Radar Report: Trends impacting professional services
Futurist Tommy McCubbin provides insights into how professional services sectors are being impacted now, soon and later under COVID-19, with supporting comments for accountants and bookkeepers from ABN director, Peter Thorp.
A recession traditionally takes months to reveal itself, giving businesses ample warning to adapt and move with consideration. Most businesses can take a manageable hit and continue trading.
COVID-19, by frightening comparison, gave no warning, taking businesses from one hundred to zero in a few days.
In this series, we look at the trends that are impacting several business verticals now, soon and later, and how accountants as bookkeepers can help guide and provide value through the pandemic.
Professional services fortunes split by COVID-19
The pandemic has affected the professional services sector very differently. Some businesses in this space, such as business consultants and advisors like you, have had their busiest time in recent history. At the other end of the spectrum are the hosts of businesses hoping to ride out the pandemic on JobKeeper (or worse, have had to shutter operations entirely).
For those advisors who have professional services clients on your books, you’ll need to be agile and think laterally. Every single company’s plans have been disrupted to some degree. The pandemic is something no business had planned for — and any strategic forecasting has been thrown out, with futures uncertain. That leaves you in a position to be actively informing the rapidly evolving plans of your clients.
Since Prime Minister Scott Morrison instructed health, medical, fitness and therapeutic services to shut down face-to-face services, we’ve since seen a partial return to normality. This leaves the agencies that require physical contact in limbo, with enormous challenges ahead.
In some cases, we’ve seen services that don’t rely on physical contact (such as personal training and counselling) successfully make the transition to video conferencing, which further highlights just how much this pandemic is reshaping the business environment.
This article will focus on the trends impacting services industries across three horizons throughout the pandemic;
- Now: Transitioning out of isolation and into partial normality
- Later: Post vaccine, when we can return to life with our freedoms and opportunities as we recently knew it
This article is a follow up to the expansive MYOB Radar Report Volume III, released in 2019. With a depth of insight into key industries including retail, the Radar Report remains a useful resource for business advisors of all kinds.
READ: Radar Report Volume III
As we transition out of isolation, we can meet in person again, leaving our only connection to the outside world: our screens. This has led to an accelerating adoption of technologies, with examples such as video conferencing, co-working platforms, and cloud-based project software.
Microsoft Teams, Google Meet, and Zoom are keeping the economy connected, with Zoom, the current market leader with 151 percent more active users than this time last year.
There are some immediate things you can do which don’t require any new processes or products:
- Reach out to clients individually, and ask how they are and assure them your agency is running business as usual
- If a client is in distress, consider offering them generous payment terms or rate card. Hopefully within 12 months, the economy will have recovered, and their business will be back on their feet, and that loyalty will be worth the investment now
- Where possible, transition to offer your full range of services via video conference
Once you have connected with your client base, it’s time to use any extra time to capitalise on the instability and opportunities in a disrupted marketplace.
These ideas can also be applied to physical service providers who’ve been instructed to shut down given social distancing restrictions:
- Upskill and adjust your services to cater for real time needs in a time of COVID-19
- Build personal and professional brands as a thought leader, sharing content on social networks
- Look to expand your connections and service offering into other geographical markets, now we can all meet in our global online economy
As we transition out of isolation and adapt to new tight restrictions to get the economy ticking over again, there will be opportunities for expanding your client base.
Most businesses will be reviewing everything, including how they engage their accountant and bookkeeper. Be the one to lead that conversation, and be clear how you can add additional value, going from
Accountant, bookkeeper or business advisor? Whatever your case, continue to upskill, adapt, and evolve your services to solve the immediate problems for businesses in flux.
Into 2021, we can expect a Post-Vaccine Boom. Online consultation could become equally preferred and accepted as face-to face meetings. We could see virtual reality (VR) meetings with avatar colleagues in virtual spaces begin to appear as innovators seek to improve remote meeting conditions.
What’s likely to be universally needed for small businesses and sole traders in professional services is scenario planning. ‘The impossible’ has just happened, proving we need to have a plan for pandemics and other speculative scenarios going forward.
