The coronavirus’s effects are being felt in virtually every sector of the US economy. The impact of the government-mandated shutdowns of non-essential businesses ordered in the hope of containing the virus will continue to ripple through society for the foreseeable future. We can expect many businesses to struggle due to the income lost during the shutdown, while others are incurring unplanned expenses to stay in business.
This could also affect how accountants operate from now on and set the table for a new normal for firms who will need to adapt to new realities and regulations. Let’s take a look at how the coronavirus crisis is transforming the world of accounting.
The Pivoting Business Model
Uncertainty brings risk, and this has led to a spike in financial consultations. More businesses are trying to learn about risk management, and how to apply it to their organization.
This could be by establishing a new corporate emergency fund, additional lines of credit, or financing the equipment necessary to offer products and services that would be considered essential. Other business owners are seeking advice about insurance or taxes, while individuals are seeking advice on insurance coverage and estate planning.
This increase in demand means that there will be an increase in specialized service, and this could be an opportunity for companies to acquire or merge with a firm with the needed expertise. Firms could also hire laid-off professionals who bring the expertise your clients need to the team.
Complementary services will not just add an additional revenue stream to a firm’s portfolio; it could result in revenue that follows a different cycle than your current business model, offsetting the boom and bust cycles seen in tax accounting or payroll accounting.
The Impact on Education
Accountants must keep up with the government rules, regulations, and laws that affect their business. Continuous development is essential for any accountant who wants to stay on top of the current legislative changes and learn how to use new tools. However, fewer people are willing to walk into a crowded classroom full of strangers.
This is why we can expect remote learning to become more popular for accountants. Students can now get an online masters degree in accounting from an accredited school while keeping their current position. A master’s degree in accounting is essential if you want to:
- Prepare for the CPA exam
- Learn about business intelligence
- Master forensic accounting
- Prepare for the Certified Management Accountant exam
- Qualify for a corporate accounting position
Depending on the master’s degree, you may learn about new technologies that allow you to better manage your firm. This list includes workflow automation, document management tools, and file-sharing apps.
These skills will become increasingly important, and roughly two-thirds of accounting firms surveyed who felt like they were pulling through from the crisis said that they were using online client portals and cloud-based software. Accounting firms that already used virtual collaboration tools were more successful in connecting with clients than those that relied on postal mail or phone calls. So, if you don’t know how to use these tools or implement them in your firm, you’ll be at a disadvantage.
The Growing Appreciation of Diversification
Relying on a small stable of regular clients can be dangerous for any firm or accountant. If one such client changes service providers or goes out of business, you lose a large percentage of your income. This is why creating and implementing a marketing plan may be essential to your accounting firm’s success.
Adding consulting services may also allow you to attract new clients or generate additional income from your current ones. However, you need to create a plan to attract additional clients, because the financial fallout from the crisis will probably take out a few of your major clients. Traditional runoff rates for consulting were 10%, but accounting firms with more mature clients or deeper consulting services can use higher numbers.
You’ll need to create a sales funnel that captures new clients for each type of service you provide and have a plan to direct them toward related services when appropriate. You also want to improve your team’s selling skills. They’ll then be better prepared to convince someone to enter a long-term relationship with your firm.
The Need for Risk Management and Resiliency for Accounting Firms
The COVID-19 epidemic was a black swan event, and the government-mandated shutdowns of up to 80% of the private economy were unprecedented. These events are bringing risk management and resiliency to the forefront not only for clients but for firms as well.
What can firms do to lessen the dangers the next crisis brings? This list includes but is not limited to:
- Paying off debt
- Building up an emergency fund
- Setting up the necessary IT infrastructure
- Deepening the bench
- Creating income streams
Paying off debt will allow your firm to breakeven, even when your revenue falls, and an emergency fund will allow you to pay the bills even though income has fallen or stopped without going into debt. Setting up the necessary IT infrastructure will also be extremely important moving forward when considering that remote work is likely to become the norm for many months for most accounting firms.
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