CPA AUSTRALIA has developed the following short list of issues accountants, including those to SMEs, should be considering, and possible actions that should be taken, to help steer their business through the economic downturn.  

Strategy is key, and the organisation will be looking to accountants and other financial decision makers for leadership on finance and accounting matters that are critical to business success.

1. Financial modelling — develop a simple spreadsheet financial model for your business around its key operating metrics (for example, revenue, costs, cash, inventory).  "Plug and play" with different scenarios to understand the potential impact of such scenarios on the viability of your business.
        Develop contingency plans accordingly. Such a plan could include cost and inventory reduction, cash use minimisation, sourcing additional funding and seeking a short-term revenue boost through, for example, discounting. If you do consider discounting, your modelling may benefit from a margin and pricing sensitivity analysis, as it is critical to understand this relationship at this point in time.
2. Currency of your financial records — ensure your financial records are up to date and produced with greater regularity, particularly cash flow statements and forecasts. The importance of cash flow and using reporting and forecasting to manage it can not be overemphasised.
        When business was booming, monthly reporting and forecasting of cash may have been adequate, however weekly or more frequent reporting may now be required.
3. Review government responses to the downturn — the policies that governments are currently implementing could have an impact on your business, particularly the demand for your products or services. For example, taking advantage of cash handouts to individuals and tax incentives for capital investment by business may be an opportunity for your business to run promotions that align with these government responses.
        You should also factor in tax incentives around business investment in your capital expenditure budget and possibly amend your future growth plans to take advantage of other government stimulus spending (such as on infrastructure).
        It is also time to review how your business manages its tax affairs, as it is very likely that with significant government deficits, there will be pressure to raise government revenue through tougher compliance activity.
4. Banks and investors — ensure you keep them in the loop and the sooner you talk about any problems your business may have, the more that can be done. In other words, secure funding options before you need them.
5. Pricing — take a more pro-active view of your pricing approach and that of your competitors. You do not want to take a pricing position that means you are uncompetitive but you have to balance this with avoiding pricing that may make your business unsustainable in the long term.
6. Customers — understand holistically which product or service lines or customers are profitable and potentially look to remove non-profitable customers, product lines and services. Look carefully at the costs of acquiring new customers, and compare against developing current smaller customers with growth potential.
7. Suppliers — look for improvements in price and terms. For example, extended payment terms, review pricing, increased scope, consignment stock and the simple rationalisation of suppliers.
8. Business improvement — look at the divisions, products and services provided by your business. Do you need to rationalise? What is generating the profits? Where is the growth? What do you need to add to meet changing market needs now and in the recovery? Ensure operational risk management is adequate to reduce the risk of productivity losses from poor practices, losses from fraud and losses from unethical to overly risky behaviour from staff.
9. Opportunity — look for potential acquisition and merger targets. If your business is strong, now is the time to become even stronger.
10. Capital Investment — this may be the time to invest if the business fundamentals are strong, but turnover has slowed. Investing during this time may cost less, and the disruption and diversion of effort may be more tolerable to your business.
11. Deemed director — with many businesses under considerable financial pressure, they may turn to their chief financial officer (CFO) or external accountant to lead them out of trouble. Where the CFO or external accountant gains effective control (directly or indirectly) over the affairs and direction of a company, that is they are the controlling mind of the company, they can be deemed to be a director of that company, even though they have not been validly appointed as such. They therefore become subject to the same obligations as a validly appointed director.
12. Watch out for your staff — the global financial crisis will have an impact on your employees and their families, so keep a lookout for signs of stress and be ready to provide support.