Businesses rely on their CPAs for sound financial advice to guide them through thick and thin. A good accountant is more than the person who “does the numbers.” A good accountant is a member of the team who can make sense of financial data and turn it into a roadmap for their clients. According to the “OnPay Small Business Finance and HR Report” taken among small and medium businesses, 86% felt their accountant was a trusted advisor to them.
Whether financial troubles are brought on by an economic recession, industry changes or other causes, there are bound to be ups and downs. Here are four ways you can help your clients prepare for bumps in the road.
No. 1 — Have a Long-Term Plan
Economic downturns are as certain as death and taxes (although it is less clear when recessions will hit). This is not news to any good CPA, who continually advise their clients to have a rainy day fund for such an event. Your clients’ long-term plan should have flexibility for financial problems. A survey conducted in 2021 found that *97% of CPAs made adjustments to their clients’ financial plans as a result of the pandemic.
While this sounds dire, not all of those adjustments were major. A majority of respondents (77%) said they made minor tweaks to clients’ financial plans to adapt to the pandemic. If you have a solid financial plan that takes into account future economic hiccups, even major financial catastrophes can be dealt with successfully.
No. 2 — Have a “Worst Case” Plan
When the economy came to a grinding halt during the pandemic, businesses were forced to make tough decisions to stay afloat. Employees were let go, and drastic cost-saving measures were taken in the hopes that the businesses could go back to normal when things turned around. Those decisions are never easy to make, but having a plan in place ahead of time can soften the blow.
Help your clients determine what is absolutely essential and what can be cut if needed. How many employees will the company need at a bare minimum? If a company offers a variety of products and services, help determine what can be pared down in an effort to cut costs. Figuring out the core offerings the business must keep and the basic essentials it needs to operate will help develop a plan.
The federal government rolled out assistance for businesses when the economy was shut down, but such broad plans will not always be available when times get hard. Make sure you know what your clients can do to make ends meet on a tight budget.
When adversity comes, CPAs must have tough conversations with their clients. Having a prior relationship of trust and communication helps your clients know you have their best interests in mind, even if the news is hard to hear.
No. 3 — Be Their Eyes and Ears
Not even the best accountant could have seen COVID-19 coming and its impact on the economy. The recession caused by the housing bubble burst in 2007 was a different story. While many did not see the good times coming to an end, there were warning signs that were clear in retrospect.
CPAs can be valuable prognosticators for their clients as they watch trends and keep an eye out on the road ahead. Clients rely on their CPAs to spot trouble on a large and small scale. CPAs should not only be watching for issues with the economy but also individual trouble for their clients.
On the individual client level, cash-flow problems are an important indicator that a company may have serious trouble if hard times hit. According to a global Intuit study— “The State of Small Business Cash Flow"—61% of small businesses struggle with cash flow. Helping clients spot these issues and address them can avoid problems that will stifle their growth, like an inability to pay vendors or creditors.
No. 4 — Be Available
Being there for your clients now prepares them to seek your help in the future. The time to develop a strong relationship with your clients is not when the proverbial cow pies hit the wind turbine. Make efforts to earn their trust now, so they can lean on you when it really matters.
When adversity comes, CPAs must have tough conversations with their clients. Having a prior relationship of trust and communication helps your clients know you have their best interests in mind, even if the news is hard to hear. It also ensures they look to you for guidance because it has been established over time that you are an invested member of their team.
CPAs have worked diligently to become trusted advisors for their clients, and they have been called on to tackle difficult issues when economic hardships hit. CPAs can build strong relationships now and use their positions of trust to help clients prepare for calamity before it strikes.
Justin Hatch is the co-founder and CEO of Reach Reporting, the leading visual reporting software on the market. Hatch is an industry expert in business management, specializing in software development and financial reporting. Hatch co-founded Reach Reporting in 2015 and launched in March of 2020, experiencing a growth rate of over 30% per month.
Like what you're reading?
Subscribe to our FREE newsletter and we'll deliver content like this directly to your inbox.