To say that the coronavirus (or Covid-19) pandemic is one of the major catastrophes of the 21st century may not be an exaggeration. Members of the IFAC SMP Committee (SMPC) recently shared their experiences about how Small Firms and Professional Accountancy Organizations (PAOs) are responding to the crisis. Six key focus areas for small- and medium-sized practices (SMPs) to evolve and thrive post Covid-19 were identified:
Focus on Staff
Staff are a firm’s greatest asset and an integral part of their competitive advantage. In the current health crisis, keeping employees safe and healthy is paramount. Many firms have implemented measures such as working from home, flexible hours and alternate shifts in the office to better practice self-distancing (i.e. one team will come in on Monday, Wednesday and Friday whereas another on Tuesday and Thursday). A recent article on flexible working "When it comes to talent retention, think flexibly” summarizes some of the benefits of flexible working and what a firm should consider when implementing such practices.
It is important that firms consider the emotional and psychological impact on staff. Consideration will need to be given to how individuals can manage the significant changes to their daily routine and life structure, as well as to their mental health. Regular connection and communication are essential, including utilizing online tools such as Zoom or Go-To Meeting. How the firm manages its employees in these circumstances could potentially have a long-term impact on their loyalty and retention. An enforced policy of working from home and no business travel has been positive for some firms addressing work-life balance challenges. A bonus has also been a change in client’s attitudes on the need for face to face meetings.
Depending on the circumstances, firms may need to consider changes to staff numbers or the level of compensation in the immediate term. It can be an emotionally difficult decision that firms will have to take. In some cases, firms have committed to seeing through the retrenched staff's medical benefit needs at least until the end of the year as a token of appreciation for past services rendered.
Regular Communication with Clients
The speed of the disruption is nothing less than spectacular. Many clients' businesses, especially small- and medium-sized enterprises (SMEs) are struggling. This is the best time to reach out to clients to show that the firm cares about them and their businesses and provide support as their trusted business adviser. At times, it is a matter of listening to the owner-managers – about their fears, challenges and possible vision of the post-coronavirus world. Never has the adage “they don’t care how much you know until they know how much you care” been more fitting than now. Identifying needs and providing relevant, timely advice is critical. Highlighting efficient ways to manage the business operation and reduce costs will be particularly valuable.
Module 6 of the Practice Management Guide (4th Edition) includes a management action plan template (see page 321) that can be further expanded with columns to indicate what measures are agreed and the timeframe of implementation. Some SMEs may have similar needs, but it is important for firms to develop bespoke solutions for their clients to differentiate their services from competitors. The article “5 steps for advising clients during covid-19 crisis” highlights the need to have a follow up action that is easily executable.
Access to External Resources
Governments around the world are coming to the rescue of businesses with a plethora of assistance and support packages. Many PAOs are collating and sharing this information. SMPs have a pivotal role through monitoring what is being developed and offered (which can change daily) and communicating relevant schemes to clients. For example, about the application process for grants or loans and guidance on how they can furlough employees. These can be significant value-adding services.
As a knowledge convener, IFAC has developed a dedicated COVID-19 website, which covers Audit, Financial Reporting, Business Continuity & Crisis Management and Professional and Personal Well-Being.
Having a strong external network to discuss issues and share information and other resources may be very valuable. There has been a rise in informal groups in many places, although caution needs to be exercised to ensure that information shared is credible.
Diversification of Service Offerings
With the coronavirus upending many small businesses, SMPs have a significant opportunity to demonstrate their relevance. Recent weeks have seen an uptake of services such as those relating to helping with their cashflow projections, preparation of new business plans, restructuring activities, review of business continuity plans and for some companies that may not survive the pandemic, services such as liquidation and receivership. SMPs need to be able to pivot to the areas that they can assist their SME clients. For instance, advice can be provided on different sensitivity scenarios and options explored (best and worst case) for the operation and financial position in the next three, six or 12 months.
It is equally important to ensure that professional accountants have the skill-set to offer these new services. In this respect, many PAOs are helping their members by developing various reporting templates and other guidance material. As an example, the ICAEW launched a cashflow guide for finance professionals and AICPA has prepared sample engagement letters, guidance, and templates for its members to help clients with their Paycheck Protection Program application that is guaranteed by the federal government in Resources for CPAs.
The IFAC Good Practice Checklist for Small Business (2nd Edition) is a useful marketing and diagnostic tool for SMPs to determine the advice small business clients may need and also help them in managing their own business. It includes checklists on financial tasks, strategic management tasks, regulatory requirements and environmental management.
Firm's Operation & Risk Management
As with a crisis of such magnitude, business, as usual, may no longer be possible. Clients could be unable to pay their outstanding fees and hence, firms may experience cashflow issues. Firms will need to manage such risks carefully. In addition, the number of new clients that are enquiring about services (and can still afford it) is likely to result in fee pressure and enhanced competition. The issue of scope creep for many assignments needs to be managed to ensure effective and efficient service delivery. Module 7 of the Practice Management Guide (4th Edition) is a great resource for firms to manage the variety of risks arising from providing new services and also covers business continuity planning and disaster recovery.
The crisis has accelerated the adoption and application of technology in many organizations. From a simple work from home solution to the installation of portals on the cloud to enable better information sharing and allowing clients to scan and send documents has been an excellent way to maintain healthy self-distancing yet enhancing practice efficiency. IFAC and many other organizations are sharing articles on the evaluation of software (see “Key Factors In Evaluating Software Investment”) to the importance of having an IT strategy (see “Developing A Technology Strategy”).
The crisis will undoubtedly be challenging for many SMPs. However, there are also significant opportunities to both build powerful relationships and emerge stronger than ever. The Practice Transformation Action Plan, launched recently, contains an excellent suite of resources, many of those are highly relevant for any SMPs, whether when facing the present crisis or being used as a reference to plan for the future.