys of finance leaders in the U.S. and Mexico. The next set of results will be released on March 30.

More news from PwC

IPA Pulse Survey: A ‘New Normal’ at the Office

IPA’s latest pulse survey tapped the knowledge of nearly 150 MPs in late May on several key issues related to the COVID-19 pandemic. For example, as many states roll out phased re-openings and firms can return to their physical offices, 30% of respondents expect to have more than half of their staff back immediately, with another 31% expecting 25%-50% of staff back in the office.

And those employees returning to physical offices in the coming weeks are likely to encounter a much different looking and functioning workspace than the one they left in mid-March, but in what ways? That is, what types of safety measures will firms be putting in place in their offices upon reopening?

Among the more popular options, the ready availability of hand sanitizer will be one of the most ubiquitous new features of office life, with 96% of survey respondents planning to introduce this relatively simple, cheap and effective addition. In order to keep a lid on large gatherings, meanwhile, 87% of firms will strictly limit meeting sizes and 68% plan to reduce capacities in cafeterias and breakrooms.

For now, however, it appears as though many firms are opting to forgo potentially more stringent health and safety measures in their offices. For example, just over half (56%) are planning to require employees to wear face coverings, while far fewer will be performing daily temperature checks (36%) or erecting protective dividers between workstations (35%).

And among the 8% of respondents who have other plans in mind, several noted in the comments that their firms will be implementing staggered work schedules in order to cut down on the number of people in the office at any given time.

Catch up on more insights from this IPA Pulse Survey:

Shrinking the Physical Office Footprint

An Interesting Interlude for Internships

Helping Clients Conduct Layoffs and Furloughs While Mitigating Their Risk

Jill Pappenheimer

By: Jill Pappenheimer

Economists predict the unemployment rate could hit as high as 20 percent before we see relief, the highest rate since the Great Recession. So, where do accountants fit in to help business clients during this unprecedented time?

While job losses during the Great Recession were mostly gradual, after COVID-19, we have seen this occur in a matter of weeks and no one can say with certainly what the recovery will look like.

Faced with a steep drop-off in business, many companies are having to make tough decisions just to keep the lights on. That is why it is important that in addition to honestly and accurately accounting for layoffs and furloughs for clients, that accountants act as trusted business partners, ensuring compliance where possible and identifying opportunities to improve cash flow.

To that end, here is a brief overview of some best practices that accountants should be aware of for businesses conducting layoffs, reducing hours, or furloughing employees so they can help clients manage their finances, ensuring compliance and avoiding risk of legal action and still keep the needs of the “person” in mind.

Avoid Layoffs With Remote Work

It seems like whenever times are tough for business, payroll is the first area to receive cuts. But given the impact on company morale, not to mention the risk of lawsuits associated with job losses, businesses should at least entertain other ways to reduce costs and retain talent. This is where the accountant’s intimate understanding of their client’s or company’s numbers can help.

With so many employees already working from home, for instance, accountants could analyze the potential cost savings of having some or all office employees work from home permanently and bring those analyses to clients. With commercial office leases typically composing anywhere from two to as much as 20 percent of a business’s revenue, there is unquestionably prime opportunity here to reduce expenses. Whatever leadership decides, just bringing these ideas to their attention helps demonstrate the value you or your firm bring to the business.

Consider Furloughs Before Conducting Layoffs

From a staffing perspective, furloughs are often the best option — for those businesses that can afford it — as having staff on standby can help companies get back to normal operations quicker. But that is not the only reason to consider furloughs over layoffs.

Unlike layoffs, furloughs actually reduce labor costs immediately, without adding new costs such as severance packages and cash payouts. That is a major benefit to companies facing cash flow shortages.

There is a downside, though, which accountants should be aware of when proposing this option to clients. Furloughs can be quite tough on employees — in some ways, even tougher than layoffs.

To ease the burden on employees resulting from their paycheck suddenly vanishing, firms should ensure that clients who opt for furloughs encourage employees to apply for unemployment benefits on the first day of their temporary leave. This action ensures employees receive the maximum compensation possible. Additionally, employees should be reminded that even those who use up their vacation time or personal time during the furlough may still qualify for unemployment benefits.

