Wedding planners and travel agents usually advise clients who are in ‘a happy place’. The same can’t be said for undertakers and surgeons, whose clients are generally facing challenging situations.

Accountants experience both kinds of clients: some have vibrant, growing businesses which distribute ample profit. Others are in distress, fighting for survival. Recent global events have exposed more accountants to clients in the latter category. What skills are required? How do accountants really add value in these situations (and get rewarded for their contribution)?

Panalitix caught up with an accountant we’ve worked with for 3 1/2 years. She is a frequent GrowthEquation user, has a successful advisory business and is based outside Washington DC. We’ll call her STAAACS (short for Super Talented Accountant Accomplished at Advising Clients under Stress)!

Panalitix: Hi again, STAAACS. Thanks for making time.
STAAACS: No problem, and thank you! Isn’t it 2am there??!!

Panalitix: Yes, but wide awake! And interested to hear about your background helping distressed businesses.
STAAACS: Before I started my own firm, I was an Insolvency Practitioner (IP) so I saw a lot of businesses entering bankruptcy or undergoing liquidation.

Panalitix: Why did you stop?
STAAACS: I liked the work but I really wanted to start my own firm. I wanted to be an entrepreneur!

Panalitix: Bankruptcy and liquidations are quite technical fields. You need qualifications and experience, right?
STAAACS: Yes, I qualified as an IP but I learned on the job that you need very ‘human’ skills to succeed also.

Panalitix: Very ‘human’ skills?
STAAACS: Yeah, prolonged stress generally brings out someone’s REAL character. Everyone has a degree of resilience. They can keep fighting up to a point. Then they reach a breaking point where their behavior will become unpredictable and sometimes irrational. In insolvency work, you are trying to guide a business through an administrative process to a particular goal. That can be difficult where people act unpredictably. Same goes for any business in a crisis.

Panalitix: Can you give some examples?
STAAACS: Think of it this way. Financial statements depict how a business is doing from a business perspective. But the individuals involved have their own goals and vulnerabilities. And they may have made promises to other people (like family members) about the future. When those promises don’t come true, this is more than a ‘business problem’. Working with distressed businesses requires an understanding of these back stories to be really effective.

Panalitix: OK. So understanding the individuals involved is important… Do you have situations like this now?
STAAACS: Absolutely! I seem to attract clients who get themselves into sticky situations! And health pandemics exacerbate the problems!

Panalitix: Can you share how you approach those clients?
STAAACS: Sure. It may sound obvious but the first step is to get your client to take responsibility. There is often a period of blaming something / someone else and this is very unproductive.

Panalitix: Who do they blame?
STAAACS: Honestly, I’ve heard everything. The recession, ‘management didn’t step up’, the ‘regulator was unfair’, ‘our customers changed’, the ‘government doesn’t understand’ etc. etc. There may be some truth in all of these factors but the real question is how we react to these challenges. That’s good business thinking.

Panalitix: OK, but something like the Coranavirus? Does that fit into the same category?
STAAACS: I believe it does. One of my favorite expressions is ‘tough love’. We have to get our clients to focus on what to do next, not how events have conspired against them. Later we can self-reflect. Meanwhile, let’s take responsibility and take action. I don’t want to rant on about this but I’m often speaking to business people who are REALLY privileged; they got a good (free) education, they got good jobs in companies where customers showed up and paid them money. Life has been sweet. But that’s only half the story in business and life. There are times where we need to step up, not wait around for hand-outs or some other ‘magic’ solution.

Panalitix: I get it. It sounds tough but honesty is required with clients.
STAAACS: Yes. Looking back on hundreds of cases I worked on, many businesses failed. The ones which didn’t had leadership which took responsibility and took control. And fast.

Panalitix: What else do you focus on when dealing with distressed businesses?
STAAACS: Speaking of ‘fast’, I also look at decision-making protocols in the business. Some are hamstrung by complex management and board structures and simply can’t take decisions quickly enough. The tougher the business decisions, the quicker we need to act. My chances of helping the business are much greater where I am dealing with the owner who can take quick decisions and then implement them. If that’s not the case, I try to engineer a situation where we can act quickly.

