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Changes to business solutions as a result of the COVID-19 Pandemic by Jonathan Rowden

In our recent webinar on continuity planning, Penny suggested we look up for a solution to the current crisis rather than continually looking down on the problem.

This got me thinking about the solutions businesses will have come up with as a result of the Coronavirus crisis; those that will stay around once things have returned to a more normal level of operating.

Clearly, there will always be business casualties as a result of an economic shock to the system. However, having lived and operated a small business through a number of recessions, the key thing to remember is that business will continue; it will just look a little different.

So, what changes do we think will be permanent?

Cloud Accounting

OK, so we are ardent advocates of Xero (other packages are available) as the best way to maintain up to date financial accounting records.  

While there has been a growing trend towards cloud accounting, we believe that the enforced “closure” of offices will accelerate the curve. Businesses will see the benefits of having their accounting information available wherever the team is located as well as the ease in which their books and records are kept up to date, let alone the savings in paper and physical file storage. 

With accounting records up to date, businesses have been able to “chase” the people who owe them money faster and more accurately. This is instrumental in getting additional cash into a business and in turn, aids its survival.

The many “add ons” that businesses can bolt onto Xero to help run their business (including industry specific software; software to convert invoices, software to predict cashflows, software to produce sophisticated real time management accounts and measure key performance indicators (KPIs) and software to speed up debt collection) will, in our opinion, ensure that cloud accounting becomes the norm for small and medium sized businesses. 

We are proud to be founder members of the new App Advisory Plus platform for accountants to help our clients make the best use of this technology.

As a recent recipient of Xero’s award for “Small Firm of the Year”, we have helped a significant number of businesses move from a desktop accounting package to Xero. Thus far, no client has asked us if they can go back to using a desktop accounting package!

Use of technology for remote working

While there will have been some teething problems getting the technology up and running, these will have have been sorted by the time we come out of Lockdown.

Businesses who were previously considering letting some, or all, of their workforce work from home may have held back due to the uncertainties of how this would have worked in practice.

Having been forced to give it a go, employers may find the reality is that it does work; or perhaps could work with a few tweaks here and there.

There are some downsides to having the team work from home (including the individual team members feeling isolated) but there will be ways to minimise these.

The upsides might be that smaller office space is required (rent and rates saving) or for those businesses who are expanding their team, the office space constraint may disappear. Moving to larger office space may be no longer a requirement.

Use of technology to hold meetings

OK, a large number of us have probably dabbled with online meetings (perhaps with a software supplier who has set up the meeting and all we have had to do was click on a link).  

The fear of adopting new technology and looking like an idiot (if the meeting we set up went a bit awry) has held back a number of businesses from having remote video meetings.

However, for lots of businesses, the need to hold meetings over the internet has overcome their fears and the reality was “Hey, that was not so bad after all”.

We are confident that when matters return to the new normal, internet meetings will continue, perhaps at a slightly lower level, leading to a reduction in travel time and expenses (a win all around).

Realisation cash is king part 1

While large numbers of businesses have known cash flow is important, how many of those businesses actively managed their debtors to be kept to a minimum, rather than just letting cash come in and only bothering if it looked like there might be a temporary cash flow blip?

Our prediction is that the current crisis will change attitudes to the granting of credit to customers and the misconceived acceptance that a customer paying late is just the price of doing business.

How this change in attitude will manifest itself is open to question, but we expect we will see:

  • More “cash on delivery” transactions (if not cash then certainly the increased use of accepting credit cards).
  • Increased use of direct debit mandates (for smaller businesses this can be achieved by the use of “GoCardless”). Where a customer cancels their direct debit collections before they are due to pay you, this is going to be an early warning sign that there is a problem brewing.
  • Where credit is given, we are expecting the use of automated credit control software to be become more prevalent where the business has adopted cloud accounting software. Xero has automated debt collection but apps such as “Chaser” will take the debt collection process to the next level.
  • Businesses undertaking more credit checks for new customers and credit checking existing customers on a regular basis.

​​Realisation the cash is king part 2

Businesses and individuals will need to rebuild their balance sheets to ensure that they have resources available to continue to trade while business returns to normal over a period of time.  

We expect that individuals may look to cut their discretionary spending to build a cash reserve. While it has always been the case that savings of up to 3 months expenditure is a sensible buffer to cope with a problem, this has not been achieved by many people. The Coronavirus pandemic may now change people’s attitudes to saving for the next problem, both in their business and personal lives.   

While this may prove to be a healthy outcome (if smoking and drinking are cut out of the family cashflow), it may also impact spending on the High Street (and internet) which will mean the recovery will take longer for businesses.

Owners of businesses will face a triple squeeze: 
 
  • They will be looking to retain cash flow in their business to fill the gaps in the working capital caused by the Coronavirus lockdown. One of the ways they will do this is to reduce the amount of money they extract from their business.
  • At the same time as taking a reduced income from their business, they will also need to generate personal cash savings, which will require further and potentially drastic cuts in their personal expenditure.
  • The need to generate cash flow for both their business and for their personal savings will, we believe intensify the trend towards a more “aggressive” management of the credit given to customers of their business.  Unfortunately, just as they are looking to reduce the amount owed by customers to their business, their suppliers will also be looking to reduce the amount owed to them; putting a further squeeze on a business’ cash flow.

To summarise what you can easily control:

  • Cloud accounting software will become the norm. We recommend Xero to businesses and we are well placed to help with this transition.
  • Use of automatic debt collection “add ons” will become more popular as businesses realise the importance of “cash is king”. We were an original “beta tester” for “Chaser” and this is the software we recommend to clients who want to reduce the level of their debtors.
  • Internet meetings will become more common. We are using Zoom for meetings and a product called Zoho to enable us to do internet-based training.
  • Businesses will become more focussed on their results and KPIs and will take advantage of software that easily produces these reports from their Xero bookkeeping. We recommend Fathom software for this and it is provided as part of our management accounting package for our clients.
  • Short term cash flow applications will be used by more businesses, especially those that integrate with Xero. Our preferred add on for cash flow is Float which, again, is provided as part of our cashflow forecasting service for our clients.

Need more advice?

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