Connecticut CPAs on State Economy: No More 'Business As Usual'

January 20, 2010

Members of the Connecticut Society of Certified Public Accountants (CSCPA) responding to a new CSCPA questionnaire are grim but not despondent in their outlook on the state’s economy. Slightly more than half of the respondents (56 percent) say their companies will rebound this year with a subset of 19 percent in that group believing that a turn-around has already begun. The remaining 44 percent put a recovery in the year 2011 or later.

Further, four out of five CPAs participating (78 percent) say that when a recovery does take hold, Connecticut’s companies will “operate in a new environment” rather than “return to business as usual.”

The CPAs also have two suggestions for Connecticut lawmakers to hasten such a recovery: reduce taxes and government spending.

The Quality of Life in Connecticut

Asked to project the “quality of life” in Connecticut in one year’s time (December 2010) 43 percent of the CPAs say the state will maintain the status quo, 40 percent believe things will get worse, and 17 percent predict improvement.

The questionnaire asked the CPAs to evaluate the state economy based on the financial performance of their own firms (if employed in public accounting) or of their companies (if employed in industry). The questionnaire went on to ask the CPAs in public practice to also summarize the performance of their clientele, both corporate and individual.

The “CPA vantage point”

“The CSCPA is seeking to enhance our role in helping to make Connecticut a better place to live and to do business,” explained CSCPA Executive Director Art Renner, CPA.

“As financial advisors to virtually every type of business there is in Connecticut, as well as to individuals, CPAs are well positioned to see business and economic trends firsthand and up-close,” Renner continued. “Our goal is to collect and summarize these observations, and use that information to create dialog between our membership and legislators, regulators, the media and others in addressing the issues Connecticut faces,” Renner said.

How are Connecticut businesses and individuals doing financially?

The state’s certified public accountants have grim observations, saying that 76 percent of their business clients are doing worse financially than one year ago, 19 percent have maintained the status quo, and only five percent are doing better.

As for their individual clients, the trends are only slightly better, with 68 percent doing worse financially than one year ago, 29 percent maintaining the status quo, and three percent doing better.

How’s business?

A slim plurality of the CPAs (41 percent) say their organizations’ billings or sales are down from one year ago, with 37 percent saying billings are level, and 22 percent citing improvement. Capital expenditures are reflected almost identically, with 40 percent reporting a decrease, 40 percent saying “no change,” and 17 percent indicating improvement.

Are clients and customers paying their bills timely?

Fifty percent of the respondents say their accounts receivable levels are worse than one year ago, 38 percent citing “no change,” and only five percent indicating collections have actually improved.

Credit flow…or no?

CPAs say that credit has dried up in Connecticut, with 66 percent of the CPAs reporting their companies and clients are having a tougher time obtaining financing, 29 percent responding “no change,” and only five percent seeing loan availability actually improving during the past year.

Taking it personally…

Looking inward, 53 percent of the CPAs say their confidence in their ability to retire as planned is worse than one year ago. For the same time period, 43 percent say personal income is down, with 39 percent indicating “no change,” and 17 percent seeing an increase in earnings.

So what’s the answer?

The questionnaire asked CPAs to respond to one open-ended question, as follows: “If I could offer Connecticut’s elected officials one suggestion to improve Connecticut’s economy, it would be…” The open-ended question generated 441 responses.

Given the nature of open-ended queries, there were a variety of responses, but several clear themes appeared. Of those responding, 22 percent would urge the General Assembly to cut taxes; 22 percent recommend “cut government spending” with comment to the effect that revenue must cover expenses; and 12 percent suggest creating incentives to assist, attract, and maintain small businesses. The anecdotal commentary that accompanies these categorical responses is that such moves would stimulate job growth.

The demographics of the survey population

A total of 701 members of the Connecticut Society of CPAs responded to the CSCPA “Connecticut Economic Survey.” Assuming a sample of this size, these results are accurate with plus/minus 1.9 percent.

The breakdown of employment is as follows: 70 percent in public practice and 22 percent in industry, with the remaining participants in various industries and positions ranging from education to government, not-for-profit, consulting, financial planning, and other categories.

Logistically, respondents are located in the following Connecticut counties:

• Fairfield County (29 percent);
• Hartford County (40 percent);
• Litchfield County (four percent);
• Middlesex County (three percent);
• New Haven County (21 percent);
• New London County (five percent),
• Tolland County (two percent), and
• Windham County (one percent).

Respondents’ company sizes by number of employees range as follows: 52 percent have fewer than 50 employees; 35 percent have more than 200 employees; six percent have between 100 and 200 employees, and six percent have between 50 and 100 employees.

Seventy-one percent of the respondents in public accounting say the majority of their business clients have fewer than 50 employees; 10 percent said their clients employ more than 200; eight percent put the figure at between 50 and 100; another eight percent say their clients are principally individuals, and three percent indicate their clients employ between 100 and 200.

About the Connecticut Society of Certified Public Accountants…

The Connecticut Society of CPAs is celebrating its 101st year of service to membership and community alike. Formed by nine CPAs in 1908 at New Haven’s Union League Club, today CSCPA has a current membership of 6,000 individuals in public practice, business and industry, government, and education. Its function is to advocate on behalf of the accounting profession, foster a professional community among CPAs, and provide continuing education opportunities as well as a comprehensive peer review program and a variety of membership services for CPAs in Connecticut.