‘Going to take at least a year’
East Coast Warehouse specializes in food and beverage logistics. Demand from large retailers remains strong. But kegs of beer for restaurants and bars have been sitting in the warehouse, and the freight trucking arm has seen a 10% decline in business, Harris said.
Food supply chains will start moving again as restaurants reopen, but it will only be a faint revival as restaurants wrestle with social-distancing rules and cautious customers, Harris predicted.
“We’re just evaluating what we really need to do,” he said. “If we do see a permanent topline reduction of 10% to 20%, where do we need to cut costs on the employee side? Are there cost reductions anywhere else?”
The largest portion of respondents, 25%, expected a small contraction for their business, and an additional 23% expect a major contraction, while the rest expected a slight expansion (24%) or remaining the same (18%). For now, most respondents thought they would keep their workforce stable or hire new employees, but 25% said that they had too many employees. A year ago, only 6% of respondents said their companies had excess workers.
Lyndi Sheets, CPA, controller of the Greater Toledo Community Foundation in Ohio, said her not-for-profit employer has maintained its regular operations with staggered schedules and other precautions — a necessity as requests for help spike.
“We’ve been swamped with all of the applications [for grant relief] — more than $1 million worth,” she said. “Our region is pretty tied to manufacturing and automotive. That’s going to come back slowly.”
Even more concerning, Sheets said, were massive changes to the retail and not-for-profit sectors. The not-for-profit sector has seen revenue drop sharply, she said.
“I don’t think there’s going to be any kind of immediate recovery. As much as it pains people to hear, I think it’s going to take at least a year,” she said.
Businesses were preparing to cut spending. More than 30% expected cuts to advertising, sales, and marketing, among the sharpest predicted reductions — but some are finding opportunities.
ALPS Insurance’s sales staff has been more successful than usual in getting people on the phone, according to Sara Smith, CPA, CGMA, the CFO for the Missoula, Mont.-based legal malpractice insurance company.
“Because they’re at home, they’ve been more communicative,” Smith said. But those calls aren’t turning into sales yet, thanks to the product’s long sales cycle, and the company’s economic prospects remain unclear. Already, ALPS is dealing with a loss of capital from turbulence in the markets, and it’s likely to face a surge of claims in the years ahead.
“Right now, all the courts are closed, so we’re feeling the calm before the storm,” Smith said. “It’s eerily quiet.” For now, the company is hustling to reduce its current claims inventory, including by settling in mediation.
“Some days I go to work and just feel like the world’s going to end, and other days I feel OK with where we’re at,” she added.
Companies seeking economic relief have several options, including a Paycheck Protection Program loan. East Coast Warehouse secured one such loan, buffering it against the downturn.
The company, which was deemed essential, has instituted safety measures and provides protective equipment, but Harris has struggled to source more masks.
“We’ve been able to operate, but it’s difficult because you’ve got more barriers to your natural work processes,” Harris said.
It’s part of a larger trend: Across the country, finance teams are being asked to take on more responsibilities, with about half saying they had gained new risk oversight.
In all, just 20% of respondents were optimistic about the year ahead for the US economy, the lowest since the fourth quarter of 2011 (19%), and global optimism was at 11%. Optimism about respondents’ own companies was higher (30%) — but even some optimists tempered their expectations with long-term fears.
“As soon as we open up our economy again, I think we’re going to boom. I think our economy’s going to come booming back,” said Alan Brill, CPA, a former owner of media companies and an adviser to entrepreneurs. “My fear, though, is … we get a second wave of this virus that really clobbers us. I think that would be a disaster. I think we’d lose our enthusiasm.”
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page.
— Andrew Kenney is a freelance writer based in Colorado. To comment on this article or to suggest an idea for another article, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.
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