Art of Accounting: Caring about practice management amid coronavirus
We are on new ground with the coronavirus pandemic, and we need to adapt as much and as quickly as possible. Most of my columns here deal with practice management, reflecting the issues colleagues who contact me are experiencing. About 10 days ago I took another look at some of the columns I had submitted and realized they were not relevant considering today’s situation and asked Accounting Today editor Michael Cohn to discard them and replace them with columns that are more appropriate to today’s situation. Last Monday’s column was the first in this new season that was beyond our imagination just a few weeks ago. Today’s is the second and I intend to keep writing new and relevant columns that could provide immediately usable information.
A major change has been working remotely. Even those firms that were not set up for this have quickly made changes to provide for remote work. It might not be perfect and might need some working around things, but it is being done well enough for now. Another thing is that most offices can be entered at all hours of the night to get mail and have it scanned and sent to preparers who are working from home. Almost every firm has a secure portal, making transfers pretty seamless.
Clients seem to have adapted quite well, with many scanning and sending in their data through secure portals, or having it sent by express delivery services. I know some firms that have asked clients to send their info to the staff person’s house instead of the firm’s office.
In terms of operating your practice, all the indications are that business will be down this year, even when the coronavirus threat subsides. I believe we all have clients who have either lost substantial business this year, are closed for the duration or will be going out of business. This will have a direct impact on accounting firm revenues. Here are some suggestions:
- To react to this, I suggest eliminating all overtime. With the July 15 due date we no longer need to work on returns that will have payments due, nor should we. Our energies should be focused on clients who will be getting refunds. That will reduce the immediate workload. If the return is completed by April 30 or May 15 instead of April 15, it won’t create too much of a hardship for clients.
- Ask clients for payment when the return is delivered to them. Your cash flow will be tight, and this is one way to reduce some pressure.
- If you have excessive staff, even with reduced overtime, use them to reduce your inventory of work that needs to get done but hasn’t yet because of the lack of urgency of those projects. Even if you don’t get paid for the work right away (but you should try to), you won’t have added costs since you are paying the staff anyway.
- If you have not-for-profit clients, it is highly likely that their revenues will be severely reduced. If you bring it up first and suggest charging and getting paid half fees until they get through this, you will be utilizing staff, bringing in cash and establishing good will that should benefit you when things get better.
- If your revenues take too much of a hit and you do not have sufficient reserves and you don’t want to let any staff go, you can ask them to take a voluntary cut in pay, say 25 to 30 percent. One effect of the present situation is drastically reduced spending — no eating out, no entertainment, no parties or lavish gifts, no new clothing, reduced gas and car costs, and a generally curtailed lifestyle. Not pleasant and not desirable, but reality. A cut in pay should not cause staff too much hardship.
We are running businesses and need to do the best we can; not perfect, but the best we can. While it's hard during a threatening crisis to think long term, we should consider how we will come out of this. We will need our staff, we will need cash to operate, and we will need to continue serving our clients.
Be well and keep on plugging away. Do not hesitate to contact me at firstname.lastname@example.org with your practice management questions.
Edward Mendlowitz, CPA, is partner at WithumSmith+Brown, PC, CPAs. He is on the Accounting Today Top 100 Influential People List. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz, and “Managing Your Tax Season, Third Edition.” Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com along with the Pay-Less-Tax Man blog for Bottom Line. Ed is an adjunct professor in the MBA program at Fairleigh Dickinson University teaching end user applications of financial statements. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 743-4582 or email@example.com.