2006: What You Need to Know Now
Finance and accounting professionals are casting a wary eye on next year. Get the forecast, with key benchmarks, when you join the new survey.
by Rick Telberg
Finance and accounting professionals are closing the books on a tumultuous 2005. They are going into the New Year with moderate confidence in the economy overall, but stronger confidence in their own organizations, not to mention themselves and their families.
So we consulted our favorite economic prophet, Professor Rosie Scenario. To be sure, Ms. Scenario isn’t always right, but we’d rather talk to her than her arch rival, Dr. Doom.
As the last month of 2005 dawned, economic prognosticators and stock market investors were buoyed by clues that the economic gloom following hurricanes Katrina and Rita and the surge in energy prices was brightening. Instead, 2006, predicted to be a year of slowdown just three months ago, began to take on brighter prospects. If Professor Rosie is right again, it’ll be the fifth year in a row of economic growth, at a rate nearly on pace with this year.Specifically, that means an upgrade in the economic growth rate forecast to maybe 3.5 percent from 3.3 percent, another two or three quarter-point interest-rate hikes from the Fed, stabilization,- not a bust – in the housing market, though mixed with lackluster consumer spending and employment.
But what does the finance and accounting profession have to say?
We’ve been out listening lately. And, although there is a lot of worry and frustration over micro-operational and macro-political issues, most professionals expect 2006 to be as good as or better than 2005.
“Couldn’t be better!” said an exuberant Steve Lethert, controller at Wood’s Power-Grip Co., a small business in Laurel, Mont. “Business has been improving steadily over the past three years..”
Indeed, based on preliminary Bay Street Group research, maybe as much as two-thirds of finance and accounting professionals are working at firms and companies with higher revenues and profits than last year. And for 2006, just as many expect additional gains – with one caveat: members in business and industry have more worries, including customer resistance to price increases, commodity cost increases and customer demand.
One naysayer is John Charles Cooley, who runs his own small CPA firm in Hurst, Texas. While John is expecting the national economy to slow, he said, “The economy in Texas appears to be better.” And, based on better expense control and replacing bad clients with better clients, “The economy for this firm looks much better.”
A key indicator will be “busy season.”
In public accounting, more than half of CPAs are expecting a better filing season than last year.
But in business and industry, the vast majority expects a year much like 2005 – which was a SOX-induced nightmare for many.
What’s your 2006 going to be like? At least to some extent, it’ll be what you decide to make of it.
CHECKLIST FOR 2006 PLANNING
– CPA firm mergers surge as mid-sized firms consolidate and merge up, reshaping the profession.
– Corporate finance managers rush for the exits, impelled by heavy workloads and new SOX-fueled opportunities elsewhere..
– CPA firms find new flexibility in hiring corporate refugees, but entry-level labor shortages remain problematic.
– Corporations try to cut back SOX spending, but CPAs and consultants find new pricing flexibility in other areas to make up for it.
– Managing partners and top finance executives are in for some rude surprises, because mid-level staffers are reporting a lot less confidence in revenue and profit projections.
Copyright 2005 Bay Street group LLC.
[First published by the AICPA with permission.]
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