Furthermore, accountants should make clear that just because furloughs allow companies to avoid the costs associated with layoffs, that does not furloughs are completely “free” either. For instance, per federal law, businesses that institute furloughs lasting one or more full workweeks do not have to pay salaried, overtime-exempt employees their usual weekly salary. However, if the furlough lasts less than a week, and any salaried employees have worked at all that week, the employer must pay those employees their full weekly salary.

Handling Pay Cuts

Some other popular options used to avoid layoffs are reducing employee hours or instituting pay cuts. While employers in most places have the authority to reduce scheduled hours for hourly employees, the story is a little more complicated for salaried employees, as employers are not allowed to reduce weekly hours to reduce compensation for exempt employees. They must pay exempt employees the same amount for each pay period, regardless of how many hours they put in.

What employers can do is have exempt employees work fewer pay periods, while still paying them in full for each pay period they work. Take it from the Department of Labor: Employers are allowed to make a “bona fide” reduction of an exempt employee’s salary “during a business or economic slowdown” as long as that reduction is not related to the “quantity or quality of work performed.”

However, these deductions from salaried employees’ pay should not be determined on a day-to-day or week-to-week basis, the fact sheet states. And the employer must continue to pay the employee at least the minimum weekly salary requirement (set at $684 on the federal level; individual states may have higher requirements) for the employee to retain their exempt status.

Conducting Layoffs

Ultimately, even with these stopgaps available to them, there are companies that will need to resort to layoffs to stay afloat. But companies intending to implement widespread layoffs should go into the with their eyes open with regard to the risks and negative effects it may have on their business. Accountants educated on the matter can help make sure clients understand these risks.

For one, employees who are laid off are far less likely than furloughed workers to return. That could make it hard to find qualified staff to perform key duties when the business is allowed to reopen.

And then there is the issue of deciding whom to lay off. To avoid actual or perceived discrimination, businesses should proceed carefully through selection process. A classic approach is last in, first out. But if a company does not have a specified policy like that in place, that does not mean leadership should randomly lay people off or let people they do not like go.

Another way to ensure layoffs are conducted on solid, defendable grounding is to align layoff requirements with the company’s goals and vision. Company leaders should thoroughly evaluate the positions and individuals that are unlikely to play a significant role in the company’s future, and layoff those employees first. Ultimately, no matter what approach the business takes, decisions should be made on objective, numerical grounds wherever possible.

It is essential to consider the potential for implicit biases or bad data in the selection process. That is why once leadership has made their selections about whom to lay off, the list should be carefully reviewed for disparate impact on employees who fall in one or more protected classes.

The list of individual characteristics considered to fall under a protected class varies from state-to-state, but a broad definition would include:

  • race
  • religion
  • age
  • disability
  • gender expression
  • sexual orientation
  • national origin

In some places, even political affiliations are characteristics that cannot be used as grounds for either hiring or firing.

 It Never Hurts to Double Check

This article is hardly comprehensive of every single compliance, or employment, risk that businesses will face when attempting to scale back payroll costs as there are far too many to possibly list here. Obviously, the more you know about compliance the better and knowing when to rely on HR experts may an important way to avoid possible missteps.

Your clients will ultimately appreciate the extra effort to ensure the best decisions are made during this tumultuous time.

Reprinted with permission from the author. This article originally appeared June 10, 2020 on AccountingWeb.com.

About the Author

Jill Pappenheimer is a partner in the HR consulting practice of San Francisco-based BPM, an IPA 100 firm.

Tech Experts Weigh In On How Blockchain May Change Business

By this point, nearly everyone has heard or read of blockchain’s potential to revolutionize many of the practices and processes of the business world. But for many people, the specifics of how this may unfold – that is, the practical, real-world examples of just how the technology may be deployed – – are still in short supply.

That’s why Forbes recently asked its Technology Council members to share some of the very real ways they believe blockchain either has changed or will change business. Here are a few of the best:

Data Collaboration and Control

Blockchain can bridge the natural tension between collaboration and data control by acting as a system of record – like a collaborative SQL database – allowing companies to do business without having to trust partners or third parties not to corrupt mission-critical data.

Decentralized Finance

Ecosystems of financial applications built on top of blockchain networks can shift the custody of assets from banks to software, offering the potential to enhance economic activity worldwide.

