Economic prosperity was distinct in the early months of 2020 until a global health issue rocked every state. As we all know, COVID-19 has caused serious effects on different industries, particularly in the field of tourism and hospitality.
While the closure of businesses serves as direct proof of the most obvious effects brought by the pandemic, it’s important to know that there are other factors left unnoticed, especially for those in the financial sector.
Today, in every business, the negative impact of covid-19 on management accounting offered by CPA firms becomes more imminent. And if this continues, companies and professionals can be placed in a difficult situation.
To help us understand these challenges, in this article, we’ll carefully examine the services, risks, and considerations for varying services on accounting firms. We’ll be considering both sides―the client and the service provider for us to fully comprehend the issue we’re looking at.
Handling clients with existing businesses
Most businesses stick with a single accounting agency for years. When this happens, you’d expect the same policies, arrangements, and procedures. But for this year and the coming years being unique, several changes should be discussed with the client so that expectations are set appropriately.
Here are some areas to look at when reconsidering the diverse field of an accounting practice:
Bookkeeping tasks have long been catered by bookkeepers, although for some accounting firms, services can be offered as a package. Allowing one agency to handle all the financial management needs of a company makes it easier to reconcile accounts. But, situations can be different for every business has its preferences.
For some entrepreneurs, COVID has led them to use accounting software. With the emergence of tech advancements in applications, processes are greatly transformed.
What used to be thought of as a grueling task are now made easier. Even without the presence of a bookkeeper, the integrated apps made it possible to automate everything.
This system has long existed but refused to be recognized fully until today. Because of the remarkable level of accuracy it provides, part of the accounting process became less toxic.
In a way, this is how covid-19 affect accounting firm positively. Although I should say, the loss of bookkeeping opportunities is at stake.
Audit and attestation
We already know the impact of COVID-19 on a business. And since this situation is something new, the methods on engagement planning and risk assessment may not have incorporated the pandemic’s influence on the figures indicated in the financial statement.
To cater to the necessary changes, an additional document should be used to support new disclosures, risks, and modifications.
If you’re wondering why? Well, suppose a business breaks down, the accounting firm can be held liable for any losses coming from stakeholders, and possibly, from financial establishments such as the banker or creditor.
To ensure compliance with the professional standards and local policies, there should be a written agreement on the proposed changes and fees, and a discussion on integral points with the client. In addition, observance of the COVID-related guidance and resources on audit and financial reporting should be reviewed.
In consideration of the pandemic’s global outrage to businesses, deadlines and tax payments were mostly adjusted. However, not all due dates were moved. This scenario can easily lead to mixed-up deadlines, resulting in delays and penalties.
To resolve this, look for software that can help in managing dates and deadlines, and perform automated checks and reminders on return filing dates. Also, clearly communicate with your clients and confirm their understanding of the different due dates legally through writing.
Since many businesses are on the verge of shutting down operations, there can be instances wherein the entrepreneur’s source of funds for payments can only be acquired from sold assets. For this to happen, ample time should be given to business owners.
A different scenario could involve businesses selling assets due to failure in preparing adequate funds for tax payments. Since this can be a sensitive issue, the blame can easily fall into the accounting firm’s hands.
The effects of covid 19 on accounting business operations can cause many deluding affairs, hurt business relationships, and prompt legal actions. However, through early acknowledgment and implementation of revamps on traditional systems, businesses and firms can easily make adjustments and continue successful transactions.
This type of service is usually offered in addition to the regular accounting duties performed for a company. However, since this is more of elective assistance, suspending consultations can be done to let a business save on its operational expenditures. Just be sure to have everything documented to avoid facing legal obligations.
Introduction of new services
The complexities of today’s financial management needs and the presence of new legislation and programs have all brought advantages and disadvantages to CPA firms. And while change is inevitable, a surefire way to cope with all the challenges is to welcome and mitigate the risks with the use of proven management considerations, while practicing standard communication and documentation with the clients.
Key takeaways: what needs to be considered?
Review written agreements
No matter what services an accounting firm offers, the legalities should be a top priority. The call for modifications on the work involved, provision of services, due dates, and fees, implies the need for updates on the content of the engagement letter. Setting up a meeting with clients and revisiting agreements is critical to the protection of each party.
Monitoring fee collections
Billings and late payments for services rendered have long been an issue for some businesses, all the more with today’s crisis. One way to avoid unpaid invoices is to ensure that they are paid on time. If necessary, suspending the service when clients fail to provide timely payments can help protect both the firm and the client.
Responding to lenders
Accounting firms are mostly the go-to people when lenders do business credit and asset verification checks, but it’s important to note that supplying information can be inappropriate and isn’t a legal requirement. Look for local guidance that provides a recommendable response on third parties to avoid placing the accounting firm at risk.
How are accounting firms dealing with COVID?
In an article by Jason Ackerman from The CPA Journal, he confirmed that the CPA firms have shown resilience despite the dramatic changes happening today. Professionals moved away from time-based billing, embraced remote work, went mostly digital, and have improved information sharing and communication methods with clients.
It was also stated that the way accountants have shown their adaptability skills tells that the industry is ready to face the changes head-on. And with clients showing their versatility to meet the new operational business demands, it means that the accounting service providers and consumers are capable of conquering future hurdles.