Hartford Business Journal

34 HARTFORDBUSINESS.COM | September 12, 2022 FOCUS: ACCOUNTING Drew Andrews, managing partner and CEO of Hartford-based accounting firm Whittlesey, said many of his small business clients are facing inflation pressures, forcing companies to pass on price increases to customers. HBJ PHOTO | MICHAEL PUFFER Accounting firm CEOs: These are the biggest headaches facing small businesses By Matthew Broderick Special to the Hartford Business Journal T he last few years have been challenging for small businesses. A Federal Reserve report noted that small business closures increased about 30% above the typical closure rate as a result of the pandemic. But even small businesses — from manufacturers to restaurants to service providers — that were able to weather the storm are now facing new headwinds with infla- tion, supply chain disruptions, and employee shortages. In fact, a March 2022 survey by MetLife and the U.S. Chamber of Commerce found that 85% of small business owners expressed concerns about inflation, with one-third of respondents identifying it as their top concern. And many are feeling that impact directly, with 41% of business owners saying they've reduced staff, while 31% have taken out a loan in response to inflationary pressures. It's an economic environment that's led to more work for accounting advi- sory firms, which have been leaned on to help small businesses navigate the implications of new accounting standard changes, rising interest rates and the Inflation Reduction Act legislation signed into law last month. Andrew Lattimer, managing partner of West-Hartford-based CliftonLarsonAllen LLP (CLA), said his small business clients have been most challenged by labor shortages. "Owners are expanding peoples' roles and people are doing more because [many] don't have the right number of people to move the busi- ness forward," he said. Lattimer said small businesses need to think outside the box — for instance, outsourcing certain func- tions, like finance or marketing, to use in-house employees in different ways. He said connecting with programs that place military veterans in the workforce can also help a compa- ny's bottom line through the work opportunity tax credits or subsidized salaries during training. But it's not just worker short- ages impacting small business owners. Lingering supply chain slowdowns — while improving since the height of the pandemic — are reducing product inventory and increasing prices. Fifty-nine percent of small business retailers can't meet consumer demand because of supply chain issues, the U.S. Chamber of Commerce survey showed. Inflation woes Drew Andrews, managing partner and CEO of Hart- ford-based accounting firm Whittlesey, said he's been advising small business clients on the Employee Retention Tax Credit, which was part of the CARES Act stimulus bill passed during the pandemic. Under the provision, businesses that can demonstrate that eligible supply chain disruptions caused by government-mandated COVID restrictions caused financial losses may qualify for a credit of up to $26,000 per employee on payroll taxes for tax years 2020 and 2021. Those supply chain issues are also having a direct impact at the cash register. "While our clients are still seeing positive [consumer activity], they've had to pass on price increases to customers," Andrews said. A Goldman Sachs small business survey in July found that 65% of small business owners said they've increased prices to combat inflation and 78% said that the economy had gotten worse from the prior three months. As interest rates have risen to combat inflation, consumer spending has flattened. In July, U.S. consumer spending was largely stagnant (up 0.01%), according to U.S. Department of Commerce figures, even as gas prices fell. At the same time, rising interest rates and fears of a possible recession have made small businesses less bullish about capital investments, said Frank Milone, a partner at Glastonbury-based Fiondella, Milone and LaSaracina (FML). Frank Milone Andrew Lattimer

• Cover