COVID-19 has been one of the most unexpected and disrupting events of 2020 that has pushed a number of industries to a complete standstill. From changing their business model to completing shutting their operations, firms are forced to rethink ways to survive in these circumstances.
As a result, no single firm can keep functioning the way it used to previously and there are certain actions that need to be taken to ensure their survival or to even diminish the negative consequences from the coronavirus.
Being a responsible and caring company, we thought of writing down some guidelines for accountancy firms on how to run their respective practices during COVID-19 circumstances.
Managing Cash Flow
Reaching out to Clients
The first and foremost step any accountancy firm can do is to out to their clients and enquire about their health and wellbeing in this critical time. This will establish a very good rapport with the clients and they are likely to appreciate this gesture too.
Showcase of such empathy by the accountancy firms reflects values of putting people first – be it the clients or its employees. Also, just to keep the clients better informed, notify them about any grants and/or reliefs available to them by the Government.
Rethinking Client Relationships
It might be important to differentiate between the different types of clients for effectively managing the cash flow.
For instance, accountancy firms can start giving out cash discounts to high-risk clients in order to encourage them to pay at least something if they cannot pay the full amount owed. Doing this will help keep the firm afloat while also keeping the clients’ tight cash situation in mind.
For low risk clients, firms can defer their fees and distribute them in the future. As these clients are expected to pay in the future without the risk of going bankrupt, accountancy firms can adopt this payment strategy for them.
As far as mid-risk clients are concerned, businesses should reach out to them and offer them discounts of around 75% every month to enable them to clear their dues. This will ensure that they at least pay something every month.
Taking these actions will help to raise the company profile and will play an important role in its relationship with the clients.
Approaching Banks for Additional Facilities
If your accountancy firm has taken any loan from the bank, then perhaps you need to call them up and renegotiate some of the terms that you previously agreed with them.
For instance, you can request the bank to reduce the monthly loan installments that need to be paid or ask them for a reduced interest rate provided all banking regulations are met. This will free up additional cash flow for your business that can be used to fight some of the coronavirus impact.
Reach out to your bank and ask them to consider mortgage holidays in these unpredictable times. This act will provide a temporary relief to the cash flow of your firm through discontinuance or reduction in your monthly mortgage payments
Also, you could try to ask the bank for an increased overdraft facility for your business bank account that could again help you manage your finances better. Consult with the bank on how much additional overdraft facility can they provide keeping in view the challenging times.
Deferring Lease Payments on Fixed Assets
Try to defer lease payments on your fixed assets to keep the cash flow position of your firm in check. For instance, if your office has some furniture that is leased, you can possibly delay its lease payment for the time being and resume the payment once your cash flow situation improves or when the COVID-19 is taken care of – whichever happens first.
Delaying Expansion Plans
For the bigger accountancy firms that were planning to acquire or merge with small accountancy practices, it is best to delay all expansion plans until some clarity is achieved regarding this pandemic.
As these decision makers are unlikely to have factored the novel coronavirus while performing due diligence for such projects, it would be in the firm’s interest to put off such ambitious growth plans till the present circumstances improve.
Asking for Rent Concessions
In case your accountancy firm uses a rented premises, try asking for some rent concessions from the landlord. You could perhaps tell them that as the coronavirus has slowed down your business, you cannot keep paying the same rent you used to pay previously. It is expected that owners will cooperate in this time of need.
Eliminating Variable Costs
As there are usually two main costs for the firms namely the fixed costs and the variable costs, it is best if at least some of the variable costs are reduced to a level which enables firms to survive easily.
For example, if there were some janitorial staff at your premises that are not needed at this time, their services can be temporarily discontinued until the situation subsides. This practice will keep some costs low in this difficult phase.
Reducing Utility Bills
Expect to have some of your utility bills eliminated temporarily – particularly the gas and electricity expenses. This is because power usage at business premises would decrease as the employees work from home and the firm will also not incur other costs like lighting, air conditioners and electronic equipment.
Also, if your premises had some cooking area where office employees eat lunch and dinner, it is believed that it would not incur the usual gas costs. As a result, you can expect your gas costs to reduce as well.
If it becomes impossible to pay some of the employees due to interruptions in business finances, accountancy firms can furlough non-essential staff members. This practice will ensure that needless costs do not burden the accountancy firms unnecessarily.
After the situation improves, the furloughed employees can be called back on their jobs and can perform their functions just like they used to before. Meanwhile, use this COVID-19 situation for training your staff or asking them to take some online courses that can help them refine their knowledge.
Outsourcing Your Work
Outsourcing clients can be a blessing in disguise that can deliver the same excellent standards in just the fraction of the cost. Opting for them indicates smart decision making which restrains the payroll, overhead and training costs for the accountancy firms.
These outsourcing firms usually have in-house specialists who can handle complicated situations and provide their advice on the best way to handle tough situations; for instance, meeting the HMRC’s tax returns deadline.
We hope this information proves to be valuable for your firm and helps in running your accountancy practices in a better manner as everyone navigates through this period
If there is anything that you would like to discuss with us related to this article, please let us know in the comments below.
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Lanop Outsourcing Chartered Accountants and Tax Advisers for Small and Medium Accountancy firms.
We are your local Outsourcing Chartered Accountants and Tax Advisers based in Putney, London. We are expert XERO Accounting advisors and trusted business advisors in UK.
While we are based in South West London and Central London, our clientele is quite global and our staff is currently working remotely to serve our clients through active Zoom accounts all over UK.
As always, you can reach out to us anytime to discuss any financial, business or accountancy issues you may have in this coronavirus pandemic.