All businesses are being impacted by the spread of Covid-19 with small and medium-sized enterprises particularly at risk. This is where accountants come in, bringing their expertise to help keep SMEs afloat
Small businesses around the world are facing one of the most challenging times in recent history. The spread of Covid-19, or coronavirus, is forcing these businesses to adapt to an uncertain, unpredictable and rapidly evolving environment. Amid conflicting and confusing advice, or even a lack of advice, from all quarters, small and medium-sized enterprises need to be able to cut through the noise to ensure their business survives.
Although there have already been some high-profile corporate collapses, notably regional airline operator Flybe in the UK, it is highly likely that SMEs will be the businesses that bear the brunt of any downturn, as they are squeezed by larger companies while having to deal with constricted supply chains and employee issues.
‘We are learning from previous situations, but need to understand the reality that there are different situations in different countries,’ says Aleksandra Zaronina, head of SME Professional Insights at ACCA. ‘There will always be formal and informal solutions, and we have seen there are many ways of protecting a business.’
Zaronina notes that small businesses will be close to the communities within which they operate, which provide both the employees and the market for their services and products. These informal networks can provide a way of protecting businesses and help them recover after shocks caused by external factors such as the current pandemic.
On a more formal footing, financial liquidity will be top of any business’s concerns, no matter their location. ‘Late payments are a big issue at the best of times and are likely to increase in importance as the epidemic continues,’ Zaronina says. ‘Access to alternative sources of finance will be different in different countries, and this is where accountants, as business advisers, will make a real difference.’
Time to plan
But above all, businesses need to ensure they have a business continuity plan in place, and that it is updated on a regular basis. Such a plan needs to look at suppliers, assess risk profiles on a geographic as well as sector basis, and follow the global agenda. ‘But it is important that this plan is communicated to staff, so that they are able to make contributions,’ Zaronina says. ‘This participatory culture will give everyone a sense of ownership.’
But even these measures might not be enough if your business is in an area that has been effectively placed in lockdown. John Kam FCCA, who runs a Chinese supply chain advisory service describes a situation in China where businesses were effectively closed for nearly two months. ‘People who were working in these businesses received half their salary, which then led to a reduction in purchasing power,’ Kam explains. ‘Theatres and cinemas were also closed. The service industry depends on labour from other areas, and the sudden drop in mobility affected many businesses.’
However, Kam adds that the Chinese government at national, provincial, municipal and district level was able to provide many levels of subsidy for struggling businesses. These included help with tax relief, social security and business loan relief. ‘The state effectively became a business guarantor,’ he says.
Small businesses in some countries, such as the UK, are now also being offered similar help. UK Chancellor Rishi Sunak used his Budget speech on 11 March to announce a series of measures: firms with fewer than 250 staff will be refunded for sick pay payments for two weeks, while also being able to access ‘business interruption’ loans of up to £1.2m. At the same time, business rates in England will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000.
But it is important to remember this is first and foremost a human issue. ‘Before giving advice to clients, my partner and I needed to look after our own staff first,’ says Rosanna Choi FCCA, partner at professional advisory firm CW CPA in Hong Kong and chair of ACCA’s global forum for SMEs.
Choi asked her administration department to do preparatory works, such as the procurement and distribution of sanitary supplies, carrying out disinfection of key sites, strengthening inspection and health protection, reporting relevant information on a timely basis, and medical observation and quarantine measures for those who had come from or had been to the key areas of the epidemic. ‘We asked our staff to report their travel history in the last 14 days and had daily meetings with managers to keep them and all staff updated and engaged,’ she says. ‘This is crucial when many residential communities were closed in early February and not allowing outsiders to get in.’
‘In China and Hong Kong, schools are closed and domestic helpers are stuck in their home provinces,’ Choi says. ‘Working parents are struggling to juggle work and childcare. On top of this, they are dealing with the fear and uncertainty surrounding the epidemic itself.’
However, Choi and others believe there could be positive news following the crisis: ‘Inside every threat there is opportunity. In the last few weeks, my staff have become more adaptable to changes. Our efficiency has improved, and we are more connected internally and externally. It is in fact the best moment to make positive changes.’