Accountants are having to be more flexible than ever to support clients with different needs during the pandemic

By Ian Lavis on behalf of Praxity Global Alliance

Covid-19 has hit certain organisations and sectors far harder than others, resulting in vastly different experiences and responses, and placing extra demands on accountants across the globe.

Accounting professionals face daily pressures to target support in the best way they can to help clients with different needs to adjust and move forward in what remains a highly volatile situation.

The impact of the pandemic has been brutal for many companies and sectors, especially small businesses in leisure, education, logistics and manufacturing.

For some businesses, it could take years to get back on track. In the hardest hit sectors, the recovery could take more than five years, according to a McKinsey survey of US small businesses.

The arts, entertainment and recreation sector will take longest to recover to pre-crisis GDP levels, followed by accommodation and food services, according to McKinsey. In contrast, health, IT and professional services are likely to get back on track relatively quickly.

Manufacturing companies are struggling

Small manufacturing companies have found it particularly tough. This is partly because working capital is often tied up in inventory and there is an extra cost of servicing debt, according to McKinsey.

There are other factors at play. Brian Matlock, National Industry Partner at US firm BKD, says small manufacturing and distribution businesses in the US have been struggling since the start of the pandemic but their needs have changed from liquidity and survival to supply chain issues.

“In the beginning, the economy slowed down and we saw lay-offs. Now we are still experiencing a slow-down but it’s a different type of slow down, with a lack of employees and a lack of materials and goods in the supply chain. Wood is hard to come by, steel is hard to come by, and there has been pretty massive inflation.”

Larger companies have tended to fair better during the pandemic because they typically had contingencies in place whereas small businesses did not. However, there is a growing need to help larger corporations address human resource issues.

Brian explains: “There is a lack of motivation among certain groups to get back into the workforce. Being able to find talented team members in manufacturing, construction and distribution is more difficult.”

From liquidity to supply issues

The changing impact of the pandemic on different businesses and sectors has meant accounting firms have had to be more flexible than ever.

In BKD’s case, the original focus was on the creation of a Covid-19 resource centre and associated taskforce to address specific regulatory, tax and banking issues. Regulatory protocols were set up to help clients access funding while specialists helped clients with technical issues and reporting requirements.

Now the focus has switched to broader advisory services for both Covid and non-Covid related issues. “There is more interest in consolidations and we have created a transaction services team to help clients address that need. The team is working the hardest they have ever done. Our tech practice is also increasing. Companies are looking at how they can address a shortfall in employees with technology,” Brian says.

BKD has also experienced a “significant increase” in Economic, Social Governance (ESG) support during the pandemic as businesses look to improve resilience and minimise risk. Companies that had better ESG policies in place prior to Covid-19, were more able to respond to the business impact of the pandemic. Those with better maternity policies for working mothers, for example, had better technical platforms set up for remote working.

There has also been a pressing need to help clients overcome the challenges of doing cross-border business during the pandemic. As a member of Praxity Global Alliance – the world’s largest alliance of independent accounting and consulting firms – BKD has been collaborating with several firms with local and international expertise, including Mazars (global) MNP (Canada), ShineWing (Asia) and J.A Del Rio (Mexico).

Charities face funding issues

Globally, Covid-19 continues to hit businesses and sectors disproportionately. Each client is looking to adjust in different ways and independent accounting firms have had to move quickly to target support where it’s needed most.

This is particularly evident in the charity sector, which has been more resilient to date but risk looms large from potential funding shortfalls and budget cuts. Here, there is a strong need for financial guidance to make informed decisions.

Michelle Ferris, Partner and Head of Charities and Care, at UK accounting firm Albert Goodman, says: “We are getting a real mixed bag. Charities that rely on fundraising events and public donations have struggled more than statutory-funded charities like Citizens Advice (which provides advice to millions of UK citizens) and those supporting the NHS (the National Health Service in England).”

Albert Goodman provides support to charities ranging from tiny local start-ups set up to deliver food parcels to those most in need during the pandemic to regional charities with an income of £20m. Client fortunes have varied enormously. The sector as a whole has escaped relatively unscathed in the UK although finances remain on a knife-edge.

“We have seen a fair amount of flexibility and a lot of charities have seen it as an opportunity,” Michelle says. “What hasn’t been surprising during the pandemic is how flexible and adaptable charities are, particularly the smaller ones that did so much good when the pandemic began.”

The true test could be in the years ahead, she says, adding: “A lot of charities are concerned about the next two to three years. What will be the impact on children’s mental health, for example, and budget and finance cuts? Requirements on their services is going to continue to grow but what happens when the funding is not there?”

Research by the National Council for Voluntary Organisations reveals: 

• Income from trading activity is expected to drop more than 17% in 2022
• Two in five voluntary organisations have six months left of reserves
• Many charities now run fewer services than pre-pandemic while others have expanded

The research highlights the big disparities between different voluntary organisations. While 43% of respondents reduced their range of services since March 2020, 37% widened their range of services. Just over half (47%) said income had dropped, nearly a third (31%) said income had increased on the previous year.

Getting closer to clients

These disparities have placed extra pressures on accounting professionals to advise and support clients at different stages of adjustment. While increasing workload for many individuals, the switch to a more advisory, hand-holding role has helped strengthen client relationships.

“I am a lot closer to my clients now,” Michelle explains. “At the beginning, the focus was on helping them access funding streams and understand changes to regulation. Now, it’s a case of ‘this has happened, how can we deal with it and what type of funding should I prioritise?’. It’s about helping in different ways. They may not have a good knowledge of changing governance, for example.”

This ability to be super-flexible to support clients’ changing needs is a common characteristic of independent accounting firms within Praxity. It is likely to be even more important in the months and years ahead as organisations reset, consolidate and find new ways of doing business.