- Accountants in public practice need to schedule a time-out from helping clients during the COVID-19 emergency to consider how their own business survives the current pandemic
- Top ideas for accounting practice leaders to consider for managing cashflow into the practice
Like busy plumbers with leaky taps at home, accountants in public practice need to schedule a time-out from helping clients during the COVID-19 emergency to consider how their own business survives the current pandemic.
Older accountants like me will draw on their experience in hard times encountered before: the 1990 "recession we had to have" and the Global Financial Crisis for example.
Others will emulate the responses already announced by large accounting firms.
Each practice will have unique issues to consider, and responses will differ accordingly.
Set out below are my thoughts for accounting practice leaders to consider for managing cashflow into the practice.
These are not recommendations. Every practice has unique circumstances.
Like the times we live in, some of the ideas outlined below may not be easy to implement. They impact personal and business relationships already under enormous stress because of the impact COVID-19 is having on our community.
Now and after the emergency has passed, these relationships are vitally important and need to be managed with great care.
Managing cashflow into the practice
- Your firm's entitlement to be paid for services provided and the terms and conditions for payment should already be clearly specified in the letter of engagement you have with your clients. Review your firm's current letter of engagement and determine if it needs amending (if so, alert clients to the changes made).
Even then, be prepared to be flexible in coming to arrangements with your clients. Consider, for example:
- Asking clients (especially those new to your practice or without a good track record of paying for advice) for a prepayment, deposit or percentage of the forecast fee and (if relevant) estimated out of pocket expenses. Insist on electronic payment direct into firm's bank account. No cheques please.
- Agreeing a fee in advance with monthly direct debit arrangements for say 6 to 12 months (during the COVID-19 emergency)
- If asked to agree to a fee discount rate, make the discount dependent on payment upfront
- Discounting the rate on your firm's next fee but make the discount dependent on settlement of all overdue fees
- Offering no discount, but rather a more generous settlement discount if your firm's fee is paid on time within the terms of credit set out in the engagement letter
- Implementing a tiered 'COVID-19 Stimulus Packages Inquiry' fee payable upfront or monthly for 6 to 12 months (some firms already charge a technology fee to cover tax correspondence costs or a set fee for a limited set of tax compliance reporting obligations etc)
- Offering a COVID-19 economic stimulus audit trail service, providing clients with evidence of their entitlements to the various government measures applied for (e.g. for JobKeeper: decline in turnover testing, record collation; modified projected GST turnover computation).
- Implement or enforce existing engagement letter terms and conditions, indemnifying costs associated with late payment (e.g. your firm may be entitled to charge interest).
- Chase those clients who have not yet signed-up to your firm's engagement letter. Clients should agree to your firm's contractual terms and conditions before professional services are provided.
- Monitor whether a client declares bankruptcy, appoints a liquidator or enters voluntary administration, and make sure your firm's entitlements as a creditor are noted.
- Challenge senior staff – particularly those with time on their hands – to:
- Bill early, bill often and collect cash. Mandate times using emailed entries in diaries when a partner, director and\or staff member must down tools, bill and collect cash.
- Help with debt collection and prep them if necessary with staff training before they make direct contact with relevant clients. Consider some form of staff incentive for those who succeed at this task.
- Identify those clients experiencing difficulty in paying your firm's fees and discuss your firm's response (this should be a standing agenda item for your regular practice meetings). Remember, each client's circumstances are unique.
- Review current arrangements for payment of ATO amounts into the firm's trust account to ensure compliance with ATO and Tax Practitioner Board requirements. Communicate with clients regularly on the flow of funds through this account. Ensure accurate accounting records are kept.
- Identify potential for contra arrangements with clients (e.g. fee reduction for client in the business of supplying you with office equipment) but note income tax and GST considerations of such arrangements
- Regularly review debts and if bad, keep evidence of attempts to collect and seek GST adjustments purposes via the Business Activity Statement
- The design of many of the COVID-19 business stimulus measures is based on "self-serve" access to government online services, using myGovID and Single Touch Payroll for example. Engage with your clients to ensure that your practice remains "in the loop" (in the rush to build COVID-19 systems, accountants don't always have line of sight on what clients have done online).
- Bring forward and promote year end and post year end service offerings. For example:
- dovetail revised forecasting for 2020-21 with preparation of 2020 accounts
- offer both year end tax planning and year end cost saving services
- to use our Prime Minister's words, develop a post COVID-19 'Road Back' business plan.
- Behind every business are business owner \ operators worried about their personal financial situation and asset protection situation. If your firm does not already manage both the business and personal side of things, actively explore the opportunity to do so.
- Ours is a competitive profession. As part of your firm's normal attack and defend growth strategy, consider:
- Developing or expanding alliances to expand services (e.g. between your accounting firm and a trusted local law firm)
- Identifying and re-badging existing skill sets within the firm and marketing them anew (e.g. audit and assurance skills lend themselves to budget re-forecasting, assistance with bank re-financing applications)
- Requests for one-on-one face to face meetings (subject to lockdown and social distancing requirements) or conduct such meetings online
- Virtual client seminars, assisting clients to download the required technology if necessary
- On-boarding clients to your firm's preferred business software platform, integrating the client with your firm in a technology sense
- Targeted direct marketing campaigns
- Local media advertising (note decline in local print media in some regional and rural centres)
- Actively seek word of mouth recommendations, testimonials.
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