Covid-19 has taken a toll on many businesses. Restricted opening hours, mandatory remote working, and a general downturn in the economy have made life hard for everyone, but with their relatively small size, SMEs have been hit the hardest.
Not all businesses have made it through the pandemic intact; many SMEs have had to close up shop. Those that do survive, however, have usually maintained impeccable accounting practices, with neat, tidy, and easy to understand books.
As the world slowly recovers from Covid-19, you’ll find many businesses busily preparing to conduct business in the new normal, whatever it brings. We believe that one key way to ensure resilience is to follow the lead of the SMEs that have survived: foster reliability in accounting.
Accounting challenges during Covid-19
The pandemic has brought many challenges to businesses, requiring changes to the way business accounting has been commonly done.
The first and most obvious challenge is that many businesses have had to operate with a drastically reduced income. This means that they always need to take into consideration whether or not they can continue and pay their expenses. This requires a lot of foresight to navigate. Pay too early, and the company may run out of cash. Pay too late, and suppliers will not be happy.
Secondly, the pandemic has disrupted all facets of the economy. Many of the challenges are industry-wide in scale. Even if a business may seem to be thriving, there is a high likelihood that they will be impacted by a disruption in the value chain. Supplies may be scarce, or demands may dry up. All these need to be taken into account, because they may very well impair the cash flow of the company.
Thirdly, as businesses struggle, they may find themselves needing to liquidate their assets or find their stock moving slowly due to sluggish sales. As such, they are likely to face more demands for financial disclosure. On the other hand, clients may default or otherwise become unable to pay. With pressure coming from all sides, the situation is far from easy for small businesses.
And lastly, all these challenges may prompt a business to pivot. As the old ways of doing business become untenable, organisations need to find new ways and methods. This may involve a drastic restructuring of the company, which will entail yet another challenge in accounting.
A helping hand from government grants
Small businesses caught by these circumstances should consider turning to the government for assistance. It’s in most government’s interest that most businesses continue to run smoothly, and Singapore has been no exception here: from writing new regulations on taxes to making certain grants available, Singapore authorities have scrambled to maintain economic stability by helping out impacted businesses.
As early as April 2020, the Singaporean government worked with the private sector to launch an ongoing series of grant programmes. From loan insurance, to multiple enterprise financing schemes, to temporary bridging loans, businesses in Singapore have plenty of lifelines to rely on.
One notable example of an SME-specific programme in Singapore is the Small Business Relief Grants Programme. Initiated by the Singapore Business Federation (SBF) in collaboration with Salesforce, the programme set aside S$960,000 for 120 SMEs to receive a one-off grant of $8,000. Over 700 businesses applied.
It’s highly likely that successful candidates for such grants often have good accounting practices to show, demonstrating their reliability and viability to government authorities. For beneficiaries of the SBF and Salesforce grant, the S$8,000 cash infusion will not only give extra runway for the recipient SMEs, but also help them thrive.
Data and digitalisation for the future
Keeping your books in good order can do more than just present a good face to potential creditors or patrons.
Good accounting is its own reward. It can inform us of the health status of our business at any given time. It allows us to make informed judgments on debt payments, fundraising requirements, and other important decisions. Furthermore, good accounting will also reflect the situation of our supply chain, as well as whether or not a company restructuring has served its purpose.
Accurate accounting can give us a clearer picture of our future state of financial health: providing us with crucial information on where our current financial trajectory is taking us, and guiding us on business decisions worth considering.
Future-proofing a business can be crucial to its longevity. Forecasting your future cash flow is one of the simplest yet most effective ways to avoid cash flow problems.
All these practices require gathering and making sense of financial data.
The more details we account for, the more reliable our future projection can be. But data gathering can be a daunting task, especially when things are still done manually. It has been said that 27.5% of accounting and compliance mistakes are due to human error. Clearly, pen-and-paper methods are not safe.
This is why it’s always a good idea to digitalise the process of accounting as soon as possible. One practical example is by utilising apps such as Xero and its ecosystem of 1,000+ apps. But while it can greatly help, the suite has its own learning curve, which many may find steep. An SME may not have the time or human resources to dedicate to learning this digital ecosystem.
Fortunately, accounting partnership services—like the ones we provide—are starting to become available to SMEs.
Improving financial resilience with expert partnerships
Reliable accounting is a must. It can help a business survive present challenges and thrive in the future. But most SMEs still face numerous challenges that arise from incomplete data to human error. While going digital is always a good idea, many SMEs lack the resources to help overcome the steep learning curve that many accounting software suites have.
Fortunately, there is a simple way out of this predicament. We at Harvest Accounting offer our partnership precisely for this reason. We believe we can give SMEs their much-needed accounting expertise without having to dedicate months to learn all the software themselves. Being Xero experts, we also make use of our enhanced AI technology for reliable projections.
Outsourcing your accounting to expert partners has many other benefits. As your financial data grows, making sense of your data can be confusing. With an accounting partner, you can get a much clearer idea of which metrics to track. You will also have a better insight on your spend management, cost efficiency, taxes and regulatory compliance, up to which clients to keep or onboard.
Our ability to provide monthly accounting, coupled with our tech stack, allows us to provide you with business advisory services on a timely basis. Expert partners in accounting can often double as an SME’s business consultant. Aside from assisting you in your digital transformation, we can also serve as a sounding board and data analyst; or help you locate grants and find beneficial partners in the industry. This makes us stand out from most traditional accounting firms that focus more on compliance.
By partnering with us, SMEs can produce more reliable accounting for their finances. These include projections of future cash flows, but also potential issues to avoid and opportunities to capture. By helping you make sense of your data, we will assist in improving your financial health.
At Harvest Accounting, we believe that we will be able to help you not only survive the pandemic but also thrive in the post-pandemic world.