The value of partnerships: How can accountants help small businesses navigate the current crisis?

With many businesses struggling to stay afloat amid soaring inflation and low consumer confidence, Kevin McCallum, CEO at accounting software specialist Bright, asks what accountants can do to support SME clients

Back in September, I read a comment from the owner of an independent bakery in Yorkshire who was frank about the problems he is facing.

“To be absolutely truthful with you,” Ed Hamilton-Trewhitt told the i newspaper, “unless we get some serious support from the government, then we’re not going to be here this time next year.”

His words, and the situation he described, would have rung true for millions of business owners up and down the country.

Small and medium-sized businesses – which account for 99% of all businesses in the UK, and employ 44% of the workforce – are in the middle of an economic storm.

Many are still recovering from the pandemic. Bounce-back loans have to be repaid, while chronic labour shortages have pushed up wages. This might have been just about manageable were it not for the rising supply chain, energy and production costs, coupled with a drop in consumer confidence and, now, what is likely to be one of the longest recessions on record.

The energy bill-relief scheme, launched in October and continuing to April next year, offers some relief to businesses that are now in survival mode. But most of the challenges above do not have a short-term fix, and will require accounting firms to offer almost daily support to businesses to keep on top of the figures.

With survival a non-negotiable, business owners across the country should be prioritising a review of all internal systems and processes, to increase efficiencies and, where possible, reduce costs. And so, with the current uncertainty likely to last for some time, SMEs – who are already focusing on the other all-important areas of their business – are sure to need some support and guidance from trusted sources, like their accounting firm.

Every penny counts

Against this backdrop, business owners must look at their own finances with an analytical eye, with a view to saving every penny and maximising every investment.

In such challenging times as these, a strategically minded and forward-thinking accountant is vital – businesses, particularly in the SME market, need a reliable, agile and informed accountant who can ensure compliance while also being a supportive partner who can deliver insights that add value.

As well as doing the sums, you also need to be on hand to explain the economic and regulatory factors that could impact their business – like unpicking the latest budget and what government support might be available to them.

Of course, the services a client requires depends on what type of business they run, how financially secure or insecure they are, and whether they want to expand their operations with investment in people, premises or new products.

Most SMEs are in the precarious position of not having much more than three months of spare cash. That makes forward planning difficult for many business owners who are concentrating on paying the essentials, like rent and wages. However, with a practical and dependable accountant by their side, they can start looking further ahead.

In my opinion, one of the most valuable services accountants can offer right now is accurate forecasting, and this is where good accounting software really makes a difference. It acts as an x-ray into the whole ecosystem of a company. It provides a clear view of whether they can afford to invest more in growth and diversification strategies, or hold back and focus on savings in the interests of survival.

With this information, they can make better decisions and start planning for the next year – yet still be agile as circumstances change.

Automation is key

Automating routine and labour-intensive reporting tasks, via a central platform, gives accountants the space to deliver these insights accurately and in a timely manner. While these insights are, of course, crucial for identifying hidden inefficiencies and opportunities to save money, they play a fundamental role during times of crisis.

Immediate, real-time insights are hugely important to business continuity, and particularly in times of change, like the financial disruption caused by former Prime Minister Liz Truss’s mini-budget announcement. A series of economic shocks, including the pound falling to an all-time low against the dollar and the Bank of England being forced to step in to ease financial markets, all led to uproar across the UK business landscape.

The government’s reckless gamble left changes like National Insurance contributions and income tax reductions up in the air for many independent businesses and, in particular, business owners who were self-employed. Although the latest budget from the new Chancellor, Jeremy Hunt, reverted many of these changes, the uncertainty that followed Truss’s mini budget has generated a great cause of concern.

As well as having access to the latest data insights, automated technology – coupled with the guidance from their accountant – can help business owners build a picture of how they may perform under the latest policies and ensure their operations remain compliant.

Beyond external government-set policies, internal processes can be streamlined. Take administering payrolls, for example. The task has traditionally been something that is too labour-intensive for accountants to take on profitability – but automated technology allows you to manage it in a highly-efficient way, taking away the burden from clients.

It also removes the potential for human error – which is important because poor payroll processes are costing businesses thousands of pounds per year.

Then there is the time and money that businesses spend on tax compliance, which is another task that can easily be automated by accountants to eliminate mistakes and inefficiencies.

Changing expectations

In a competitive and challenging market, service is what sets accountants apart from the competition – this much has been true ever since I first entered the accounting software market. When cost is no longer a differentiator, service becomes key. And let us not forget that accountancy firms are just as vulnerable to the economic headwinds as any business.

With potentially the longest recession in generations looming in the background, companies today need to consider how to expand to maintain profits. And, while the primary role of accounting firms is to help clients remain financially healthy and tax compliant, they also play an important role in advising their clients through difficult waters – from updating them with the latest guidance and how they must adapt their business’s operations to suit changing policies, to helping business owners reach their objectives.

With real-time data at their fingertips, an accountant can advise their client using reliable insights based on performance, financial markets and regulations. This is an invaluable service, as it allows accounting professionals to teach their clients how to use money effectively and enables them to be more agile with their operations, in both the short and long term. It is this essential service that will ensure accounting firms stand out from the crowd, particularly in difficult climates.

The most successful accountants today make use of the technology available and apply their expertise to the challenges customers face. Ultimately, their success is your success, and by steering them through the crisis, you should be rewarded with long-term and trusted relationships and, hopefully, plenty of recommendations.