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Why You Need a Strong Accountant During the Coronavirus Pandemic

Why You Need a Strong Accountant During the Coronavirus Pandemic

Accountants have always been undervalued in business, particularly in SMEs, where many directors see them as an expensive overhead. At a networking event in February, I was speaking to the director of a successful manufacturing business and he was complaining about the cost of his accountant.

He was frustrated at the cost of a few thousand pounds a year to file his accounts, explaining that he only had a hundred or so lines in Xero every month. The director had a business turning over seven figures and only saw his accountant as a way to track expenses and file end of year accounts.

When I asked about the business, it was clear it had problems a good accountant could be solving – he clearly he wasn’t getting the most out of his. The business had no financial planning, was losing out on hundreds of thousands of R&D tax reclaims and was clearly not being tax efficient. Over two or three years a good accountant could have made the company better off by well over six figures.

The training to become an accountant is incredibly rigorous. After completing a degree, accountants need to pass three years of increasingly difficult exams to qualify; business owners need to wake up and start tapping into this expertise to grow their business.

An Accountant: Your Most Important Ally During COVID-19 

During the current crisis, when cash is going to be tight for many businesses, there may be a temptation to cut back on accounting costs—in most cases, this is a mistake. I’ve highlighted five reasons why a good accountant is more important now than ever before.

1.       Access Government Funding

The government support package for businesses has multiple strands, so it can be challenging to understand the best schemes and process the application. A good accountant will know their way around the different options and be able to advise on the best choice. 

If you are trying access funding through the CBILS scheme, the information required by lenders can be onerous. A reliable accountant will give your application the best chance, or if CBILS isn’t an option they can help you find alternative lenders.

2.       Plan for Success 

A good accountant doesn’t just keep score—they help you plan for the future. The correlation between detailed financial planning and commercial success is clear: companies that understand their financial position and the key drivers for success outperform peers.

Budgeting not only shows a clear path to success, but it also focuses the mind of the key decision-makers. With a good plan, every decision can be weighed against the financial implications. During the COVID-19 pandemic, this is even more important. However, many directors are panicking and envisioning a worst-case scenario. A clear financial plan not only alleviates fears but helps leaders think about solutions, too.

3.       Access Tax Breaks and Benefits

The UK government is good at supporting businesses; there are multiple tax breaks and schemes that can help ease cash flow, save money and even provide a capital injection. There are too many to name, but one scheme that is woefully under-utilised is the R&D tax relief scheme. A good accountant can help you review which schemes might be relevant for your business.

The government has set aside billions to help encourage businesses to invest in research and development. This relief can be significant, and it may come in the form of tax breaks or hard cash. However, the latest reports suggest that under 1% of eligible businesses are making claims for it because they are unaware that they qualify.

4.       Build Better Processes 

One of the key reasons for businesses failing is poor financial management; too many businesses don’t have a clear view of their financial position and have no plan for the future. Many are living day-to-day and month-to-month from a current account, praying they don’t run out of cash.

Many companies are plodding along like zombies, just about servicing the interest on debt but unable to pay debts down. Because these companies are operating on a knife edge, they don’t have the resources to survive a drop in revenue.

We estimate bad debt will double to over £8 billion this year as supply chains fracture and the economy slows. An accountant is critical in helping insulate businesses from the coming shocks; however, some companies may be beyond saving. A good accountant can help directors decide on the best way forward and develop processes to execute the plan.

5.       Spot Opportunity 

As with any external event, some businesses will struggle and others will see an opportunity. COVID-19 is no exception. For example, Edtech companies that have found it painfully slow getting traction in schools are all of a sudden in demand.

Accountants can help with evaluating growth opportunities, developing plans and ensuring capital is in place. They also have the experience of seeing hundreds of different businesses, so they will be well placed to offer commercial advice.

Mark Halstead is a director at Red Flag Alert, a business intelligence solution that provides real-time business intelligence on every UK business.

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