The COVID-19 has already taken a tragic toll on the global economy and has crumbled the very foundations of the global financial markets leaving it in a state of recession which may have even greater impacts than the ‘Great Recession’.
While the impacts of the pandemic seem to increase every day, both in magnitude and duration, a few large accounting firms have witnessed a role switch over from Accounting practices to advisory services that businesses are badly in need of right now. However, small accounting firms have been drastically hit by the unannounced arrival of the Corona outbreak.
At Outbooks, we offer Accounting and Outsourcing services for accountants in the UK and this is where our concerns lie. So today we will be discussing how the Covid-19 is impacting the Accounting industry.
Impacts on the Accounting Industry:
During these tough times when the economic downturn has already done enough damage, obtaining financing has become even more difficult for a few small size Accounting firms. As a result, many such firms are responding to the crisis by either selling their business or downsizing operations as a cost-cutting measure. While selling their businesses at such times is resulting in fewer costs that isn’t a fair value for the business, downsizing is resulting in firms losing clients due to manpower shortage.
Delay in payments or breach of agreements
All businesses are going through a nightmare and while everyone is looking for their survival, Accounting firms and specially small-sized ones that offer services to small businesses are seeing either delay in their payments or termination of contracts. Even though the UK government did announce various aid schemes for businesses as a response to the ongoing pandemic, the impacts have already gotten deeper into the economy.
Unable to cope up with the digitisation of tax and cloud accounting software
The most affected by the COVID-19 are the small accounting firms that have seized to adapt to the rising need for cloud accounting software over the traditional practices. Small firms in the UK have declined in the recent past (nearly 490 firms between 2017 and 2019) due to the failure to adapt to the tax digitisation needs. And the Covid-19 has made it more difficult for them to survive when switching over to technologies like cloud accounting.
According to cpapracticeadvisor, “The majority of firms (62%) who felt they are responding to COVID-19 successfully were more likely to be using cloud-based technology.”
Transitioning to remote work culture
While the country is still not freely accessible as social distancing seems to be the new normal, the work culture has transitioned to a remote work culture that requires the use of technologies like the above-discussed cloud-accounting, digitalisation, and more. This is the difference that separates the most successful firms from the least successful ones as communication and outreach have become the only way to overcome the current crisis. Small accounting firms due to their lack of both skilled resources and capital, they are left in a tough spot.
We are in the midst of a global crisis which only seems to evolve every day and it clearly suggests that the financial markets will be left broken by the time we are ready for the new normal. This is where cost and capital is required as small firms need to plan out contingency plans to survive.
Change comes with uncertainty and small accounting firms need to quickly adapt to the changes even though they came unannounced.
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