It’s very clear that we’re about to go into a global depression which is geared up to be worse than anything the world has seen before. Aside from that, I’ve been having quite a few conversations recently about what will happen after the Covid-19 ‘global episode’ is over and what the future looks like for both people on a personal level, but also businesses. It’s clear that the world as we knew it will not continue and some drastic changes will take place over the next months and years as a result of this pandemic and the aftermath that it will leave in its wake. I thought I’d put my thoughts down on three things that I think might happen in the business world. It will be interesting to see if and how any of these play out.
We’re seeing many businesses go under at the moment, which is expected but also a big shame. A study carried out by the FSB suggests that SMEs account for 99.9% of the business population (5.9 million businesses at the start of 2019). They also account for three fifths of the employment and around half of turnover in the UK private sector. Hardly surprising then that the government is doing so much to try and save businesses from going under as a result of the coronavirus.
However, most of the funding won’t be available until the end of May/ June, and businesses either have to fund themselves through until that point, or try and negotiate with their lives to not have to make payments to staff and suppliers until they see some income from the government.
A lot of businesses haven’t been in a position to build up a war chest of excess cash in the bank, nor are they able to get loans, so they must adapt somehow, now and going forwards. Unfortunately, not all businesses are forward thinking or agile enough to do this quickly, and so we will start to see a big drop in businesses in general, while the ones who have adapted quickly, changed tactic, taken the correct advice and shown their value will come out the other side, fitter, stronger and more resilient than they were when they went in.
We’ve been speaking to lots of business owners who are, frankly, not in the position to be making decisions based on their financial information and other data in their business.
Popular preconception about the bookkeeping and accountancy profession is that it’s effectively a data entry game that doesn’t really require a lot of skill or thought. This hasn’t been helped by the fact that the profession is completely unregulated. In short, people are able to wake up and, because they’ve become bored of their job, or sick of their manager, decide to become a bookkeeper or accountant, with no experience or knowledge on the subject.
What then happens is that they go and get their first client, Bob down the road who runs a small business, they merrily go through the month punching numbers into a spreadsheet or accounts system, putting everything into “general expenses”. Bob just wants it off his plate, and he doesn’t know anything about bookkeeping or accounts, he just wants to make his widget and play golf and for someone else to do all the boring and complicated financial stuff for him so he doesn’t ask questions or look at the data.
Then a virus comes along to decimate the small business economy and now Bob needs advice. AND he needs to be able to use his management accounts to make some decisions about the way forward for the company that he has worked so hard to build, and that his livelihood depends on. He also wants to think about getting a loan to see him through until the grant arrives. But he can’t do any of that because his bookkeeper had no idea what they were doing and, as a result, Bob’s accounts are a mess and they don’t know what advice to give him either, so Bob is now completely alone and in the dark about what his options are.
It’s more important than ever to be able to trust your management accounts and all other information available about your business and I predict that business owners will be waking up to that. They’ll take more time to learn the basics of bookkeeping, how to read their financial statements, cashflow forecasting and the other things that enable them to check whether their bookkeeper or accountant is doing their job properly.
Previously many businesses have been reluctant to take up homeworking as a viable option for employees, in the fear that their staff might spend all day on Facebook instead of actually doing what they should be. However, the Coronavirus lockdown has forced their hand and they are having to trust staff to get the job done.
Employees may start to consider homeworking opportunities available to them as part of their ‘weeding out’ process when applying to prospective employers, and employers will likely now be more open to the idea if they have seen a positive outcome from their staff during the Corona Effect and take up will likely become more widespread. Homeworking could even become an employment right rather than a benefit if taken to the extreme, and businesses who aren’t open to it will get left behind when it comes to recruiting the best candidates.
That’s it. What are you doing to adapt and change, and what things might you add to this list and why?