Developing an Adaptation Mindset – A Checklist for Accounting Teams

2020 has been a year of disruptions and reactions. Companies have reacted to supply chain interruptions, new regulations, shifting market demand, and staffing issues, among other challenges with some faring better than others.
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Marcus Wagner explains, “Because of COVID-19, businesses and their accounting departments are going through a cycle of shock (and maybe some denial), survival, learning and adaptation. For those of you who haven’t done so yet, it’s critical to begin the shift into the learning and adaptation phases as quickly as possible so we emerge stronger as a result."

Adapting has been critical thus far and will continue to be as we move into 2021. An adaptation mindset allows your business to respond to current challenges and anticipate future disruptions to generate better financial outcomes. Companies with accounting teams that adapt quickly can minimize revenue loss during a downturn and capitalize on revenue opportunities faster during a recovery period.

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Prepare your business to adapt to whatever comes next using this checklist of best practices:

Go Digital
Wagner further explains, “Businesses and accounting departments who were early adopters of new technologies like the cloud have come out ahead as a result. Don’t be left behind.” Your accounting software and any adjacent technology should be managed digitally to keep your business agile enough to adapt to whatever comes next.

• Use an online bookkeeping software that fits both the business’ needs and the skill-level of your personnel
• Integrate software with supplemental financial apps for tasks like sales tax calculation and employee expense tracking
• Store financial information in the cloud for better accessibility and more reliable back ups

Manage Risk
While a global pandemic is not a risk that many business owners could have foreseen, managing overall risk is vital to minimizing additional damage from the fallout after a disruption of this magnitude.

• Create a disaster recovery plan
• Review business insurance policies to determine if coverage is adequate to pay critical expenses
• Hire a professional to conduct a financial risk assessment
• Strengthen IT practices across your network and train employees on how to avoid cyberattacks
• Do business with reputable service providers to mitigate the risk for data breaches

Reduce Costs
Getting leaner poises your business for future financial uncertainty, which is why many business owners cut spending across the board when there is a downturn in the market, or a disaster occurs. However, adapting effectively does not include cutting spending indiscriminately. Instead, cut costs strategically. 

• Reduce operational waste
• Scale back spending on ongoing service expenses – only pay for plans that cover what you absolutely need, instead of those that include fancy upgrades
• Renegotiate contracts with vendors
• Avoid cost cutting where the long-term effects on revenue outweigh the short-term benefits
• Eliminate spending in areas that do not cost more to restart again later
• Cut costs where risks will not increase as a result

Improve Cash Flow
Stay agile and ready to adapt to whatever is next by keeping cash flow positive. Ensure that the business has enough float to sustain operations in the face of future risk.

• Collect on accounts receivables (AR) faster
• Exercise strategic control over vendor management
• Create revenue in new ways to respond to market changes

​Hire an Accountant
An experienced accountant should be overseeing the financial components inherent in these types of adaptations. However, many businessowners want to avoid the significant costs of hiring and retaining an accountant in-house. 

• Outsource financial functions to a third-party accountant to draw on the expertise of a dedicated professional without hiring in-house

Find out more about how an accountant can help during a market downturn and reach out to us for more information on how to prepare for the coming year.