The coronavirus pandemic abruptly shifted the CPA practitioner’s focus from business planning for client growth to simply planning to keep their clients’ heads above water. Standard business operations and commerce were frozen by the efforts to contain the spread of the deadly COVID-19. The time frame associated with the disruption was never clear, and various governmental assistance programs were instituted to provide some economic relief. Despite the efforts, business owners have been concerned that the relief wouldn’t be sufficient to ride out this unprecedented storm.
Practitioners can help their business clients improve their chances of survival by systematically and honestly addressing the following concerns.
Resource prioritizing – Health care professionals use triage to determine the priority of treatments based on severity and need. Your business clients can benefit from a sort of triage by assessing and prioritizing their immediate business needs. Make sure they consider the following:
- How dramatically have normal business activities been disrupted?
- How will the disruption impact revenue streams?
- What financial resources are on hand to support cash flow needs?
- How much borrowing capacity do they have?
- What cost-containment measures can be taken?
- How long can the business hold out?
Scenario planning – This effort entails making assumptions on what the future might be like and how the business would be affected under those circumstances. Through this exercise, clients can identify a set of uncertainties or different realities that can impact the business. COVID-19 has created a lot of disruption, so a realistic assessment using different underlying assumptions related to various uncertainties will result in dramatically diverse outcomes (i.e., best-case to worst-case scenarios). Here are some scenarios you and your clients can delve into:
- How long will normal business operations be disrupted?
- Will key business relationships (customers and vendors) survive?
- Will accounts receivable be collected?
- What will be the demand for their products and services going forward?
- What cost-containment measures can be implemented?
- What are some sources of relief, and how much can be realistically expected?
Financial forecasts and cash-flow projections based on scenarios – Forward-looking financial and cash-flow projections, derived from the underlying assumptions in scenario planning, will provide the best available information for clients to make informed strategic and operational decisions. The situation can change rapidly and dramatically, so continual reassessment of the likely scenarios and financial impact to the business is necessary.
Communicate – COVID-19 has always been both a health and financial crisis. Clear, honest, and straightforward communication is essential. Sometimes difficult decisions must be made to save the business. These may include employee layoffs, furloughs, compensation reductions, and other financial hardships. Therefore, clear and routine communication is necessary to rally the troops inside the business and to stay connected with outside partners. Your client should be as transparent as possible about the current situation and the rationale behind tough decisions, delivering messages with compassion, empathy, and acknowledgement that the entire staff is in this together.
Consider the recovery possibilities – Unfortunately, not all of your clients will be able to survive this historic catastrophe. Some will cease operations, be forced to sell off their assets, or merge with a stronger organization. For those that make it through, here are important considerations for future success:
- How will the pandemic’s economic crisis alter the way commerce is conducted and what does that mean for your client’s current business model?
- Is the client still relevant to key customers; if not, what changes should be considered?
- Can your client incorporate new crisis survival tactics (working remotely, leveraging technology, certain cost-containment procedures, scenario planning, etc.) into their standard operating procedures?
- What new opportunities are available and how do they seize them?
Seemingly out of nowhere, the global business community has gone from “business as usual” to “crisis mode.” But this traumatic experience, and the lessons learned, will forge a new appreciation for the strength of the entrepreneurial spirit that will lead to our financial recovery and whatever the “new normal” may be.
John S. Stoner, CPA, CVA, is a partner in the business consulting services group of RKL LLP and a member of the
Pennsylvania CPA Journal Editorial Board. He can be reached at email@example.com.