The resilience dividend: Reaping rewards of helping clients help themselvesby
The scramble to deploy telecommuting operations during the initial wave of the pandemic was a watershed moment for business as panic set in across the globe. One man not troubled was accountant Matt Portt, whose decision to introduce remote working long before anyone had heard of Coronavirus reaped immediate dividends for his practice.
Portt, as oblivious to the impending health crisis as anyone in 2019, was instead thinking about the climate and building in future resilience to combat a long-term threat.
“Offsetting carbon is a relatively small outgoing, particularly when you consider the impact this has on the environment,” he told AccountingWEB. “We started small by moving to a paperless office and from there introduced remote working, reducing our carbon emissions by cutting out the daily commute before the pandemic instructed everyone to work from home.”
When lockdowns were ordered and social distancing regulations came into force, Portt & Co. realized the dividend on their investment sooner than imagined. Disruption was avoided, and the situation allowed the firm to reach out for new opportunities and provide new services, building on their foundation as a forward-thinking practice.
Industry watchers’ belief in the “resilience dividend” as a concept is growing. Any premeditated action to strengthen a business, and it doesn’t have to be with a crisis in mind, goes further than just shoring up against vulnerabilities. It will bring benefits to the practice economically, socially and reputationally.
With Brexit complications, trade disputes, the retreat of globalisation and the push to become carbon neutral all competing for attention, not to mention Covid, industry experts say the focus of operational resilience has to shift from mere troubleshooting to growth. And to support this adjustment, accountants are embracing capital advisory services as I wrote about previously in my article: 'Covid lets capital advisory out of the bottle'.
“Resilience begins with trying to understand the future – scanning the horizon, generating scenarios, anticipating likely effects, and assessing the resources through dynamic management and a flexible operating model,” said Marco Vettori of consultancy McKinsey. “Efficiency has been the priority for the past decade, but now businesses are moving to a dual way of thinking.”
They are planning for uncertainty by creating buffers for inventory, especially for bottleneck components and capital, so they can withstand periods of significant cashflow reduction, he said.
Balance sheets are also being strengthened to drive expansion opportunities, from asset growth and credit improvement to broader balance sheet management.
Multiple-scenario planning is likely to be a fixture, Vettori said. The frenetic early days of the pandemic, where the accountant stepped in to provide leadership with several outcomes as just-in-time supply chains collapsed and reactive, data-driven supply chains evolved, are likely to be the norm in future.
“Advisers need to be creatively involved in financial restructuring,” said Jon Moulton, CF and a Fellow of the Institute for Turnaround Professionals. He said accountants are primed to help the economy grow again and will be required everywhere from financial restructuring, lobbying the government and formulating policy. “Advisers can also help raise equity and debt in order to replenish balance sheets, and help in negotiating time to pay from creditors, especially the government,” Moulton added.
The accountant of tomorrow spots where extra funding can help in such circumstances; taking advantage of discounts to purchase in bulk, or paying temporary employees, or where extra capital can cover other expenses. It may be that additional working capital is needed to fund obligations to suppliers, employees and the government while waiting for payments from customers.
“Accountants are usually the people preparing books, but they also see the worry points and danger signals; not just knowing how to spot them, but also how to recommend solutions,” said Capitalise chief executive Paul Surtees.
“Covid accelerated the need for quick access to cash and triggered a surge around cashflow forecasting. Practitioners are realising they need to step up from a reactive, first responder role to proactive consultant.”
Building trust, strengthening relationships
That step from accountant to advisor, where guidance on capital injections and strategy are encouraged, has been a long time coming. Some practices are still struggling with the emotional journey that applying for and obtaining funding can entail.
One survey of SMEs found 70% would accept a slower rate of growth rather than borrowing to grow faster, such is the reticence to ask for help. The same survey indicated that a large percentage of SMEs are not in control of their finances; 62% of SMEs don’t produce regular management accounts and 70% have less than £10,000 in the bank.
Research by Capitalise & Experian found 487,500 businesses have cash reserves of four weeks or less and 230,000 of which are already risk rated at maximum or high.
“The early majority of accountants are now joining the cloud-first innovators, Capitalise has delivered over £1billion of approved capital through the accountant channel,” said Surtees. “Helping SMEs gain control of their finances with better Management Information and timely capital advice has been a huge opportunity for practices."
The opportunities are there, and ultimately the client will thank them for it.
“We’re going through one of the toughest economic periods in decades and many industries are suffering blow after blow,” said Aylnsey Damery, chief executive of business advisory platform Clarity. “But we’ll make it through this – and businesses will not only survive but thrive again. Many accounting firms find their average fee per client increases when they offer repeatable advisory services – that’s over both compliance only and bespoke advisory.”
The resilience dividend
Articulating and measuring resilience-related investments, whether by improving debt recovery or funding, through grants, research and development, dispute resolution, funding or credit improvement, is a virtuous cycle; the benefits are clear, and it makes the client less likely to undervalue such investments in future.
“In the longer term, businesses will learn that resilience is a capability they need to master, not an alarm button they hit after the fire has started,” said Arvind Govindarajan, partner at McKinsey. “It’s been neglected because it was traditionally seen as an expensive muscle to have. Now organizations are realising it’s an expensive muscle not to have.”
Making the client more resilient ultimately isn’t about lessening their reliance on the accountant, it’s about strengthening both parties and moving capital advisory from an exotic item to a must-have accessory in the bookkeeper’s arsenal.
“In order for the UK economy to thrive, we need to help our SMEs to plan, to build confidence in their delivery,” said Capitalise’s Surtees. “As they grow we need to help them protect their balance sheets from exogenous risks, and as they get resource-hungry to deliver their capital in the shape and size that fits best regardless of product. Resilience is key to their success, your success will come from building increasingly valuable relationships with them over the years through these high-value services.”
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