How accountants are coping with lockdown and economic slowdown
Finding a bright side to look on in the current economic environment may not be easy but, if you look hard enough, there just might be some upsides.
Johanna Leggatt | April 2020
The COVID-19 global pandemic is rattling business and finance sectors, health services, and how we go about our everyday lives.
With so many employees self-isolating at home, and restaurants and bars shuttered, there is no doubt this is a game changer for many people and the industries they work in.
Now, more than ever, a cool head is needed to navigate unchartered waters, and steer clients in the right direction.
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The early impact
Director of Absolute Accounting Services on the central coast of New South Wales, Gavin Swan FCPA, is remaining calm.
“At this point, [the] business has been very busy, and we are well advanced on our lodgment program, so we are well ahead,” Swan says. “After January, we chased work that wasn’t in yet, and that is paying dividends now.”
Managing director of Generate Accounting Group in Auckland, New Zealand, Angus Ogilvie FCPA, says some businesses won’t survive, “but the majority will”.
“Some clients remain exposed, particularly those with high debt,” Ogilvie says. “We are encouraging early discussions with banks and finance companies to agree to a plan.”
West Australian-based director of Wise Accounting, Tyler Wise CPA, runs a lean accounting business with one employee and was already working remotely before social distancing came into effect.
“The main challenges have been getting clients to use the [videoconferencing] technology, and for it to not be an inconvenience for them,” Wise says. “We need to accept that people are distracted, and to make it as easy as possible.”
Planning and analysis
Swan has not undertaken a formal scenario analysis because, as he points out, even the federal government has found that difficult in the changing circumstances, with the May 2020 Australian Federal Budget delayed to October.
“If I do come out of this with no buffer – if it has all been invested in the business – then that is okay, as that is what the fat is for: to support the business and staff during these times,” he says.
Ogilvie is planning for three different scenarios: revenue declining by 20 per cent, 30 per cent, or 40 per cent.
“The deeper the impact, the more we’ll need to cut back,” he says. “We are doing everything to protect our team as we’ll need them on the other side.”
The firm is generating an increasing amount of revenue from advisory services and those clients should “weather the storm”, he adds.
“We [expect] the impact will be felt most from clients who only use us for compliance services. Our base assumption at this time is that we could lose 20 per cent of our revenue over the next 12 months. The impact of that will be manageable.”
Cash flow and clients
Swan has long prioritised cash flow in his business and is now reaping returns.
“I have a nice buffer, having chased not only outstanding debtors but outstanding work,” he says. “There is a great saying that ‘cash is a fact and profit is opinion’.”
Swan also encourages staggering invoices during this time.
“If you have a large job, people appreciate being given some time to pay in instalments,” he says.
Ogilvie is also a firm believer that cash flow is king.
“More than 50 per cent of our revenue is recurring,” he says. “We [have moved] to a fixed fee model driven by the need to stabilise cash flow.”
Wise adds that many clients have been seeking urgent meetings to help them understand the Australian Government’s economic stimulus measures and how they apply to them.
“You are acting more like a counsellor than an account these days,” he says. Indeed, a handful of clients have asked Wise whether they should close the doors (on their business).
“So, we try and look at it with them from the perspective of what has happened, rather than what you fear will happen, and then we map out a plan.”
New ways of working
Ogilvie says the firm’s cloud-based systems are a boon in times of self-isolation.
“Face-to-face meetings with clients are no longer possible, but we are using videoconferencing and the good old-fashioned telephone to ensure communication is enhanced.”
In addition to looking after staff, Ogilvie says the company is investing in thought leadership.
“We have increased our social media presence substantially. We are curating helpful articles from media sites and written several blogs with advice on assistance available to clients.”
He emphasises that forward planning is critical.
“We are also using Float, which is an excellent cash flow tool, to help us navigate through this period and run our scenarios,” Ogilvie says.
Lessons to learn
Swan says one of the biggest lessons from the lockdown so far is the importance of communication.
“These are uncertain times, so any certainty you can give people is much appreciated,” he notes.
Ogilvie believes now is the time for accountants to prove to clients that “we have their back” by engaging with them regularly via phone calls, email, and newsletters.
However, above all, first look after your personal wellbeing.
“It’s a stressful and uncertain time for everyone and practitioners need to take care of themselves,” Ogilvie says.
Meanwhile, Wise sees the economic downturn as a potential opportunity to alter the traditional business model.
“If everyone can work remotely, it opens up the possibility for accountants to work more flexibly, as opposed to nine-to-five,” he says. “If you can get past the doom and gloom, there are some potentially good things.”