How accountants should support clients in the cost-of-living crisis

As the Government strives to regain control of the crisis, we talk to accountants about how they are advising clients

Research by BDO earlier in the year warned that nearly 60 per cent of UK businesses were likely to struggle from these three major threats over the next few months. It also warned that around 18 per cent of businesses fear that these threats (high inflation, high energy bills and supply chain issues) could create more business disruption than the Covid-19 pandemic.

Accountants play an increasingly important role in supporting their clients during this time, not just in terms of value-add services and value for money, but also on a strategic level: risk-adjusted forecasting and planning as well as cash flow forecasting.

Accountants may also want to consider looking at the following areas with their most vulnerable clients:

• Business costs: including staff costs, spending and investment, overheads and third-party contracts: can current payment terms be re-negotiated? Are there any unnecessary spending areas which can be minimised or reduced?
• Forecasting: Including risk-adjusted forecasting, and future and cash flow forecasting.
• Funding opportunities: existing government schemes, grant funding rounds and so on.
• Tax relief: including R&D tax credits and small business rate relief (SBRR).
   

We spoke to several UK accountants to find out how they intend to support their clients over the coming months.

Maintain regular client communications and stay up to date with tax reliefs and funding opportunities

Yvonne Cooper, Head of Finance, Access2Funding

Our clients within energy-intensive sectors such as hospitality and manufacturing are the ones most affected by increasing business costs, particularly spiralling energy costs that will further increase during the winter.

Government tax relief support can help offset some of the increasing costs businesses are facing, from R&D tax credits to capital allowances and grant funding.

Our continuous support for clients includes:

• Regular communication:  providing insightful updates and analysis of the ongoing cost-of-living crisis, with solutions we see that could help businesses.
• Advising clients to seek advice from experts, including ourselves, on how to lower overall business costs.
• Notifying clients of any relevant tax relief or grant funding rounds
• Maintaining a pragmatic approach by considering alternative funding sources.

Many of our clients are futureproofing their businesses by innovating with renewable energy sources, for example implementing carbon recycling or reducing, reusing and recycling their business waste to lower grid payments.

Next steps: Accountants with vulnerable clients should maintain open and transparent communication, keeping abreast of current affairs and issues that directly affect their business. Export your knowledge and your network with them to highlight you are there for them.

Verdict: Clients within energy-intense sectors are likely to struggle the most – so keep in regular contact, updating on relevant tax relief or funding opportunities.

Review client overheads for scaling back opportunities

Craig Billington, Chartered Accountant, Kirkwood Wilson

There are two sides to the issue: the rising cost of gas and electricity for businesses but also, how businesses can support their employees through this period. Supporting team members invariably means wage increases, thus bringing further cost pressures to businesses.

The best way to help clients is to sit down with them and help them understand where their overheads can be scaled back. Management accounts, in particular, help clients compare costs quarterly or monthly, allowing the business owner to make informed decisions about areas that might have room for improvement cost-wise.

Next steps: Be available for clients whenever they need you – let them know you care, and never dismiss a phone call.

Verdict: Consider scaling back overheads.

Carry out an independent 360-degree business review including financial performance and practical strategies

Brian Burke, Managing Director, Restructuring & Insolvency, Quantama

The cost-of living-crisis is being felt by businesses, their customers and by those in their supply chain. Costs such as borrowing, goods and materials, labour, fuel, and energy are all rising rapidly.

To date, many have absorbed the costs as much as possible to protect their customers from the full impact of their increased costs but every affected business is analysing the impact of rising costs on profit margins and cash flows.

We are advising clients to:

• Ascertain how much they can absorb before having to pass the increase on to customers, then consider the impact on customer demand.
• Review and consider their financial position regularly utilising real-time management financial information.
• Minimise unnecessary expenses.
• Review essential costs and suppliers and identify areas where you can negotiate, source more cost-effectively and create savings.
• Review buyers, suppliers and funding – keep on top of any business debts or customers with outstanding invoices.
• Revise your terms with your suppliers to spread costs or secure flexibility on payment timescales.
• Proactively engage with customers to ensure timely payments or identify those who may be struggling.
• Review staffing costs and reassess current structure whilst protecting and retaining talent but be honest if cutbacks need to be made.
• Review your portfolio – not all products or services will be equal in terms of profit potential.

Next steps: Carrying out an independent review (including financial performance and recommended strategies) to provide a candid picture of the business can be a real turning point.

Verdict: Carry out an independent 360-degree review of the entire business, including financial performance and practical strategies.

Offer clients cash flow forecasting sessions to help forward planning

Andy Smith, Abbeygate Accountancy

There is likely to be a rise in pay increase requests due to struggling employees who are also likely to struggle with travel costs to and from work.

At Abbeygate, we’re planning to run sessions with our clients on cash flow forecasting to help clients plan ahead, replicating what we did at the start of the Covid-19 pandemic. This will support resilience in uncertain times.

We’re also providing support with budgets and business growth to counteract any rise in fixed costs.

Next steps: Pick up the phone, talk to your clients, and don’t just do the traditional job of the accountant – Advise, Support, Help!

Verdict: Provide cash flow forecasting sessions with clients to help forward planning.

Annie Makoff is a freelance journalist and editor.