What should the top priority be for accountants in 2021?
Clement Chan, Managing Director of Assurance, BDO and Past Institute President
2020 was an unprecedented and challenging year for all of us, regardless of our background and profession, brought on by the disruption caused by COVID-19 pandemic.
The most notable disruption caused by COVID-19 was the implementation of various travel restrictions and social distancing rules worldwide to stem the spread of disease. This lockdown and disruption of normal lives and economic activities have caused a tremendous impact on everyone. With this in mind, accountants – who are not immune to change – can consider the following points below to help businesses navigate disruption.
Financial reporting timelines. Because we live in a highly integrated and globalized world, we see a lot of multinational corporations with global business presence and listing status. With various reporting timelines required by different exchanges and regulators, both accountants in practice and business can face a tough job in meeting different reporting deadlines, especially amid COVID-19-related work from home measures. Accountants have to take these differences into account and prioritize their time well to still meet deadlines amid disruption.
Business impact. Almost every industry has been impacted by COVID-19 in one way or another. Accountants need to be vigilant and forward-thinking in order to come up with appropriate strategies and plans to deal with expected difficulties and problems. Some common examples include using their skills to help businesses manage cash flow, arrange temporary bank credit lines, and handle short-term breaches of loan covenants.
Financial reporting standards. Accountants need to make the right judgement on accounting issues concerning financial reporting standards when preparing financial statements or auditing them. This includes different accounting issues based on the new and changing areas such as impairments to do with existing businesses or investments, going concern assessments and the consequential accounting policies and treatment, appropriateness of accounting policies and estimates so on.
Forward planning. Last but not the least, the pandemic has also forced people to rely more on virtual communication. Accountants need to be aware of the relevant technologies and software available and use them effectively in order to maximize their workflow and help clients with their IT transformation journey.
“Accountants need to be vigilant and forward-thinking in order to come up with appropriate strategies and plans to deal with expected difficulties and problems.”
Frankie Leung, Managing Director, Alvarez & Marsal and an Institute member
No longer are accountants solely focused on pure accounting matters. Their roles have expanded into advising on non-accounting issues such as regulatory requirements, internal controls and compliance culture. This trend looks set to continue well into 2021 and beyond.
As accountants play the key role of gatekeeper for businesses, they can ensure internal controls are strong enough to detect and prevent misconduct. By working together with compliance personnel, accountants can identify potential gaps and come up with risk-mitigating strategies to help an organization’s financial and auditing systems. This, however, is not an easy task in current times, as the COVID-19 pandemic has led to more related fraud and cybercrime risks across all businesses.
This can stem from employees working remotely or organizations branching into e-commerce, for example, as this may expose businesses to digital fraud risks. The adoption of virtual methods for approval processes such as expense reimbursements and third-party payments may also pose additional risks due to a lack of proper supporting documentation. Therefore, accountants must stay up-to-date with the latest threats and mitigating strategies in order to direct their organizations in responding effectively and swiftly.
Accountants must also keep abreast of technological developments such as remote investigative tools and improved data monitoring systems, as this will help them solve compliance challenges and strengthen internal controls. This is particularly important as regulators are implementing stricter measures with larger fines and an increasing focus on individual accountability. I believe more financial institutions and organizations will be fined by regulators for non-compliance breaches, particularly in failing to put in place adequate internal controls for risk management transgressions in the COVID-19 era.
Accountants should set a good compliance culture tone, as culture and ethical standards are critical to achieving risk reduction across all businesses. Regulators are increasingly putting culture on their radar as they can see that culture directly influences conduct within companies. Accountants must also bear in mind that merely having a compliance framework is not sufficient. An organization with a weak culture that engenders unethical behaviour is likely to fail, despite having a documented compliance framework. Accountants can help align commercial goals with those of compliance, as they play a key role in ensuring challenging financial targets do not erode a strong risk management culture.
“Accountants must also bear in mind that merely having a compliance framework is not sufficient.”
Kevin Fitzgerald, Managing Director - Asia, Xero
Over the past 12 months, accountants and their clients have faced unprecedented challenges and uncertainty with significant financial pressures. This uncertainty is likely to continue through 2021, despite the roll-out of vaccines. To help their clients weather these challenges and emerge stronger, accountants should prioritize two areas for success in 2021 and beyond.
Take advantage of digital tools. During the pandemic, digital tools played an important role for businesses facilitating communication and collaboration in the midst of lockdowns and significant interruptions to life and work. Accountants who embraced digital transformation for both themselves and their clients were able to continue to operate, advise and add value through digitization of accounts, records and processes and prevent significant disruption to their day-to-day businesses throughout 2020. Accountants should prepare by making sure they have the right technology in place for future change. While we are seeing life begin to return to a semblance of normality, it is likely that the way we work has changed permanently. Digitalization will be a key advantage for organizations to improve accuracy, productivity and visibility, enabling them to plan their resources and make more informed decisions impacting the future of their business and future proof it.
Provide additional value through advisory. Professional accountants in practice can offer greater value to their clients by providing insight and analysis to help their clients plan for the future. Today, business owners need more than a top level view on their business performance and a tick of approval on compliance. Accountants can help their clients capitalize on opportunities where they exist and minimize the impact of speed bumps in the road ahead through more accurate business planning. Accountants have a unique ability to translate raw financial figures into qualitative or even predictive insights that aid with decision-making.
None of us can predict exactly what 2021 will hold, but what is abundantly clear is that this year will be a defining moment for accountants who make the decision to digitalize, and diversify their offering. These accountants will be better equipped to see out and succeed through these turbulent times.
“Accountants have a unique ability to translate raw financial figures into qualitative or even predictive insights that aid with decision-making.”