Cash Flow Concerns Rise as SMBs Brace for Economic Downturn
- Consumer spending coming back stronger than expected could be a positive sign for the economy.
- Businesses anticipate economic decline, face cash flow concerns. Higher borrowing costs and increased layoffs and employee turnover are negative indicators.
Pointing to a challenging Q4,
While down seven percent from Q2, still two in three (
“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
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:
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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 under20% 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.
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Some companies are unable to utilize the full workforce: Almost
30% of companies indicated their workforce was not fully utilized. Over20% are retaining their underutilized workforce to pit against possible future needs.
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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.
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Employee Turnover: More than
54% of businesses reported an increase in workers leaving their business, up from around the50% 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
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Rocco Aloe
Gregory FCA for CBIZ, Inc.
Cbiz@gregoryfca.com
610-860-2075
Source: CBIZ, Inc.