December 21, 2020
The impact of COVID 19 has been felt across the globe. Individuals, Families, Businesses, Governments have all been severely affected by this pandemic. UK businesses have not been untouched by this. Among them, the hardest hit has been the SME sector. Almost 50% of the total revenue generated in the UK and around 45% of its labour force is contributed by the SME sector.
Almost 80% of UK SMEs have employed some type of special measures to tackle and effectively tide over the Covid pandemic. There are facts to support the claim that these SMEs benefitted from the expert counsel given to them by their accountants in choosing the ideal support schemes for their business. Various support schemes announced by the British government include the Furlough, VAT deferral scheme, Income tax deferral scheme and government backed business loans.
The Coronavirus job retention scheme, most popularly known as furlough and its equivalent for the self-employed people i.e. the self-employed income support scheme (SEISS) have been very popular. Almost 35% of SMEs have resorted to furlough and almost 25% of one-person businesses have used SEISS. The government backed business loans – the Bounce Back Loans Scheme (BBLS) and the Coronavirus Business Interruption Loans (CBILS) have been equally popular. Almost one-third SMEs have availed either of these loans. Also, on an average, around a quarter of SMEs have used either of the deferral schemes announced by the government.
As mentioned earlier, most of the SMEs have used at least one of the above listed schemes. The SMEs have been advised by the small business accountants in selecting the correct lifeline for their business. However, businesses that didn’t employ an outsourced or internal accountant were highly likely to not take advantage of any of these support schemes, with almost 36% using neither of them. This is because either they didn’t apply or their application was rejected. Let’s look at this point in more detail.
Availing more support schemes because of accountant involvement
An organization is more likely to secure some form of government backed schemes during the pandemic when an accountant is more intimately involved in the business. This has to do with the greater awareness that an accountant gives to the business.
As per a survey, when the accountant was not intimately involved in that case only 60% had used the available facilities. But this jumped to 88% for those businesses where an accountant used to handle areas of tax (e.g., VAT) or helped with business accounting and planning.
Deployment of special measures with the help of accountants to tackle the Covid crisis
Apart from availing the support schemes, SMEs has devised their own strategies to tide over this period of uncertainty such as spending cash reserves, introducing work from home, availing ordinary loans, hiring more staff or introducing new products and services.
Among these, the simplest, easiest and most popular option was to spend cash reserves for those with cash to spare. However, it may not be a prudent measure as the businesses most likely to use this measure were the ones that used accountants for basic accounting and reporting (47%) or didn’t employ accountants at all (28%). Businesses that used accountants for niche work, such as handling tax efficiency, cash flow and business planning, were less likely to use up their cash reserves. This seriously suggests that for these businesses cash is king.
Almost 23% of the businesses that took loans other than CBILS and BBLS were the ones that had a specialised accountant who was able to bring to these companies.
Those same businesses which used accountants to secure funding were also the most likely to hire new staff or launch new products or services in response to the pandemic (almost 30%). This may point to the fact that these businesses are showing growth in the face of adversity and this has been possible because of the presence of a professional and experienced accountant.
Similarly, the businesses which furloughed their employees, deferred VAT or income tax had an accountant to look after these highly complex areas and this made them more aware of their hard-earned money that can be saved.
Accountant’s support – Very crucial for businesses
All the aforementioned points make it amply clear about the crucial role played by accountants in helping smaller businesses navigate through this unprecedented crisis. The accountants assisted in terms of both assessing the options as well as obtaining the best fit solution. These findings are very promising. However, there are still a sizeable number of small businesses which are going solo and not seeking the accountancy services that they should be doing and this is worrisome. Hence, there is a huge potential for such businesses to avail the expert services of an accountant and streamline and strengthen their finances so as to recover at the earliest from this pandemic.