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Mid-market business legal and accounting sentiment improves


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The third Deloitte Black Ink® Member survey conducted in December 2009 shows that the outlook held by mid-market accounting and legal firms has continued to improve in the past six months with 71% of respondents noting a very positive or somewhat positive outlook, up from 58% a year ago and 67% six months ago.

Deloitte’s Black Ink® network provides specialist financial advice to member suburban legal and accounting firms in fields including tax, insolvency, superannuation, forensics, business forecasting and corporate finance.“These results certainly reflect the state of the economy and renewed but cautious optimism towards business in 2010,” said Mr Simon Cathro, Deloitte Black Ink® Lead partner.

In line with these findings, fewer were reporting clients’ suffering greater financial difficulty (from 50% six months ago to 35% in the latest report) with12% of these businesses having experienced growth compared to six months ago, when no businesses were reported as having shown growth.

Cash flow and working capital continues to be the greatest barrier to achieving business growth, up from 26.9% 12 months ago and 28.7% in June 2009 to 31% in December 2009. The inability to obtain financing also accounted for a further 11% of responses.

Of those clients experiencing cash flow issues, the most common cause is old debtors (64%) with a further 32% attributing the cause to unpaid creditors.

Given the cash flow issues, Mr Cathro believes that early 2010 represents a period where middle market businesses should continue to focus on cash flow management.

“Finding the balance between access to capital, managing debtors and creditors and future cash requirements to fund business growth will be a particular challenge for most small businesses and their accounting and legal advisors in early 2010,” said Mr Cathro.

However, 88% of respondents to the survey report that less than 25% of their clients are conducting forecasting to evaluate future cash requirements.

“Without forecasting, businesses cannot get clear visibility on their cash flow requirements going forward. It would appear that as a result of a relatively strong economy over the last five years, too many businesses have become complacent around properly forecasting cash flow to grow or maintain their business,” said Mr Cathro.

Other results of the survey include:

  • As the effects of the downturn flow through the economy, the survey shows that the number of insolvency enquiries to suburban accounting and legal firms has risen again slightly – 33.7% of respondents have been consulted about insolvency or bankruptcy in December 2009 compared with 29% in June 2009
  • 78% of respondents are reporting an increase in the complexity of their clients business affairs over the past five years. This was attributed to legislative/compliance issues and more complex financial structures.

To see a full copy of the report, please refer to the Deloitte Black Ink® website.

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Contacts

Name:
Karina Randall
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: + 61 2 9322 3778, Mobile: +61 414 823 712
Email
karandall@deloitte.com.au

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