Given the tricky economic climate and the rising insolvency statistics, I wondered if firms had changed their approach. Are they returning to the Covid-lockdown approach of speaking to all their clients to offer help urgently? At Accountex Summit Manchester, I met with some leading members of the profession to find out what conversations they were having with their clients.
My concern is that most firms are misled into thinking their clients are fine, because this is not an immediate crisis. It is a long, drawn-out period of prices gradually increasing and profits decreasing, so are advisers waiting to hear from their clients or are they determined to be proactive and probe into the current situation deeper?
Up-to-date data
Mike Parsons of Kroll believed the most successful restructuring cases were where the financial information was reliable and up to date. If management teams had already been able to find operational efficiencies and cost savings, the solutions were found more quickly, avoiding running out of time, which could otherwise have led to the end of the business.
According to Richard Bell of DTE Business Advisers, some of their clients were finding the trading situation was getting tougher. But a lot of clients still had access to enough cash for the moment. He recognised that the uptake for cloud accounting products was increasing and that definitely helped them to have access to the latest data. Clients also made use of them when they needed to know how other businesses were managing, especially around pay rises and retaining staff.
Stable and resilient
While accountants inevitably spend most of their time on their better-quality clients, the wider opportunity lies with those businesses that can be supported to become more stable and resilient, just by focusing on their credit score. Amy Cotton of Capitalise shared that 40% of clients on their platform had a credit score of D or below. This means 40% won’t be fundable if they need external finance, or won’t be able to get new contracts, such as a new energy tariff.
But while some clients are finding things tougher, others are still embracing opportunities such as acquisitions or capital investments. Emma Birchall from JS (Jackson Stephen) said they are encouraging more businesses to have up-to-date financial information so they can make informed decisions to produce monthly management accounts. “Having quarterly strategy meetings where they can highlight key variances and review projections gives business owners the confidence to understand the cash impact that decisions will have,” she said.
Young businesses don’t reach out to accountants soon enough for advice according to Wendy Smith who works on the Innovate UK Edge programme. “They spend a lot of time concentrating on their tech and research and development, but they usually need more support on understanding their financial situation,” she said. “They can evidence that when companies work with accountants who can explain what’s happening in ways they can understand, they have far more chance of being successful.”
Employing technology
Accountants are struggling for capacity, but are they utilising technology sufficiently? Are they determined enough to change their working practices so they can have conversations with clients on a much more regular basis, whether in-person, virtually or via email?
I still have the niggling feeling that too many accountants are only looking at historical financial data and therefore believe that the situation is fine. What do you think? Am I being unrealistic, a pessimist or a realist?