Supply Chain Management

Blockchain can provide accurate, authenticated and transparent transactions with predictable, pre-approved fees and full auditability, lowering costs by removing intermediaries, increasing reliability by distributing the ledger and reducing fraud because transactions are immutable and irrevocable.

Data Connection

Because a company’s data is transparent to all parties that participate in a blockchain, chain participants can potentially see all costs, transactions and inventory between competitors, suppliers and customers, allowing for a more fair and competitive market without regulatory and middleman cost.

Cross-Industry Data Consolidation

Different businesses can cooperate with each other more effectively thanks to the connections between data storage and data users from multiple domains enabled by a single blockchain network, helping them to overcome discrepancies and create a unified, fully transparent and safe data flow.

User Authentication

Using blockchain for user authentication in digital channels provides the combination of a trusted, tamper-proof distributed ledger along with verified credentials, enabling people to have trusted, portable digital identities that they can use on any website – from their bank to their health care provider.

Human Resources

Blockchain can remove inefficiencies associated with hiring and paying employees, allowing candidates to securely update information as HR verifies credentials.

AICPA CEO: Helping Businesses Recover Involves Taking Some Risks

Just as health care professionals work on the front lines of the COVID-19 pandemic, CPA firms are the financial first responders, helping their clients recover economically.

More than any other profession, accountants are best positioned to serve as trusted advisors to the 6 million small “Main Street” businesses battered by the economic downturn caused by the COVID-19 shutdowns, says AICPA CEO Barry Melancon.

Melancon, speaking May 20 at the virtual AICPA Spring Council meeting, says accountants will play a critical role in bringing back an economy that in April saw consumer confidence plummet by one of the largest one-month drops ever. GDP dropped 4.8% in the first quarter and more than 40 million are unemployed.

As passionate debates flare on the fairness, or unfairness, of reopening plans, Melancon says, “It’s our job as a profession to not be bogged down by that.” Focus on helping clients take some risks in developing new business models and avoid being “ultra-conservative.” He adds that accounting is a profession that “strives to get it right,” but it’s also a profession that “gravitates to the technical” and can become paralyzed by the details.

“Our real value and our real message going forward is that trusted advisor role,” he says. “I think we will see that the most valuable employees in firms, and the most valuable people in finance, are going to be the ones that can focus at that level.”

He adds, “How well we do that, I believe more than anything else, will drive how well we help the economy to recover.”

Melancon discussed the numerous ways accounting professionals can succeed in an uncertain economic environment. One way is by retaining staff, and he says that in his many discussions with firm leaders, he has seen a passion for maintaining the workforce, keeping commitments to hire in the fall and to continue internship programs, even if they’re virtual.

Keeping talented professionals will be key to helping small business clients, who are being hit disproportionately in this crisis, as are small CPA firms. The reverse was true in the 2008 recession, which heavily impacted large companies and large firms. Firms with diverse client bases will fare better than others, he says.

Business opportunities for firms include helping clients with Payroll Protection Program (PPP) forgiveness, tax deductibility of PPP spending, business valuations, forensics, tax planning, new state regulations and extended tax deadlines. Additionally, firms can consider business continuity (“not a traditional sweet spot”), business transformation, forecasting and scenario planning, supply chain management and workforce planning. Consulting skills will be at a premium.

The “new normal” will certainly be different and will offer opportunities. For example, Melancon says, members of Congress are talking about legislation requiring annual audit of or assurance over of emergency stockpiles.

“We are on the front lines – not just for the next day, not for the next month, but for a series of months into the next year – as to how this economy is going to recover. Never before have our skill sets been more needed, has our attitude been more appreciated and our outcomes more expected than they are today.” – Barry Melancon.

Program Looks at Diversity in Accounting Profession

Against the backdrop of a nationwide discussion of racial equality, and at a time when many firms acknowledged pent-up frustrations and outpourings of concerns from their own staffs, a new public television documentary looks into how minority candidates view their place in public accounting.

The latest episode of the PBS series Roadtrip Nation shines the spotlight on three Big 4 audit recruits as they travel the country to interview leaders throughout the profession – including a former CEO of Deloitte, an accountant-turned-baker and a forensic accountant – and examine their own place in a largely white profession.

