Before Spotlight Reporting became a global software solution for the accounting industry, many of our key employees were out in the field as accountants, helping clients of their own through the turbulent waters of the GFC.
Our Designed by Accountants, for Accountants series shone a spotlight on the expertise of our team. Alongside their own stories, we asked them to share their experiences around working through the GFC. Here are their tips to help your clients get through challenging times.
Nik George: It’s all about the cash flow
“First and foremost, businesses need to manage their cash flow—ensuring money is coming in, and watching what goes out. For some right now, incoming money might be scarce because of lockdown restrictions, and even after the lockdown is lifted, they likely will encounter reduced customer demand for a period of time. The key is knowing this will happen, and planning ahead. The last thing a client needs is to make it through to July, only to realise that they’ve run out of money. If accounting firms haven’t been doing cash flow forecasts for their clients before this, now is the time to start.
“Next, businesses need to maximise their sales, by focussing on selling products and services with the highest margins, or looking for ways to improve margins on products and services that are in demand. A number of small variations such as price increases, quality or quantity reductions, bundling of products or services, additional services, and cost reductions can make a significant difference.
“Finally, marketing is going to be important—businesses should not go quiet. Even if there was a steady demand for their products and services before the crisis, there’s no guarantee that customers will resume spending after. Businesses need to let their customer base know why they should keep investing, and clear communication is going to be fundamental.”
Matt Kekena: don’t be afraid to ask for advice
The best thing any business can do during this period is to seek advice from people who know what they’re talking about: advisors. In my experience, businesses who took advice during tricky and difficult times tend to flourish, while those who are too stubborn to listen, who think they know best, are unfortunately no longer in business.
“I’ll always remember one particular client, who paid us a decent fee, only to disregard our advice. We were forced to watch them go into decline, knowing that they had families to feed and bills to pay. We’d field calls from employees asking why they hadn’t been paid their wages, and suppliers who refused to deliver another order when the last one hadn’t been paid for. All because they refused to be open to advice.”
Danelle Whaanga: change the business model to reflect the times
“During the GFC, our accounting practice advised many building, construction, and architecture firms of various sizes. We encouraged the larger firms to pick up smaller contracts, rather than chase larger contracts, so they didn’t have as much lockup on their balance sheets. Focusing on their cash flow meant foregoing the larger projects that might win awards, but small jobs got them paid faster. Out of six of these larger firms, only one had to refinance, which we considered a win.
“We also had a few medium sized building and construction firms, with reasonably expensive management teams. Most of these management teams had qualified builders amongst them, so instead of making employees redundant, managers were redirected to help onsite with projects. This meant that they took a pay cut in the short term, but once things had settled down, they were able to return to their management roles and salaries.
“Overall, our biggest takeaways were having shorter contracts, focusing on cash flow, reducing the lockup of work, reducing the need for external contribution, and utilising teams for maximum productivity—this is what got our clients through the recession.”
Richard Francis: Cash is King
“Businesses don’t often live or die on profit alone. The old saying, ‘profit is an opinion, cash flow’s a fact’, is very true in a crisis. There’s all sorts of accounting jiggery-pokery you can do to get the numbers to look the way you want, but if the cash isn’t coming in, it can all be over really quickly.”
Since the beginning of the crisis, Richard has presented webinars aimed at helping advisors and their clients navigate through the current stormy waters:
We also have other webinars featuring experts from the wider community:
Don’t hesitate to reach out if you need more support. The team at Spotlight Reporting is here to help.