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Small business

4 tips to help get small businesses back on track

There are several ways accountants can help restore a company’s financial wellness following the pandemic

Business owner chatting with adviserA CPA can be a company’s internal adviser and help re-strategize operations for better success (Getty Images/sturti)

The pandemic has severely increased pressure on small businesses and their owners, encouraging them to seek out financial assistance where available. With small businesses accounting for 97.9 per cent of all companies in Canada, this has resulted in a new market opportunity for CPAs to provide advisory support

“A CPA experienced with the challenges facing small businesses can provide small business owners with a clear picture of current operations,” says CPA Ideh Fesharaki, finance and private equity consultant. “CPAs are trained to exercise professional judgment, to engage in critical thinking and to have a deep understanding of complex multi-faceted operations and the resulting financial consequences. As such, they are ideally suited to help owners identify their strengths, weaknesses, opportunities and threats, and create a plan to address them.” 

Here are some of the ways CPAs can help businesses regain financial stability as they emerge from the pandemic. 

1) REVIEW THE SITUATION AND ACT ACCORDINGLY

As a CPA, you will naturally want to start by sitting down your client to see how well their business is faring in the current climate.

In some cases, says CPA Eitan Dehtiar, the pandemic could have exacerbated financial issues that a business was already experiencing, such as cash flow problems or industry downswings. Or the business may have been able to survive only because of government subsidies. “As a CPA, you have to ask, did the business have any pre-existing conditions that are not necessarily related to the pandemic, but that may have been masked because of it?”

Once you have a clear picture of where the business currently stands, you can look at ways to stabilize business performance. Dehtiar advises setting up a financial dashboard for the business—with no more than three to five areas—that can provide early warning signs for the business. 

2) PROTECT CASH FLOW

By helping owners understand their business’s spending patterns and budgeting predictions, you can help them gain a better sense of the financial and operational stakes in play, says Fesharaki.

“Cash flow management can be a deciding factor in a small business’s prospects of survival and ability to thrive,” she says. “Cash provides liquidity, negotiation power, a security reserve and a hedge—although arguably a depreciating one during inflationary periods.”

Reducing fixed costs can help businesses retain stronger cash flow, adds Fesharaki.  This can be done by negotiating lower rent, leases and contracts or using other tools to increase available funds.

Dehtiar agrees, adding that you should also keep an eye on accounts receivable to learn about customer transactions and see if there is steady or delayed payment. You should also review suppliers’ behaviour and inventory management to understand how supply chain issues may affect the business. 

Once armed with this information, you can help owners adjust their approach by tailoring terms of payment with customers or managing inventory to better protect the business. 

3) EXPLORE NEW OPPORTUNITIES AND POTENTIAL RISKS

After reviewing a company’s financial objectives, you and the business owner will have a much clearer understanding of the operational structure. And from this, a new plan can be devised. 

“CPAs are an important sounding board, but also an internal adviser who can help business leaders explore and open up new pathways for the organization,” says CPA Gordon Beal, vice-president, research, guidance and support at CPA Canada.

Through open dialogue, you can work with the owner to determine the best ways to achieve success. Options might include building a greater local presence, generating growth internationally or otherwise identifying new revenue sources.   

By developing a new strategy, Beal says, “CPAs can build the plan that’s going to be successful for the business in the short term, medium term and longer term, and generate the kind of cash flows they need to support the organization's cost structure.”

Reviewing and assessing for new opportunities will allow the CPA, together with the business owner, to identify risks and better plan for the future, says Fesharaki. “In analyzing data, CPAs can help business owners better understand how their behaviour, leadership style and attitude toward finances have shaped their current business and financial position.”

4) REGAIN STABILITY

Beal says that having a good understanding of a business and how it operates, along with a familiarity with its financial strategy, can help CPAs to plan its best next steps. 

And while owners know their operations best, says Fesharaki, complexities such as taxes and debt restructuring are not part of their daily operations. Hence the value of having a CPA to advise them. 

“CPAs can be excellent partners in helping small businesses succeed and thrive, especially during times of uncertainty when the impact of financial decisions can be very consequential,” she says.   

HOW CPAs CAN HELP SMALL BUSINESSES

Find the tools you need to manage the finances of your small business because of the pandemic, plus use these resources to help improve your business practices. 

Also, learn about the changing trends and issues that will affect how Canadians manage their money and why CPAs are the trusted advisers to turn to during uncertain times.