Pandemic Response: Adaptation of Accounting During a Crisis
The COVID 19 pandemic has caused ripples of damaging effects on the economy. To contain its spread, lockdowns and community quarantines forced many businesses to close or pause operating. In effect, some people lost their jobs and sources of living with no way to recover their losses.
And as the disease continues to run its course, the instinct to survive pushes all of us to adapt. As a response, companies are finding ways to restart and recover losses while making it still safe for everyone.
This article talks about the survival responses of accounting during a crisis. Let’s take a look at how accountants continue pushing boundaries and helping business owners survive through this crisis.
For one, the service sector was not very lucky when the pandemic hit. As services are usually completed with social contacts, it has to find solutions to recover. The accounting sector is one of the many services that found ways to bounce back. Here are the adaptive responses of accounting during a crisis.
Moving to Online Solutions
With the current situation, service activities are now moving to a work-from-home setup. And cloud accounting is really helpful for accountants in this move towards remote working. Cloud accounting provides a channel to use accounting systems even from the safety of their homes.
With the powers and capabilities of cloud accounting, there’s no more need to go on-site to get documents. All can be available in cloud storage. Reports and statements can also be forwarded to decision-makers online. Cloud accounting has made working through a crisis still efficient and effective.
Accounting during a crisis is difficult. Members of accounting teams are now working their tasks separately as a result of remote working. Because of this setup, risks for mistakes are higher. To solve this, accounting teams now follow stricter controls.
This is to primarily ensure the accuracy of outputs. Additionally, accountants want to maintain the efficiency and confidentiality of company information. And these are all enabled through cloud accounting.
Focus on Relevant Information
Many industries are having a hard time bouncing back from the effects of COVID 19. To help, accounting is now focusing on giving information and insights that could help the company recover from its losses. Performance measures are checked to picture the current health of the business and see where they can be improved
For example, the company needs to assess its debt status and profitability status if they think they are in danger of closing. Therefore, accountants should focus on the company’s debt and profit indicators. Accountants and decision-makers, together, should then assess which aspects they could cut loose and which ones they can improve.
Transparency on Uncertainties
One of the biggest factors to consider in business management today is the uncertainties. At the rate that the disease is going right now, no one can assure when the economy will return to stability. Therefore, accountants are now making full disclosures of the uncertainties in their reports.
For example, when forecasting sales and making budgets, accountants should highlight the uncertainties on these numbers. Business owners should take on new projects with caution. Risks should always be factored in, more so now, to make allowances for errors.
Adjustments in Accounts
The shutdown of the economy during the early weeks of the pandemic did not only affect revenues and profits. It also made big impacts on financial position accounts. As such, accountants should prioritize impairment tests and make adjustments when necessary.
For example, trade receivables may need higher provisions because credit payments are more uncertain. Other accounts like inventory should also be checked to see if there is spoilage. If there is, it must be measured and recorded.
Increased Demand for Upgraded Accounting
Companies are aware of how terrible the economic situation is. Because of this situation, the demand for more transparent accounting is increasing. They need to know their issues. And from there they can make plans and strategies to improve their situation.
3E Accounting can offer this for you. We are a competent accounting firm, dedicated to helping you move forward from your current standing. We specialize our services with the use of cloud accounting software. With our team of experts, we can assure full disclosure and professional services. Contact 3E Accounting today!