Firms fear post-lockdown fee squeeze and late payments

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Over the past few months, accountants have gone above and beyond the call of duty to support their clients during the Covid-19 lockdown. Such was the profession’s unstinting response, the Accounting Excellence Awards (AEA) have added three new Covid-19 categories.

As soon as the government announced the various support schemes, accountants have had to absorb the information and provide rapid action for their clients in dire need. But while the initial rush of CJRS claims and BBL applications are in the rearview mirror, the hardest time is still to come.

Many accounting firms highlighted bad debt and credit risk as a huge issue going forward. And with Covid taking a hit out of the economy, many accountants are bracing themselves for the loss of clients due to the poor economic conditions of Covid-19, Brexit or even IR35. The clients that cling on may need a reduction in fees or be late paying.

Ivan Houston, a director at small firm finalist Scholes CA, told AccountingWEB that the issue of bad debt means “prioritising work will need to be done with one eye on a client’s ability to pay”. As a result, “There could also be a significant capacity issue with clients delaying work, resulting in the normal yearly workload being ‘compressed’ at the back end of the year.”

The squeeze on fees may require accountants to use this time to generate additional income to retain business coming out of the Covid lockdown, advises Paul Donno from 1Accounts.

Claire Bartlett from Arden Bookkeeping believes this additional income could come from bookkeeping and payroll. “The aftermath for our industry will be as businesses start to see the biggest effects for themselves they will need to cut back on costs and that might mean bringing services back in house like bookkeeping and payroll,” she said.

Another growing area of interest since lockdown was enforced is advisory services. Sarah Sallis from the Accountancy Office, a finalist in the AEA sole practitioner of the year category, sees the summer months continuing with the business continuity planning and cashflow forecasts which were pivotal in supporting clients through the initial stages and will be just as important now in getting their businesses back on track.

The emphasis on advisory services coming out of lockdown will likely lead to a growing demand for up to date financial information from clients so they can plan their survival, said Alan Davidson from Medium Firm finalists Pentins Business Advisers. But not everyone will be equipped to deliver this service. “Unless the accountant has the systems in place, this additional reliance will be hard to deliver,” added Davidson.

While the main major challenges so far are client-facing, a just as big internal struggle could come as firms start to bring back furloughed staff members and the months of long working days hit a breaking point.

The challenge of employee engagement and recruitment has been an ongoing issue before Covid struck. In the 2019 Accounting Excellence Awards, 46% of entrants pointed to recruitment and retaining talent as their biggest concern, with skills being coming in at second among 44% of firms. You’d have to think the virus has only exacerbated the issue.

“Developing and retaining talent was a major focus pre-coronavirus and will need to be again afterwards, said Warren Munson, the founder of Inspire Professional Services.

But Munson sees the steps firms took during the virus and in the aftermath as having a detrimental effect on the motivations of teams. “Whether they have had pay cuts, been furloughed or simply seeing it happening to colleagues will need to be managed,” he said.

Sole practitioner finalist Andy Sullivan of CompleteHQ has witnessed the effect of furloughing. “Near to us a few of the larger small firms, of say 40-75 employees, seem to have had to furlough a lot of their teams as the lower-level technical teams aren’t able to work unsupervised remotely,” he said.

Sullivan suspects this could lead to a huge shift in the future. “It will place a huge new focus on the cloud-accounting systems as those using desktop or server-based systems will have seen issues recently.”

Ultimately, though, firms will be hamstrung by the stark demands of their clients. With tough times ahead all-round, firms will have a difficult choice in how they best serve clients.

“Firms will need to think about the resources they have vs what will be needed as many clients look to recovery, rather than quickly be back to the levels of demand and types of work they undertook pre-crisis,” concluded Munson.

What is your firm’s biggest fear in the next three to six months now lockdown has been eased?

https://www.accountingweb.co.uk/practice/general-practice/firms-fear-post-lockdown-fee-squeeze-and-late-payments