YOUNGSTOWN, Ohio – Rising interest rates, labor challenges and changing regulations – all are hurdles local businesses face as 2023 comes to a close.
Accountants across the Mahoning Valley are helping their clients address these uncertain times.
Staying on top can be challenging, rewarding and fun, according to Carl DeSiato, an accountant at DJL Accounting and Consulting, Austintown.
“It’s been a challenge – because a big part of the client relationship is making sure they know that we have their best interests in mind and that we know our information,” DeSiato says. “It is important that they understand that we understand what we are doing.”
Lisa Metzinger, a partner at Cohen & Co., says she sees the uncertainty as a way that accountants bring value to their customers, becoming a trusted adviser with intimate knowledge of their businesses and finding opportunities for them to capitalize on the current situation.
“The biggest challenge of running and owning a business at this point is the uncertainty of the world,” Metzinger says.
“It’s an environment we’ve been living in for the last few years. And I think that we are all settling in with some comfortability in the world of uncertainty,” she says.
Bruce Flyak, partner in charge at BodinePerry, says, “There are just so many things that are out there from a compliance standpoint, whether it be federal, state, local and so many different agencies, depending on what your business or industry is, that it’s hard to keep track. So, it is good to have that support that we provide.”
BodinePerry, based in Canfield, is transitioning it name and brand to DGPerry CPAs + Advisors.
Tim Petrey, managing partner of HD Davis CPAs, says when it became apparent during Covid that inflation and interest rates were going to rise, his accounting team began to work closely with clients to focus on addressing cost creep.
“We’re seeing cost creep in every industry,” Petrey says, noting inflation affects everyone through labor costs. Employees need more money to cover their living costs, which leads to even more increases in costs.
Combatting cost creep means charging the right price for products.
“Businesses that were able to be proactive to these changes have not been largely impacted by this,” Petrey says. “Conversely, businesses that did not pay attention and plan for changes are scrambling to keep up and having a difficult time adjusting pricing enough to stop the bleeding.”
Tracie Stephens, managing principal at Schroedel, Scullin & Bestic LLC, Canfield, says one of the biggest things her firm is looking at is debt management, including refinancing options, consolidation loans and renegotiations. In addition, Stephens emphasizes the importance of cashflow analysis, looking at working capital and possibly postponing some capital expenditures to cover short-term cash needs.
“Liquidity is their lifeblood, especially when there is economic uncertainty,” says Stephens, who suggests evaluation of exposure to risk and ways to diversify the products or services that a company produces. For instance, not just manufacturing the item, but repairing it as well.
DeSiato emphasizes the importance of getting competitive rates. While some companies are using up their influx of Covid money, he says it will shortly run out.
High interest rates could cause projects to be refinanced or delayed.
“I don’t necessarily see totally canceling a project. But now what you are seeing is a little bit of a delay because it has changed the costs,” Flyak says. “Maybe we change the scope of the project. Because we thought we had X dollars to do this project and we still only have that amount. Now maybe we need to make some adjustments and downsize the project.”
Those who secured long-term loans at fixed rates may be doing fine. As time goes on, however, the higher interest rates that banks will offer companies will affect their cash flows, Petrey warns.
Accountants agree that an accounting firm can help businesses seek loans and sources of funding that offer better interest rates.
“There are a lot of private lenders, private equity companies that are thriving in the market,” Metzinger says.
Flyak sees the labor shortage as one of the biggest challenges for businesses. Competition can be fierce to find and retain talent. Remote work allows competitors from out of town to lure good employees.
“You can take a job in California and live in Youngstown. So that has made it difficult,” Flyak says. “It creates turnover when you see people leaving. It’s the No. 1 issue when you talk to clients.”
Petrey says “a perfect storm” has hit the labor market, especially in our region. “Our unique combination of an aging workforce, growing businesses, new businesses and wage inflation has made the labor market in our area far more competitive than ever,” he says.
The companies successfully combatting this issue are those who correctly price their products and build workplace cultures where employees want to work, Petrey says.
What does 2024 look like for businesses in the Mahoning Valley? No one has all the answers but accountants offer some glimpses.
In addition to continued labor shortages and inflation, Flyak notes the economy may face uncertainty caused by two wars overseas.
But he sees positives as well – for instance, in the reduction of the Ohio Commercial Activity Tax exemption, which is rising to $3 million from $1 million next year and to $6 million the following year.
On the federal side, Flyak says most businesses will have a new requirement to register with FinCEN, the Financial Crimes Enforcement Network. Failing to register could mean large fines.
Staying on top of changing regulations is a big part of the accounting firm’s job, Flyak says.
Even before the new year, Stephens says accountants are looking to help their clients take advantage of every qualified business deduction, maximize depreciation, manage tax brackets and time Roth IRA contributions.
“We want to make sure they are aware of all of the potential tax advantages available to them, given the challenges that are associated with these economic fluctuations,” Stephens says.
Metzinger talks about the importance of helping clients accept that their bottom lines may be tighter.
“Labor prices, the everyday material prices, are going up. Service prices are going up. You can’t automatically raise the bottom line to make up for it because of what the market will bear,” Metzinger says.
Petrey sees continued technology advances in the new year. He says these advances have changed accounting more in the last three years than the 30 years before.
The accounting workforce is aging. According to The Wall Street Journal, three-fourths of the CPAs have reached retirement age. Petrey says he sees that trend leading to greater use of AI and other technology.
He believes this is an exciting time in the region. “There are pockets of leadership that are excited about leaning in to change and taking on the opportunities head on,” Petrey says. “We’re cautiously optimistic about the trends going into 2024 nationally – but much more positive about the trends locally moving forward.”