Cash is king
We are living in a new era where many clients are facing financial difficulties. Accountants should take affirmative action to protect their practices. Philip Fisher suggests that accountants should now consider upfront billing or much tighter credit control policies.
Before getting on to the main topic, in these politically correct times, it is probably necessary to unpack the age-old phrase that sits on top of this column.
Any accountant who gets paid in cash is living in the past. Indeed, they are also putting themselves at risk of falling foul of the money-laundering regulations unless they take the greatest care.
As gender neutrality has become de rigueur, the use of words that specifically attach to one gender, particularly the masculine, is also frowned upon as patriarchal. However, somehow I don’t think that readers would be attracted by a piece that was headed up “Bank Transfers Are Monarchical”.
Now we can move on to the (even more serious) stuff, which is the need to ensure that your business is not unduly hampered by the inevitable financial difficulties that so many clients will be suffering in the short-term and looking at least a year, and quite possibly several more, into the future.
Despite the best efforts of our own government and most of their peers around Europe and further afield, not only has the coronavirus pandemic left over one million people dead but it is also in the process of wrecking the economies of every country to a greater or lesser degree.
Sadly, the United Kingdom is in the vanguard of those that have been most severely affected, with much worse to come.
The accounting industry stronghold
While this is damaging at a national level, it is also having a selectively disastrous impact on businesses and individuals across the spectrum.
As previously commented, accountants are often managing to fare better than many other industries. We are able to work from home, while much of the business that we transact is necessary and therefore, as long as clients survive, we should be in a reasonably strong financial position, albeit not necessarily making the same profits as in the last decade.
On that basis, those employed should also feel more secure, since redundancies in our sector are likely to be far less swingeing than those faced by others, even when the consequences of pandemic closures are added to any work that is lost when we fully depart from the European Union at the end of the year.
Indeed, canny accountants might manage to turn this latter event into an opportunity to generate revenue, since clients who are hard hit are likely to need a great deal of support from reliable business advisers.
Client relationship pandemonium
The most significant area in which we are potentially seriously exposed is the collection and payment of fees for valuable work.
Some clients may not have what it takes to survive yet another lockdown in their region or across the country. If that is the case, then any work that we have done will never be paid for.
Slightly further down the food chain will be those clients who are left in dire straits, barely able to survive but holding on for grim life. In such cases, many of us may feel an obligation to help them out, particularly since the alternative may be accepting a penny in the pound should we drive them over the edge.
Other clients might have perfectly viable businesses but use the current economic situation as an excuse to defer or delay payments, the more cynical then using their hold on what should be our money to negotiate a reduced settlement.
Time to consider upfront billing
Accountants will have their own views on the idea of upfront billing. Most might in the past have regarded it as somewhat distasteful and insulting to clients with whom we enjoy a mature relationship.
However, in the current scenario, especially when some practices operate on the basis that almost all fees are for fixed amounts, it might be worth considering asking clients to pay for services before projects start, rather than at their completion or, far worse, six months later when you finally think about it (it happens).
In principle, clients should understand the business imperative and go along with this. If any are unwilling to do so, then it might be worth carrying out some kind of credit checking exercise before starting work.
If that is a step too far, fixed settlement terms should form part of what might be a new set of coronavirus era engagement letters, requiring payment within say 14 days of completion and these should be strictly enforced.