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NFIB Small Business Optimism Report for April

The National Federation of Independent Business (NFIB) has just released the Small Business Economic Trends Report for April 2010. The report published since 1973 measures small business sentiment on numerous economic and business factors that confront small businesses.

This months report indicates a decline in business optimism. The NFIB index fell 1.2 points in March to 86.8 That’s up from the lows of March 2009, but has been below 90 for 18 months. The report reading is a contra indicator of economic recovery.  Small business owners are by nature and temperament optimistic and the report provides a sobering insight into the mind of US entrepreneurs and risk takers.

Highlights of the Report:

  • Jobs: After a devastating period of employment reductions, employment change per firm hit the “zero line” in March, setting the stage for a resumption in job creation. Nine percent (seasonally adjusted) reported unfilled job openings, down two points, a “negative” for hope that the unemployment rate will fall. Over the next three months, seven percent plan to reduce employment (down one point), and 15 percent plan to create new jobs (up
    two points), yielding a seasonally adjusted net negative two percent of owners planning to create new jobs, weaker than February and still more firms planning to cut jobs than planning to add.
  • Credit: Regular NFIB borrowers (35 percent accessing capital markets at least once a quarter) continued to report difficulties in arranging credit. A net 15 percent reported loans harder to get than in their last attempt, up three points from February. Eighty-nine (89) percent of the owners reported all their credit needs met or they did not want to borrow. Historically weak plans to make capital expenditures, to add to inventory and expand operations also make it clear that many good borrowers are simply on the sidelines, waiting for a good reason to make capital outlays and order inventory and take out the usual loans used to support these activities. Only five percent of the owners reported “finance” as their top business problem (up two points). Pre-1983, as many as 37 percent cited financing and interest rates as their top problem. What businesses need is sales, giving them a reason to hire and make capital expenditures and borrow to support those activities.
  • Profits: Reports of positive profit trends worsened by four points in March, registering a net negative 43 percentage points (39 points worse than the best expansion reading reached in 2005). The persistence of this imbalance is bad news for the small business community. Profits are important for the support of capital spending. For those reporting lower earnings compared to the previous three months (58 percent, up three points), 62 percent cited weaker sales, two percent blamed rising labor costs, five percent higher materials costs, three percent higher insurance costs, and seven percent blamed lower selling prices. Five percent blamed taxes and regulatory costs. Owners continued to reduce compensation at historically high rates, with 10 percent reporting reduced worker compensation and 10 percent reporting gains. Seasonally adjusted, a net zero percent reported raising worker compensation, only two points better than February’s record low reading of negative two percent.
  • Prices: The weak economy continued to put downward pressure on prices.  Seasonally adjusted, the net percent of owners raising prices was a negative 20 percent, one point better than last month. Plans to raise prices fell one point to a net seasonally adjusted nine percent of owners. On the cost side, five percent of owners cited inflation as their number one problem (e.g. costs coming in the “back door” of the business) and only three percent cited the cost of labor, so neither labor costs no r materials costs are pressuring owners.

Components of the Optimism Index include: Labor Markets, Capital Spending, Inventory and Sales, Inflation, Profits and Wages, Credit Markets

The NFIB Report can be downloaded from the Sum2 website. NFIB Optimism Index

The NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since1986. The sample is drawn from the membership files of the NFIB.

You Tube Music Video: Stevie Ray Vaughan, Couldn’t Stand the Weather

Risk: sme, small business, economic recovery

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April 27, 2010 Posted by | recession, small business, SME, unemployment | , , , , , , , , , | Leave a comment

Survey Says: Corporate Tax Audits on the Rise

An-Examination-at-the-Faculty-of-Medicine,-ParisA recent survey published by Sabrix indicates that corporate tax audits are on the rise.   Eighty-three percent of companies surveyed report an increased number of audits due to state and local tax revenue shortfalls.  Survey respondents comprised 140 tax executives from the Forbes Global 2000 Index.

Ninety-six percent of the attendees said that despite the recession, transaction taxes such as sales and use taxes will continue to be an area of focus. In response to the economic downturn, 45 percent of the attendees said their companies had reduced their employee headcount, but 45 percent also increased their investment in tax technologies.

Eighty-one percent of the respondents have made sales and use tax and value-added tax a more strategic focus of their company due to the economy. A similar proportion said they have implemented new programs and processes to remain compliant.

The IRS is under pressure to enforce compliance with federal tax statutes.  The US Treasury coffers are seriously depleted given all the stimulus and economic recovery expenditures.  The IRS is mandated to assure that corporations comply with all tax laws.  The IRS has developed an Industry Focus Issue, (IFI) audit strategy that  profiles high risk corporate tax compliance statutes.   IFI guides field audit personnel through a risk based assessment of corporate tax compliance.  The IFI aggregates and ranks  Three Tiers of high risk tax compliance issues.  Examiners will conduct rigorous reviews of these issue sensitive factors.  The factors concern revenue recognition, sales tax, partnership reporting, and the repatriation of revenue derived in foreign domiciles.

Sum2 has published a product, IRS Audit Risk Program (IARP) that guides corporate tax managers and tax professionals through a risk assessment of their exposure to IFI risk factors.  The IARP helps corporate tax professionals score tax risk exposures, determine mitigation actions, estimate remediation expenses and manage tax controversy defense strategies.  The IARP is available for purchase on Amazon.com.

Sum2 also has developed the Corporate Audit Risk Program (CARP).  The CARP is IRS tax risk assessment tool for corporate tax managers.  A  single user license for CARP can be purchased on Amazon.com.

Risk: compliance, tax audit, reputation, litigation

You Tube video: Stevie Ray Vaughan, Taxman

October 23, 2009 Posted by | CARP, CPA, government, IARP, IRS, regulatory, risk management, Sum2, Tax, Treasury | , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment