Impact of COVID-19 on Accounting & Small Businesses
No matter how tired you are of hearing and reading coronavirus news 24/7, it’s safe to say that the world has changed dramatically in recent months. Millions of Americans have been furloughed, adapted to a virtual work environment, and utilized new relief legislation to continue their businesses, as commerce has declined significantly. Surprisingly, the demand for accountants has surged as firms continue to seek guidance on loans, grants, and other aid in the federal pandemic rescue package.
Staying Afloat with an Accountant
During this uncertain time, accountants have been and will continue to undertake new services. Accountants can assist a client in evaluating the various loan programs administered by the U.S. SBA to determine which relief program a client is eligible for and which one can provide the maximum benefit. Even if you have applied for relief already, there are follow up requests from the SBA about P&L statements and monthly sale figures - it’s critical that this information is gathered in a timely manner and accurate. For example, if a client has applied for the Paycheck Protection Program created by the CARES Act, the amount of the loan forgiven is dependent on the accounting for the usage of funds received. Amending prior-year tax returns to reflect changes to the net operating loss rules is also a new service and consideration.
Don’t forget the purpose of accounting advisors: it is not only to produce financial reports, but it is to help make optimal strategic decisions and provide financial forecasts based on expert analysis. In fact, 82% of business leaders have had to make a financial re-forecast. Managing cash flow and strengthening your balance sheet by building up a cash buffer that considers these extreme uncertainties in the economy are important. Accountants can help you lower costs, identify new growth opportunities, and even optimize your cash flow by identifying profitable and unprofitable customers, all while preventing layoffs. They will help you build and formalize contingency plans so that you are ready to execute them any time.
Bookkeeping and core accounting functions such as vendor invoicing, cash disbursement processes, and monthly financial reporting, should be streamlined, organized, and running efficiently. While the drivers of revenue and expense depend on the industry, ensuring that your accounting functions are running smoothly will make obstacles much easier to tackle, and may reduce risk and prevent financial loss.
Even if having an accountant is the last thing on your mind right now, experienced advisors like bookkeepers and accountants have proven to be especially useful during this crisis, and have also allowed businesses to focus on their specific business problems efficiently, rather than getting caught in the tedious administrative details.
The Future for Small Businesses
As of May 2020, more than 100,000 small businesses have closed forever, despite Congress approving $700 billion in relief for small businesses. Experts have expressed how culturally devastating it is for communities as these small businesses help provide communities with a sense of identity and place. But here’s the silver lining...
“It’s opened the door to a lot of ideas that have been dismissed because change is hard. And if things are good enough, then why would you change?” -Liz Supinski, SHRM’S director of research products.
COVID-19 has been a huge driver of innovation - this is an opportunity to grow and change as the wants and needs of consumers change. Many small businesses have invented new products and found new ways to deliver services. This includes anything from creating digital teleworking tools and home-schooling solutions to safe food delivery solutions to even online fitness classes and gyms selling idle equipment to members! According to SHRM, 43% of small business owners have pivoted their business models.
Not only has the pandemic spurred innovation, but it’s also led to reskilling and upskilling in individuals and firms. SHRM found that 22% of small businesses have asked employees to learn new skills to support changes in their business.
Despite these positives, small business owners can still feel concerned about increased risks and liabilities while reopening amid COVID-19. These inevitable financial, operational, and even policy changes are complex, but having an advisor with accounting expertise to help navigate these new changes can affect the future success of your business.
Have questions? Want more information about this blog topic? Contact the HOPE Accounting Firm at 216.744.9303 or at email@example.com.