The show was completed several months ago but hits the air at time of great unrest following nationwide protests surrounding the death of George Floyd in Minneapolis. Over the past few weeks, the Institute of Management Accountants released a toolkit laying out best practices to launch a diversity and inclusion program; PwC said it would create a council made up of rank and file staff to help shape the firm’s efforts and advise its senior leadership; and NASBA committed to offering unconscious-bias training and creating a system to report and investigate discriminatory behavior.

Despite these recent efforts and ongoing outreach from organizations like the AICPA to try and attract more minority talent, African American CPAs account for just 1% of the profession. And one of the show’s backers says there’s still a long way to go to make accounting a more inclusive and diverse profession.

“This is a profession that is actively trying to recruit and improve and provide opportunity for underrepresented and underserved talent, but there’s a lot more work to be done,” says Liz Barentzen, vice president for operations and talent at the Center for Audit Quality, which sponsored the episode. “We saw this as a great opportunity specifically to talk directly to diverse talent.”

AICPA Survey Sees Bleak Profit and Sales Outlook Ahead

As the full scope of the economic swath cut by the COVID-19 pandemic begins to emerge, a new survey of CEOs, CFOs, controllers and other CPAs in U.S. companies paints an ugly picture of the road ahead.

Only 20% of respondents in the second-quarter AICPA Economic Outlook Survey expressed optimism about the overall outlook for the U.S. economy over the coming year, down from 61% in the first quarter and now at its lowest level since late 2011. Meanwhile, as companies have cut their profit and sales outlooks in response to pandemic-related impacts, executives now expect revenue to contract by 5% over the next 12 months (down from an anticipated 4.3% growth rate last quarter) and profit to drop by 5.5% (down from an anticipated 3.3% growth rate). In addition, while less than 8% of business executives said their companies had made downward adjustments to their forecasts in light of the pandemic in the first-quarter survey, 81% had done so this time.

Adding to the parade of dire news, the percentage of U.S. executives expressing optimism about their own company’s prospects over the next 12 months fell from 66% to 30%, quarter over quarter, while respondents who said they expect their organizations to expand in the coming year dropped from 64% last quarter to 24%. In terms of top pandemic-specific concerns, respondents cited customer demand/ability to pay, the safety of employees and cash, financing and capital challenges.

“Not surprisingly, this quarter’s survey documents the severe impact the pandemic has had on the outlook for U.S. businesses,” says Ash Noah, AICPA managing director of CGMA learning, education and development. “Moving forward, the reopening or ramping up phases in different states will be critical but the rise of liquidity concerns and the uncertain social and economic environment, including potential second-wave infections and prospects of additional layoffs, continue to present an extremely challenging environment for businesses.”

More news from the AICPA

Examining Strategies For Success – For Free

Business leaders are always on the lookout for ideas that will help put their companies over the top, but it’s not often that they come across anything truly worthwhile without having to pay for it.

But for this week only, author Jake Hanes is sharing his new book “The 7 Strategies of Highly Successful Business Owners” as a free download in the Amazon Kindle Store, allowing readers to check out the resources, insights and best practices that this CPA and entrepreneur has discovered across a number of ventures throughout his career.

In addition to lessons drawn from his first-person business experiences, Hanes shares tools he learned from mentor and business coach Kevin Weir, ActionCOACH Global founder and CEO Brad Sugars and leadership expert John Maxwell. Touching on ideas that translate across industries, Hanes shares strategies ranging from establishing predictable cash flows and better leveraging resources to dealing with economic uncertainty and building a powerful team.

The free download of Hanes’ books is available only until June 5.

Aprio Adds New Private Equity Services Team

Atlanta-based Aprio, an IPA 100 firm, has announced the formation of Aprio Private Equity, an integrated service team designed to serve private equity and strategic buyers in the middle market.

Led by partner Michael Levy, Aprio Private Equity provides fund services, post-merger integration services, portfolio services and exit strategy services, in addition to transaction advisory services.

“Aprio Private Equity will draw on our advisory, audit and assurance, tax, wealth management and outsourced accounting services expertise to provide an integrated approach to our private equity clients that will create opportunities for improved financial and operational performance, minimized tax liabilities, and elevated marketplace credibility,” says Aprio MP and CEO Richard Kopelman.

