Preparing for the new paradigm of economic and medical realities.
CPAs are hunkering down for a quadruple-whammy as the coronavirus Covid-19 pandemic slams society and the economy. Information is tenuous and changing.
More: Tax Season Turns Ugly under Coronavirus | Lessons from the Trenches of Tax Season | Coronavirus Rattles Tax Season | More Firms Falling Behind | Accountants Cautiously Bullish on the Economy
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No one knows for sure what’s going to happen, but in the tax & accounting industry, four things are pretty certain:
- To avoid disaster, CPA and tax prep offices must take special measures.
- Absences at the IRS will further slow response rates, and deadlines may be further postponed.
- At least some clients will be delayed in providing documents.
- Over the next year or more, virtually all clients are going to suffer an impending recession – and their accountants will have to share the suffering.
The 2020 CPA Trendlines Barometer is tracking the proactive measures tax and accounting practices are taking to deal with an uncertain future. The Barometer has already detected a radical shift in expectations. At the end of February, 48 percent of respondents were expecting a “somewhat better” tax season – better in everything from ease of operations to net profits. But by the middle of March, that number had dropped precipitously to 32 percent.
At the same time, those expecting a somewhat worse year had more than doubled, from under 9 percent to over 19 percent.
18 Months of Uncertainty
With the Department of Health and Human Services now saying that the pandemic could go on for 18 months – yes, well beyond next year’s busy season – with waves of improvement and worsening, the issue isn’t just policies and procedures at accounting practices. It’s the economic health of clients. Their fate is very much the fate of their CPAs.
Recession is inevitable. The only question is how deep it will go as sales plummet, supply lines falter and whole economic sectors all but shut down.
Michael H. Simms at Veracity Financial Services in Palm Beach Gardens, Fla., suggests that CPA firms do what they do best. His firm, which specializes in risk management, is preparing for a recession by “actively engaging clients now with proactive advice, tax planning, and business management strategies to guide them through the current dynamic and into the new paradigm.”
Yes, we may be on the verge of a new paradigm – still very much undetermined – and it will start with troubled times. With the future now as shaky as the present, the Barometer is asking members how they are preparing for a recession.
Clients are going to need help. For some firms, that spells opportunity. Pamela Corn, a partner at Corn & Corn, LLP, in Austin, Texas, clearly recognizes the need to help clients survive. “Be available to help clients with government programs when they are put in place,” she advises. “Stay current on all the local, state and federal programs that are available. Make this information available to clients. Find resources for clients to solve their problems.”
John Finning, a partner at AAFCPAs, a large firm based in New England, is also focused on offering services that help clients stay afloat. He says, “Offer to help clients with analytics and budgeting.”
For now, sole practitioner Hilda Zacarias is primarily concerned about health and deadlines.
“I am worried, of course, for our clients and our employees,” she says. “We need to stay informed and share as much accurate information to our clients as possible. I am stunned that the IRS has not extended the filing deadlines. I am also not sure about the impacts of those who owe but cannot file by the 04/15 deadline. Our office has stopped face-to-face tax preparation but remains open via phone and email to address issues from our clients.”
Clients Need a Helping Hand
Giving clients a helping hand is always advisable, but it’s also important to gird the firm for hard times.
Bob Bowers, at Bowers & Associates Inc. in Los Angeles, says, “We need to prepare for reduced revenue from business clients who are struggling or may go out of business.”
In Hackensack, N.J., Kevin J. Collins, a partner with Tobin & Collins, CPA, PA, has several serious recommendations:
- “Be vigilant in not performing work for clients that already owe you money.
- “Up your collection efforts.
- “Watch your staffing levels and be quick to cut any questionable staff post 4/15.
- “Watch discretionary expenses.
- “Monitor the financial well being of clients, especially those in more susceptible industries.”
Victoria Martin, the managing partner at Martin Starnes in Hickory, N.C., says CPA firms have to keep their own financial houses in order.
“Always be conservative in your approach to budgeting and cash flow projections,” she says. “Prepare for the worst and hope for the best. Don’t always deplete all cash reserves to the bare bones. Some CPAs by nature are conservative, but I have seen a lot over the years who literally live paycheck to paycheck. If you don’t have reserves, something like the current pandemic could send your firm into bankruptcy.”
A CPA in South Dakota has similar advice for the inevitable financial stresses, telling us, “Get lean on the expense side to cover for the downturn in small business clients that are going under and get picky about new clients. Not all new clients are created equal.”
About that new paradigm: What will it look like? Interlinked home offices? Clients in whole new businesses? Cutthroat competition? Hardscrabble survival? Early adopters of whatever it is will be the ones to thrive.
The CPA Trendlines Barometer wants to know what tax & accounting practices are doing, and what you think is going to happen. Help us all gain a better understanding of the present and the future when you contribute to the survey.