As accountants and bookkeepers, you can be the ones to lead and give confidence to your clients that, after this and other disasters, everything will be OK.
While we have spent months staring out the windows of our home and essential workspaces, we see a vastly different world. We must not forget the best stimulus, and the only way back to any sort of normality is to contain the spread of virus, and respect best practice and advice from the Government. But, most importantly, containing the spread will save lives.
A practitioner’s perspective
Peter Thorp, Director, Australian Bookkeepers Network
Recession? Depression? Quick recovery? Slow recovery? Predictions from some sectors of our media of another Great Depression coming soon to a suburb like yours ignores one undeniable fact. The economy today (yes even the battered and bruised COVID-19 version) is nothing like the economy of the 1930s.
Parallels drawn to past economic disasters reek more of keeping the media relevant in your eyes than meaningful economic commentary. Sure, the country’s 28-year-streak of uninterrupted economic growth looks likely to end, but is it really time to give over to the doomsayers?
There are strong parts of the Australian economy in the lead up to COVID-19 such as services and manufacturing, and one suspects that while many of its participants are currently slow or in varying stages of hibernation, they will bounce back relatively quickly.
If the doomsayers are to be believed and the Great Depression is the economic benchmark we are now to be measured against, let’s look at some of the comparisons. Services and private consumption were the sectors least affected during the Great Depression, while business investment was the worst.
The services sector of our economy today dwarfs the services sector as a percentage of GDP post the Great Depression, so its ability to lift GDP by comparison is huge.
Assuming consumers are true to their support of the services sector over recent decades it is fair to say these businesses are likely to do much of the heavy lifting as we emerge from the post-pandemic gloom.
Think about it; what sector would you rather be in about now?
For me, services as a sector simply needs to be unshackled from the government-imposed shut down and it will restart largely by itself. Some components (particularly those dependent on domestic support) will kickstart quicker, such as in health, communication, financial, cultural and recreational services. Those components reliant on international support and highly discretionary levels of spending will take time, but their resurgence may even be stronger.
Make no mistake: services will be the leader of a return to economic normality.
So what does that mean for tax practitioners?
Recognise who you are dealing with. The nimble, agile players in this short period of economic gloom that have adapted to find new revenue streams or new ways of doing business are those in the Services sector. They were and continue to be great adopters of new technology.
I was reminded of this recently by my son (a physiotherapist firmly embedded in the health services sector). His business was decimated by coronavirus as clients opted out of face-to-face contact with a health professional. He adapted his business to reach out to the COVID-induced ‘work from home’ set through their employer’s HR departments to deliver physiotherapy services over electronic platforms right into their homes. I am in awe of the examples of the ways this sector has adapted.
As tax practitioners, how do we help this sector?
First up you need to help them access the COVID-19 stimulus incentives (if they are eligible) as this may help their financial kick start out the other side.
Many will still qualify (even though some will not) for the Cash Flow Boost measures or JobKeeper incentives such as the generosity of the Basic or Alternative Tests for the Jobkeeper initiative and the blind support of employers under the Cash Flow Boost initiative.
Also be mindful of the various state and local government initiatives as well as those from the private sector such as the banks and landlords. As these clients emerge some will look to invest and those that require equipment should look to take advantage of the $150,000 Instant Asset Write-Off (keep an eye out for when that’s due to expire, as this may change).
Next, and as business restrictions are lifted, then your role changes quite quickly. It is essential that you understand your client’s business path through and out the other side of the pandemic mess to ascertain exactly where you can help. To do this you need to communicate with your clients.
Once you understand what they’re trying to achieve with their businesses and how they are trying to achieve it then your role will become clearer.
Stay close to clients in this sector as they will have a thirst for your services as they put their foot on the gas and move out of the gloom. This sector has the propensity to pay for your services, so make sure they are aware of your capabilities and your willingness to be involved.
Technology is this sector’s friend, therefore you should look to become the conduit to new technology that furthers their business model. Understand where they want to take their business in a post-COVID-19 world as this should generate more targeted reporting both financially and of KPIs.
Remember, your clients need you now more than ever.