More news from Aprio

Leaders: The Pandemic Has Revealed the Truth About Your Heart. Do You Like What You See?

Deb Boelkes says how you behaved during the coronavirus crisis reveals some essential truths about whether you lead with your head only or also with your heart. The good news? It’s not too late to switch to a more heartfelt leadership style. Here’s what that looks like.

A couple months ago, a crisis hit the world—one that changed almost everything about how companies operate. We all know the details, so no need to enumerate them here. But as we continue to navigate this fearful, uncertain, emotionally charged stretch of history, Deb Boelkes wants leaders to ask themselves a big question: What has the pandemic taught you about the role your heart plays in your leadership style?

“Times of crisis and extreme change have a way of revealing hidden truths,” says Boelkes, author of Heartfelt Leadership: How to Capture the Top Spot and Keep on Soaring. “It shows us what we’re made of. It shows the people around us what we’re made of. And while many leaders have had to make really tough decisions in the upheaval caused by COVID-19, the way they did those things speaks volumes.”

In other words, if you had to lay people off, did you do it with love and concern? Were you patient as employees struggled to balance their newly remote jobs with home schooling and child care? Did you say thank you? Did you double-down on efforts to keep people engaged and inspired? Did you continue to nurture their growth and push them to live up to their potential?

All these are the attributes of what Boelkes calls a “heartfelt leader.” They mean you don’t lead only with your head—always putting goals and profits ahead of people—but you also care deeply about employees’ well-being. (It’s not an either/or proposition, she says. People who truly believe you care work harder and are more engaged, making it a smart financial strategy.)

In Heartfelt Leadership, Boelkes lays out the path to leading with the heart. Full of real stories and lessons from top heartfelt executives, the book will help you learn to transform from a person people follow because they have to, to one they want to follow.

Now that the dust is starting to settle and businesses are—ever so slowly—starting back down the road to normalcy, Boelkes urges you to take a good hard look at your own “heartfelt quotient” and see how you stack up. Here are a few things heartfelt leaders regularly do:

They give their personal best every moment. “My first job working for a major corporation was at Disneyland,” says Boelkes. “My high school drill team auditioned and was selected to perform together throughout the winter holiday season. I was a ‘marching card,’ the ace of clubs with the Alice in Wonderland dance unit. Once we had the job, we each gave our personal best every single moment. We competed against ourselves to set new personal best records with each ensuing performance. If any one of us made a wrong move, it impacted all of us, and it certainly impacted our ‘guests.’ We all depended on each other. Disneyland depended on us. The audience who had paid so dearly to attend depended on us. If any one of us failed individually, we all failed. We had to work together at peak performance, in perfect unison, every single time. We had to be perfect. No excuses. Ever. Disneyland set a bar for job performance and work ethic against which I have measured every other career and customer service experience I have ever encountered throughout my life. My heartfelt thanks will forever go to Walt Disney and all the Disneyland cast and crew members for that incredibly important lesson.”

They build a culture of love. (That’s what draws the talent.) Tim Hindes, co-founder and CEO of Stay Metrics, a provider of driver retention tools, believes that successful companies are the ones that lead with love from the top down. He says, “When we started with two of us in 2008, we basically grew the company to $30 million in under three-and-a-half years. It wasn’t the two of us who did it. By the time we were done, we had thirty-five team members. We constantly had people coming into our offices saying, ‘This guy is talented. He wants to be part of this.’ If you dare to create this type of environment, one so unorthodox, you’ll find talented people will come to you who don’t want to play the old game. So, not only is it the right thing to do, it’s a brilliant move. I do think a lot of the problems we have in business, if you root down to it, are an absence of love and culture at the top.”

They live by the Golden Rule in good times and bad. It’s the foundation of trust. Colleen Barrett, president emeritus of Southwest Airlines, says, “You just have to practice the Golden Rule, on or off the clock, with each other, with your customers, with anybody you come into contact with. It’s really simple. I’m not saying we never fight with our unions. You know, we’re 86 percent unionized. At Southwest, you could be in the middle of a ferocious negotiation over something or somebody or some work rule, whatever. But…if you walk into the room at the beginning of the day, when you walked in as a total stranger, you would not know who was who, because they’re not on one side versus the other. They’re intermingling. They’re talking. They know each other by their first names. They know their families. They know something about them because that’s who we are. Do we argue? Yes. But do families argue? Yes. Do we have disagreements? Yes. But there is such a trust there.”

