Supporting clients through COVID-19

The unfolding COVID-19 crisis has forced Australia’s federal and state governments to unveil unprecedented stimulus measures in a concerted bid to help small-to- mediumsized businesses survive.

They include cash flow boosts for employers, temporary relief for financially distressed businesses, increasing the instant asset write-off, initiatives to back business investment, and support to businesses using apprentices and trainees.

On top of the government measures, banks and other lenders have announced their own assistance programs, such as allowing businesses to defer payments on their loans.

Many businesses will already be rushing to take advantage of the measures on offer but doing so without professional advice could be a costly mistake. Which is why accounting practitioners should be considering proactively contacting their business clients, not just to explain the relief assistance that is available to them, but to advise on whether the measures make sense for their specific business.

“Accessing many of these support measures requires business to do tasks that typically require the assistance of accountants,” notes Gavan Ord, CPA Australia’s manager of business and investment policy.

“For example, the cash flow boost measure requires people to lodge their business activity statement.

For practitioners, there is an opportunity to share information on the stimulus packages from governments, with their clients, and set out how they may be able to assist [with] access to such support.”

Timing and advice are critical

For businesses needing urgent financial assistance, getting quick access to professional support is essential to fast-track applications.

“Some of that support is going to be necessary for a business’s survival, so the quicker business can access it the better,” says Ord.

“A delay in applying may mean a delay in getting cash to make their payroll, or it could mean a delay in being able to pay their creditors.”

Yet, practitioners also have a valuable role when communicating with clients whether they should be taking advantage of certain measures or passing on the opportunity. One example is the payments relief being offered by financial institutions where businesses can defer making loan and interest rate payments over the coming months.

Ord warns that a delay on making payments doesn’t necessarily stop loan interest from accruing, which could result in businesses having to pay quite large interest bills once the payments deferral period expires.

“This is an opportunity for accountants to say to their clients ‘here is what’s available, and here are some of the tips and potential traps on what is on offer’,” he says.

“It obviously depends on the circumstances of the business. If the business is in a good cash position and they remain in a good cash position, then it may be better to keep paying interest, for the time being.

For businesses in cash flow difficulty, it may be better to access the interest deferral and take advantage of other measures by the federal government and the banks that potentially make it easier for small business to get a new loan, extend their current credit limits such as overdraft facilities or restructure their current loan.”

Practitioners can help their clients to speak with their bank, prepare the financials required for loan applications, and provide their client with wise counsel on whether taking out that new loan is prudent or purchasing that asset makes business sense.

Assessing best interest

Reaching out to all business clients may be beneficial for both the client and the practitioner.

Online tools now make it very easy to conduct calls with multiple clients at the same time, which may be useful to broadly explain the measures available in an open forum.

One-on-one contacts will provide businesses with specific information relevant to them.

“An accountant is well placed to help businesses do a reality check on what’s good for the business and what’s not good for the business,” Ord says.

“Just because something is on offer by the government or the banks doesn’t mean it’s in a business’s best interests.

For example, while the expanded instant asset write-off and the new accelerated depreciation measure may sound good; whether they are actually good for a business will depend on their circumstances.

If they’re actually in financial trouble, going out and buying a $100,000 piece of equipment may not be the best decision at this point in time regardless of the government incentives.”

Difficult discussions

Ord adds that practitioners also will need to have some hard discussions with some clients around their solvency.

“There’s going to be a lot of businesses that, technically, are going to be trading while insolvent during the crisis.

The government has introduced some temporary relief measures on trading while insolvent, but that doesn’t mean businesses should stop regularly measuring their solvency and liquidity.

Businesses need to keep on top of their finances all the time so that they are more likely to make the right decisions for their business as they manage through COVID-19 and place it in the best possible shape for the recovery.”

With government stimulus measures, possible easier access to finance and businesses needing the guidance of professionals to get through the crisis, the coming months may actually see an influx of work for many practitioners.