Publication

27 March 2020

COVID-19: 5 key steps for accountants to guide SMEs through the crisis

Accountants – many of whom are small practitioners themselves – are SMEs’ trusted advisors. The corona crisis is a critical time where SMEs need all the guidance they can get to navigate through the storm.

We call on SME accountants and small accountancy practices to help struggling SMEs through these difficult times. See also our 15 actions for governments to protect European SMEs and sign up here for our periodic SME policy updates.

We recommend the following actions for SME accountants to support their struggling SME clients. Many of these will also be relevant to small accountancy practices and practitioners themselves:

1. Inform yourself of all aid options

Accountants should be aware of all financial and other forms of aid provided by national governments or at EU level. It would be helpful for the national accountancy body to be aware of aid that other countries provide, so they can flag any best practices to their own national policymakers.

2. Apply the available aid to your client’s situations

Identify clients in high risk sectors and those that would benefit most from public support measures. Help them by:

  • Advising on, and guiding through, all the claims available to them
  • Identifying options to diversify their business
  • Accessing emergency financing provided by governments
  • If possible, consider re-negotiating your fees and payment schedules with them

3. Help with immediate business survival

Inform your SME clients of immediate measures that might make the difference between survival and collapse. And help them implement these, for example, to:

  • Access the reliefs on offer as soon as possible to maximise the impact.
  • Review and adjust their cash flow forecasts to determine what impact cuts in sales will have on their ability to pay their suppliers and debt. Businesses should continue to pay their suppliers when they can to help avoid a wide-spread collapse of the financial system.
  • Consider the business model to ascertain whether the SME can deliver goods or services in an alternative manner – such as by home delivery or online, and whether it can downsize or stop certain activities, such as travel, sales and marketing.
  • Understand their supply chains and plan for the supply of products and services to get disrupted. This may involve scaling back production for some parts and stock and re-considering suppliers and clients from countries heavily impacted by the virus.
  • Check their insurance and whether they are eligible for a claim for any financial losses.
  • Communicate with their staff to discuss the possibility of short term pay cuts.
  • Ensure that their financials are up to date so they can monitor profitability, stock, and debtor-creditor balances. Many governments offer deferment of tax returns and financial information filing. However, such deferments’ long-term impacts are not clear. They could result in a later bottleneck in filing such returns and the possible loss of financial and tax data.
  • Renegotiate their payment terms with suppliers and help them communicate with their bank should they be unable to meet loan commitments.
  • Negotiate with their debtors, for example to offer discounts in exchange for early payment.
  • Continually monitor the situation and inform your clients of new initiatives so that when lifting the restrictions becomes imminent, they are ready to recommence trading.
  • If all else fails, consider the insolvency options as it may be possible to rescue viable businesses by debt reorganisation rather than be forced into full liquidation.

4. But also help SMEs plan for the medium term

Many SMEs are likely to be in a crisis mode. The SME accountant should help them avoid emergency measures that could endanger the business’ medium-term viability. They can, for example, help them to:

  • Reconsider whether laying off employees is unavoidable. On top of having negative social and societal impacts, cutting down on workforce also constitutes a loss of key skills for the business. This should be a last resort option only, so make your clients aware of and help them access all alternative options, aid and financing available first. It is possible that staff would prefer taking a temporary pay cut over redundancy. This could increase staff loyalty and allow the business to resume operations once the restrictions are lifted.
  • Start building financial reserves as soon as possible, to prepare for a new peak in coronavirus cases even after the current restrictions are lifted.

5. Help your clients benefit from expertise of the whole SME ecosystem

You may need to call in relevant other experts to support your clients in executing these steps. Some countries, for example, require involving a certified professional for business restructuring and insolvency. It could also be wise to get legal advice to examine force majeure clauses in business and insurance contracts. As their accountant, your SME clients will rely on your networks.

 

This was prepared by Accountancy Europe’s SME Experts combining practical experience from across Europe. Find out more about our SME work.

 

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