They use the magic words—”I don’t know”—and use them often. Garry Ridge, chairman and CEO of the WD-40 Company, shares the power of admitting that you don’t have all the answers. He says: “I love three words so much, ‘I. DON’T. KNOW.’ I think they’re the most powerful words we can use as leaders, to say, ‘I don’t know. Tell me what you know.’ Suddenly these barriers come down. Fear goes away. Conversation happens. Dialogue. Learning. Eventually, we come toward a position we both then say we think we agree on.”

They strive to never hurt anyone. This should be a given, but as a leader, your goal should be to enhance the lives of your employees and certainly to do no harm. Garry Ridge says, “When we put on the badge of leadership every morning, we take on the responsibility of other people. As leaders, we have no right, by our actions, to mess up other people’s lives. We leaders need to take that extremely seriously. Too many leaders out there, through their overinflated self, their ego, who are driven by short-term goals instead of long-term thinking, make decisions that hurt people every day. They have no right to do it. The Dalai Lama says, ‘Our purpose in life is to make people happy. If we can’t make them happy, at least don’t hurt them.’ Our purpose as a leader is to help people engage and enable, NOT to hurt them. We want to apply to their positive, not to their negative.”

They keep asking, “How do I help you grow?” Britt Berrett, former president of Texas Health Presbyterian Hospital Dallas, emphasizes the need to show your people who don’t necessarily share your values that you care. “I had a funny experience with one of our chief officers,” says Berrett. “I adore her and work very closely with her. For me, my time is very precious. I don’t have a lot of slack time; for me, it’s my faith, my family, and then my job. I knew there was time we needed to spend together. She needed that one-on-one time. It was in the afternoon, so I said, ‘Let’s go grab lunch.’ My favorite lunch restaurant is Wendy’s. So, we went off to Wendy’s for lunch. I didn’t think anything of it. We sat down. I thought we had a good conversation. Later, I found out she was a little put off we went to Wendy’s. The message to her was I didn’t really care. I didn’t really know. She was absolutely right. In the frenzy of the day-to-day, I kind of forgot that. We laugh about it now, but whenever we go out to lunch, it’s always Wendy’s. We’ve made a joke out of it. But I needed to understand what was important to her and how I needed to show up as a boss. That’s what genuine leaders, I think, do. They ask the question, ‘How do I need to show up to help you?’ You’ve got to modify your strategy and your behavior to help them grow.”

They don’t treat employees like assets. Howard Behar, former president of Starbucks Coffee, says, “We hear leaders all the time say, ‘People are our greatest asset.’ They’re not assets. You don’t own them. They can choose or not choose to be part of your organization. There’s nothing keeping them there, except maybe fear of loss. The more we treat people with caring, with love, the more they want to perform, the more they want to be part of the organization. Here’s how it works in the real world. When you trust people and you give them more responsibility and accountability when they’re ready for it—sometimes even when they’re not ready for it—the more they want to perform, the more they don’t want to let you down. They don’t want to let their teammates down. They don’t want to let themselves down. It just works. There’s no magic here.”

They recognize that everyone who works for them is a somebody. Paul Spiegelman, former CEO of BerylHealth, says, “Everybody is a ‘somebody.’ We’re not taking ‘nobodies’ and making them feel like a ‘somebody.’ We’re recognizing they are ‘somebody.’ I can ask people questions. I can learn enough about them and show I care about them to make them feel good about themselves. To me, that is probably the secret sauce, so to speak: Make people feel good about themselves.”

“Even if you have to admit you haven’t been acting like a heartfelt leader, now is the perfect time to turn things around,” advises Boelkes. “Right now, many people all over the world are taking stock of their lives and vowing to become better, kinder, more loving human beings. No reason leaders can’t do the same. Let this crisis be a growth experience—one that inspires you to start making a positive impact on your company, on your employees, and on the world.”