Cash Flow Concerns Rise as SMBs Brace for Economic Downturn
19 September 2023 - 2:30PM
Business Wire
Pointing to a challenging Q4, 67% of small to
mid-sized businesses anticipate further economic decline, with cash
flow concerns at the forefront
CBIZ, Inc. (NYSE: CBZ), a leading provider of financial,
insurance and advisory services, has released the results of its Q3
2023 Main Street Index, taking the pulse of and gauging the outlook
for small and mid-sized businesses (SMBs) amid the current economic
downturn. While most businesses expect the economy to continue its
current downturn, additional data points to some concerns on Main
Street, notably with cash flow and higher borrowing rates.
While down seven percent from Q2, still two in three (67%) SMBs
expect an economic downturn. Sixty-five percent of businesses felt
moderately to very confident that they have the cash flow
sufficient to continue operations in the event of a down market or
other market disruption. Thirty-five percent have anywhere from
wavering to no confidence. Ranked from zero (no confidence) to 10
(completely confident), only 13% of businesses shared a sentiment
of three or below. Additionally, the Index saw a sharp rise in Main
Street businesses experiencing higher borrowing costs, with 41%
reporting they faced higher rates on new loans or in refinancing,
compared to 27% of businesses in Q2.
“Cash flow is the lifeblood of any business and is what stands
between growing and going bankrupt. Similar to how consumers are
feeling the pinch, in part due to running out of stimulus and the
resumption of federal student loan payments, PPP funding for small
to mid-sized businesses is running dry,” says Anna Rathbun, chief
investment officer of CBIZ Investment Advisory Services. “This
financial pressure is forcing many Main Street businesses to make
tough decisions, especially around labor. The data suggest a
concerning trend: Businesses may have leaned into the side of
overhiring amid the labor shortage concerns, and now, as demand for
discretionary goods wavers, we're seeing a workforce that's not
being fully leveraged. It clearly indicates the broader economic
challenges we're facing.”
Based on a survey conducted August 7-28, the Index analyzed
responses from 902 businesses with fewer than 100 employees in 31
industries across the U.S.* The Index assesses a range of timely
trends, including business sentiment, areas of growth and decline,
and cash flow.
The data was evaluated from an overall perspective, as well as
based on company size, region and industry. An interactive
infographic with the results is available on the CBIZ website. Key
findings include:
- Product and service prices continue to rise due to inflation
or inventory levels: Nearly 57% of companies raised prices in
Q3, on par with the same data point from Q2. While the price
increases continue, sharp price increases are tapering off. Just
under 20% of companies raised prices for customers and vendors
anywhere from one to four percent, up more than five percent from
Q2. This may indicate a tapering down of dramatic pricing
corrections to more of a steady inflationary pricing strategy.
- Some companies are unable to utilize the full workforce:
Almost 30% of companies indicated their workforce was not fully
utilized. Over 20% are retaining their underutilized workforce to
pit against possible future needs.
- Layoffs inch up: Eighteen percent of SMBs reported
layoffs this quarter, though just about 12.5% of that group shared
the cuts had only a slight impact on their business operations.
This percentage of businesses reporting layoffs rose just two
percent from Q2 but has increased almost seven percent from
Q1.
- Employee Turnover: More than 54% of businesses reported
an increase in workers leaving their business, up from around the
50% mark in both the first and second quarters.
“Looking toward the holidays and year end, we’re keeping an eye
on whether businesses will meet expectations they set for sales.
There is uncertainty as to whether consumers will meet those
expectations. If consumer spending comes back stronger than
expected, that could be a positive sign for the economy,” says
Rathbun.
*Note: Not all those surveyed in the CBIZ Main Street Index are
clients of CBIZ.
About CBIZ
CBIZ, Inc. provides professional business services that help
clients better manage their finances and employees. CBIZ provides
its clients with financial services, including accounting, tax,
financial advisory, government health care consulting, risk
advisory, real estate consulting and valuation services. Employee
services include employee benefits consulting, property and
casualty insurance, retirement plan consulting, payroll, life
insurance, HR consulting and executive recruitment. As one of the
largest accounting, insurance brokerage and valuation companies in
the United States, the Company’s services are provided through more
than 120 Company offices in 33 states. For more information, visit
www.cbiz.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20230919693933/en/
Media Rocco Aloe Gregory FCA for CBIZ, Inc.
Cbiz@gregoryfca.com 610-860-2075
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