What bookkeepers can look out for to help their clients in 2021 – Part 2

By Craig Michie

In Part Two of this two-part series featuring Matthew Addison, executive director of the Institute of Certified Bookkeepers, we explore what bookkeepers should be looking out for in 2021 to help their small business clients.

For thousands of small businesses, their bookkeeper is their first port of call for a clear understanding of how well their business is doing.

With many businesses coming off pandemic relief, this puts bookkeepers in a very important position to be able to help their clients in the SME sector survive the challenges of 2021.

It’s crucial for small businesses to talk to their trusted advisor early in 2021 about the cashflow impact of a business, or its suppliers, coming off JobKeeper.

Taking this one step further, it’s also important that bookkeepers and their clients are alert to the benefits of acting now to find funding that will help smooth cashflow and put it in place before it is actually needed (because by then it may be harder to put funding in place in time).

I have first-hand experience of this: when I ran my finance brokerage one of my key business relationships was with a savvy bookkeeper who kept a close eye on the funding needs of her clients. She was in a good position to see how the business was tracking, what its current and future cash flow needs would be and what style of funding might suit that business.

In 2021, one logical step small business directors could consider in order to generate cash is to find and lock in a method of funding that accesses the cash tied up in an unencumbered receivables ledger.

Financial products such as invoice finance help SME directors address cashflow issues.

We’d encourage any small business to talk to their trusted advisor – including bookkeepers, accountants and brokers – about funding options and cash flow strategies that will help them survive and thrive in 2021.

We spoke to Matthew Addison, the executive director of the Institute of Certified Bookkeepers, and got his thoughts on the role of bookkeepers in recognising that their clients need new types of funding.

Craig: ScotPac wants small business owners to be fully aware of the business conditions and threats they will face in 2021. Also, to be aware of the funding options that will put them in the best cashflow position to face their challenges. What is the role of bookkeepers, as trusted advisors, in this process?

Matthew: 2021 is all about consolidating what evolved in each business due to COVID.

Businesses will have to monitor what’s occurring, as a basis for making decisions about recovery or rebuilding.

2021 will be about recovery, but also small businesses will need to take steps towards putting in place better business continuity in case there is a “next time” pandemic.

The economy has changed, all purchasers have changed in their engagement and behaviour and therefore each business should evaluate how to position and promote themselves in 2021.

The business environment is unlikely to return to how it was in 2019: in my mind, 2021 is not a return to normal, it is all about adopting and evolving into the new normal.

This isn’t all bad. The Australian economy has developed its digital capacity. The business environment evolves. Business has had to evaluate what resources are valuable and essential to their existence and possibly their survival.

COVID also brought to light the need for business to ensure remote work is possible, that their online presence exists, that customers can find information about what the business is doing: are they shut down? Are they delivering? Do they have an online exhibition/presence to allow engagement and purchasing?

Bookkeepers are entrenched in assisting, managing and advising on solutions and they will be assisting business to step through this all of the above thinking and then undertake the required action.

Craig: ICB has made its members very aware of the Business Funding Guide produced by the Small Business Ombudsman (ASBFEO) and ScotPac, to help businesses find appropriate ways to fund. Why did you support this initiative?

Matthew: Yes, we have promoted the use of the guide as an explanation tool, and as a resource to help the discussions bookkeepers have with their clients about cash flow and funding.

I’d say understanding options and having explanation material on hand is part of the bookkeeper’s role. Bookkeepers should be aware of all the funding options outlined in the Guide – it is a really useful tool for initiating or developing discussions with the managers within a business about their funding options.

Some of our bookkeepers are involved in assisting to put funding in place for clients working with the experts, brokers and other parties.

My position is that there is a bigger role for bookkeepers to play when it comes to funding. A bigger role to ask business questions and also to ensure the lenders are providing answers appropriate for the business. In our experience, the sticking point is the lenders and their systems.  Application processes are too complex, and requirements for small businesses are just too hard.

ICB has tried to engage with the big banks to streamline processes and simplify engagement with business, but we hit a wall. As an organisation we would be keen to engage with funders to give our point of view on the style of products that would be easy for our members to recommend as suitable to small business clients.