Panalitix: What are some actions you are taking to help your current clients?
STAAACS: It’s interesting that a crisis is a really good time to look at business fundamentals. There is an opportunity to make sweeping changes and go back to basics. There are often things which should have been addressed before which can now be addressed. So I always start with this ‘big picture’ analysis.

Panalitix: What does that involve?
STAAACS: Basic stuff. Are you selling? What are you selling? To which customers? At what cost? Are you profitable? What is really working and what is not? If we understand this, we know where to focus. We know what is worth preserving in the business. And what needs change. Oh, and a plug for GrowthEquation – it’s a great tool for this purpose.

Panalitix: Thanks! Now, I’m imagining a panicking business owner who only wants to talk about his immediate decisions… Isn’t it difficult to get them to think ‘bigger picture’?
STAAACS: Yes it is… but that’s the value of the advisor; to get them to stop and think about longer-term outcomes. And opportunities.

Panalitix: Do you have an example?
STAAACS: Many. One of my clients has been limping along for years with a weak software product offering. Recent events have driven them back into consultancy where they have considerable strength. We helped shine a light on this opportunity.

Panalitix: And another?
STAAACS: One of my biggest clients supplies fresh produce to the hospitality industry. They’ve been hard hit but the business fundamentals are really good. They’ve developed a plan to take market share by entering long-term contracts and providing extra service when their competitors are shying away. There are risks… but decisions they are taking now suggest the coming years are going to be good for them.

Panalitix: Thinking more tactically, what are some immediate challenges your [distressed] clients face.
STAAACS: Staffing is right up there. Simply put, a change in business circumstances means that new work needs to get done. And some work which was mainstream is no longer required. Human Resource management means making decisions to ensure the ‘right’ work gets done by the ‘right’ people. There may be lay-offs, engaging contractors or changes to compensation. We help model the impact in different scenarios.

Panalitix: What else?
STAAACS: Obviously cash flow management features high on the list. We’re helping clients figure out their breakeven point in various scenarios and how this will impact cash. Then we set short-term targets (in dollars or units). Hitting short-term targets in tough times really increases morale. We also review accounts receivable and accounts payable to find ways to improve cash flow. That may lead to a discussion on pricing, discounting and payment terms.

Panalitix: Does your approach vary with each business you work on?
STAAACS: Each case is different. We just developed some cash reserve policies for a client and for others we are managing their creditor relationships to arrive at payment plans. One e-commerce client asked us to help improve and implement credit rules because bad debt was unreasonably high. We try to do the work which enables the owners / managers to focus on their main business.

Panalitix: Sounds like we shouldn’t wait until a crisis to look at these issues?
STAAACS: Exactly! Accountants should be more proactive in these areas. As you say, we shouldn’t wait for a crisis to take this on!

Panalitix: Any other opportunities for accountants?
STAAACS: It’s one thing to set up systems and analyze data but, in times of crisis, you need to closely monitor change. We offer a cash flow monitoring service where we provide a day to day report on available cash. This enables us to quickly challenge the assumptions behind cash management and make recommendations.

Panalitix: Are any of your clients working from home?
STAAACS: Yes! The smart ones have been selective. They worked out which jobs can effectively be executed offsite. In some cases it really doesn’t matter where the work is done. I also know of cases where certain employees were not comfortable working from home for a variety of reasons. This has to be taken into account. We have a team based in India so I shared our internal communication guide with a client so they could use it too. I predict that some of our clients will continue working from home after this experiment… and others will rush back to their office!

Panalitix: We’ve covered a lot of ground. Any last thoughts on helping distressed clients?
STAAACS: I feel strongly that there are opportunities in every story of bleakness. The accountant doesn’t have to precisely identify those opportunities but should help their client to do so. That will lead to life-long productive, profitable relationships!

Panalitix: Much appreciated, STAAACS – have a good day!
STAAACS: You too! And get some sleep!