The Association of Chartered Certified Accountants (ACCA) has recently released a report that shines a spotlight on the performance and viability of smaller businesses as the COVID-19 pandemic continues to ravage the global economy.
The report titled Covid-19 global survey: inside business, impacts and responses, shows the severity of the pandemics effects, with continuity planning falling short across all sectors.
The report takes into consideration a global survey of over 10,000 ACCA members and stakeholders who are working in a wide range of organisations. Research reveals that the outbreak is particularly challenging for smaller organisations compared to their larger counterparts, with all sectors reporting distinct concerns about cash flow and growth.
SMEs, especially the businesses that are towards the smaller size, have a more pessimistic view than the larger organisations when considering profit and revenue. Among business leaders of the smallest organisations, with fewer than 200 employees, 85 percent expect year-on-year revenue to be lower than the previous year, and 86 percent expect year-on-year profit also to be lower.
Acca’s data also reveals that almost a third of organisations are lacking in appropriate business continuity plans (BCP) to help ensure operations proceed as smoothly as possible in times of crisis. The problem is particularly prevalent among the smaller businesses and organisations, with 38 percent of those suggesting they do not have a continuity plan in place compared with 15 percent of firms with 1,000 or more employees.
“Not having a BCP can compromise the resilience of organisations’ management through the COVID-19 outbreak and could have significant implications for employees, customers, investors and all stakeholders connected to the organisation,” said Jamie Lyon, ACCA’s head of business management.
One of the more consistent findings throughout all sectors is that there has been a reduction in employee productivity. The public sector, at 69 percent, cites this issue most often, compared with 59 percent in not for profit, 55 percent in the corporate and financial sectors, and 50 percent in academia. Despite many businesses adopting a work-from-home policy to continue with operations, there is only so much that employees can do with such limitations.
Cashflow concerns across sectors vary immensely. 39 percent say this is a concern in the corporate and financial world, compared with only 26 percent in the public sector. Once again, it comes as not surprise that the firms that are feeling the sting of cash flow and supply chain disruptions are the smaller businesses.
“Public sector finance professionals need to provide timely financial analysis, such as cash flow forecasts, to support the critical public services being delivered during this crisis. However, the research reveals that public sector members are less likely than peers in other sectors to have completed a financial reforecasting following the outbreak of the pandemic. The strength of the recovery will depend on rapid and effective government responses, with professional accountants having a critical role to play in supporting this response through the provision of timely information and analysis,” said Alex Metcalfe, ACCA’s head of public sector policy.
When leaders were asked if they had performed a reforecast of their organisation’s financial outlook for2020 since the outbreak of COVID-19, only 35 percent in the public sector said they had, compared with 55 percent in the corporate sector and 47 percent in academia.
“Our report also reveals small but growing concerns about financing and debt obligations, which we could expect to rise in the coming weeks. The immediate picture is of focusing on short-term survival, which may worsen over the coming weeks and months. Many respondents see these issues threatening the very viability of their organisations over the next six months. The pressure will be on governments globally to sustain these organisations, and especially SMEs,” concluded Lyon.