Accountants essentialas Finance Minister warns of deep recession
16 April 2020
On Tuesday, 14 April, Finance Minister Tito Mboweni warned that the country should prepare for a deep recession but offered hope of a return to economic growth in 2021.
According to Ettiene Retief, Chairman of the National Tax and SARS Committee at the South African Institute of Professional Accountants (SAIPA), the future of most businesses will depend on the critical financial choices they make now.
“Accountants and tax consultants are more important than ever, not just for financial and tax reporting, but as business advisors who can help their clients discover and leverage vital emergency funding,” he says.
This is especially true for SMEs who often do not have the deep overdraft facilities and contingency financing available to big businesses.
“There is a vast amount of information to consider and many requirements to satisfy before companies can apply for aid,” warns Retief.
Government intervention schemes require organisations to submit financials and projections, including assumptions and impact analysis, to prove that their current distress is a direct result of COVID-19. This prevents scarce funds from being squandered on businesses that were already failing before the pandemic occurred.
It, therefore, benefits companies to ensure their financial statements are up to date and that the impact of the virus on their profitability is accurately represented in interim reports.
Accountants, who are typically familiar with the state and needs of their clients, can also assist with a variety of applications, including cost-saving through efficiency and effectiveness, employee UIF applications, tax deferments, etc.
In addition, organisations must develop a sound business continuity plan that embraces heavy cost-cutting and stretching the value of each Rand spent. They may even resort to bootstrapping techniques, like sharing office space or reciprocal service exchange, which will likely become a standard tactic for some cash stapped SMEs.
Accountants will draw up strict operating budgets, and implement monitoring and evaluation strategies to assure adherence. They will also develop sustainability plans which include a thorough review of their clients’ business models. “This will help companies weather the coming months and provide optimal approaches to keep their business afloat,” says Retief.
Most businesses have a strong relationship of trust with their accountant, who is also intimate with their business affairs. This, and their strategic capabilities, makes the accountant the ideal candidate to help the business prevail.
“We must realise that, effectively, every business is now a potential business rescue case, and this is a situation for which Professional Accountants are not only well trained but optimally suited,” says Retief.
He advises all organisations to quickly approach their accountants for assistance in making sensible financial and strategic choices that contribute towards their survival and return to profitability.
The Institute continues to make representations before the government on the importance of uninhibited accounting services as a means of driving economic recovery and growth, during and post COVID-19.