By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
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By Lauren Pitonyak
It’s been a little more than a year since the pandemic upended our lives and the economy. The good news for accountants is the vast majority of firms weathered the crisis reasonably well compared to others.
Firms changed where and how they perform their duties to get through, plus, as essential workers, CPAs pulled out the stops to help their clients respond to the financial losses that government lock downs precipitated.
Today, as the U.S. vaccination effort is making headway, perhaps you are wondering what the “new normal” will look like or which changes that you’ve implemented during the crisis will become permanent. Many industry observers think that even as things normalize, there will continue to be significant risks to the accounting industry.
In this blog, I discuss two risks, in particular: the financial tightening among firms and the financial challenges facing their clients.
Despite the vaccination rollout, a universal lift of social distancing is not imminent. It will take time to gain a general population immunity. For this reason, the 2021 financial outlook for accounting firms remains uncertain. Be prepared for further rounds of expense reduction or revenue replacement.
Reduce your “brick-and-mortar” footprint – In 2020, you likely transitioned all or most of your employees to work-at-home. If it went well, you may have already reevaluated your office-space needs. If you postponed doing that and 2021 continues to be challenging for office work, it might be time to consider a long-term commitment to remote work and reduce your leased office space.
Accelerate transition to the cloud – The pandemic made it clear that you and your staff must be equipped to provide continuous client service from anywhere. Adopting cloud-based technologies is an important way to achieve this. Firms that made a cloud transition prior to the pandemic had a much easier time getting back up to speed during the crisis than those that didn’t. “You need to be 100% in the cloud,” recommends Jim Bourke, CPA, partner and managing director of advisory services at Withum. The cloud provides flexibility for home-based accounting staff in the event they lose power there: cloud apps allow them to seamlessly continue to work from any location that has power and internet access.
Make judicious expense cuts – Slashing your budget is not a good idea. There’s a fine line between achieving financial relief via lower expenses today and creating revenue shortfalls due to future resource shortages. When considering whether or not to reduce an expense, determine whether the item is essential to produce current or future growth or whether it’s become extraneous. For example, you may be able to justify cutting a brand-building tactic, but not a lead-generation one. The former likely does not have a direct relationship with revenue; while the latter may be directly linked to the generation of sales. Eliminate sales-related expenses at your future peril. Do a similar analysis before laying off staff. Reducing head count will most likely reduce expenses short term, but may produce deleterious long-term results. For example, layoff costs (severance, offboarding, etc.) may eat into your salary savings. In addition, forcing remaining staff to pick up the slack may lead to lower productivity, burnout, and resignations. Reducing expenses should be measured and focused, not indiscriminate.
Strategically lead your firm out of the pandemic – There’s a natural tendency to hunker down during a crisis and emerge cautiously once the coast is clear. Experts suggest this may not be the optimal approach. A Harvard Business Review article explains how companies that use prevention strategies (laying off employees, increasing operational efficiency) and promotion strategies (growing their markets, investing in the business) were more likely to emerge strongly from a recession. According to the authors – Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen – a combination of strategies produced the best three-year compound annual growth rate for both sales and EBITDA growth. However, companies that relied solely on prevention strategies lagged behind their bolder peers.
The COVID-19 epidemic has had a catastrophic impact on small businesses. According to a Yelp economic analysis, about 163,000 small businesses closed either temporarily or permanently by Aug. 31, 2020, due to the pandemic. As government restrictions continued, those numbers likely grew through year-end 2020 and beyond.
CPAs have seen countless clients suffer financial distress because of the pandemic. For those still hanging on, CPAs should have a watchful eye for signs of trouble.
Signs of financial stress – All clients have occasional rough patches. When they suffer difficulty along many fronts and for a long time, it may be time for you to offer assistance. Here are a few warning signs to watch for:
Help your clients plan – CPAs are well-positioned to render assistance to financially distressed clients. The type of assistance you can provide varies, depending on the nature of the client. For example, if you have a lot of restaurants or breweries as clients, you can help them assess the financial impact of reducing internal seating capacity or of expanding outdoor dining. You might help them seek local regulatory flexibility to reconfigure their business to boost income. You can also assist small business in any industry apply for available government loans or grants. The opportunity to apply your accounting and financial smarts to aid your clients’ pandemic struggles is almost unlimited.
Encourage financially distressed clients to pay you – Even in the best of times, some clients will be late with payment or may never pay you. During the pandemic, this problem has become acute. It doesn’t have to be insurmountable. Here are some steps you can take to receive what you’re owed.
It may be tempting to sue a client for a bill that’s long overdue, but consider the downside. Clients may respond with a countersuit for malpractice. Think about whether the benefits of receiving payment are worth the headache of getting ensnared in malpractice litigation. Even though your professional liability insurance will likely cover your legal expenses, wouldn’t you rather spend your time on more productive matters?
Lauren Pitonyak is an account executive at Gallagher Affinity in Philadelphia. She can be reached at Lauren_Pitonyak@ajg.com. Gallagher Affinity has been offering insurance programs to PICPA members, their families, and employees for over 65 years. Learn more about these offerings.
Sign up for weekly professional and technical updates from PICPA's blogs, podcasts, and discussion board topics by completing this form.
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