The professional services industry is feeling the impact of the COVID-19 crisis in a variety of ways. Firms are adjusting to remote working and new client engagement models, all while navigating demands in the face of growing uncertainty.
To assist in navigating these unprecedented times, our industry experts have created and compiled several resources to help you tackle these challenges. Here are the top five most frequently asked questions from our professional service industry clients and our answers to them.
1. WHAT ARE THE TOP THREE CONCERNS WE HEAR FROM OUR PROFESSIONAL SERVICE CLIENTS?
- Acquiring new clients and billable hours
- Hiring and training
- Waiting for client payments and cashflow
2. WHAT HAVE WE ADVISED OUR PROFESSIONAL SERVICES CLIENTS TO DO TO LESSEN THE IMPACT ON THEIR FIRM?
We have advised our clients to think long-term. We can still weather the storm with proper planning and thoughtful decision making. We recommend the following:
- Cashflow will be vital over the next 6-10 months. Liquidity is an important area to review and improve. By putting your firm in a strong liquidity position, you strengthen your capabilities to manage internal costs such as staffing and IT infrastructure, as well as the ability to jump at new opportunities.
- Cashflow analysis and projections are crucial for both current and future operations. We recommend creating a 14-week cash flow forecast to assist with your firm’s projections.
- Be aware of alternate funding sources, such as SBA loans or other federal or state programs.
- State and local funding allocated to industry services are expected to be impacted over the coming years. We recommend planning for additional shortages and reforecast financial plans.
- Review and improve the firms billing of work in progress structure.
- Review strategies for accounts receivable collection and cash conversion cycles.
- Understand your drivers and key performance indicators. This will help you make the best decisions.
3. WHAT TAX RELIEF OPTIONS ARE AVAILABLE FOR MY PROFESSIONAL SERVICES FIRM?
The new relief bill provides support for businesses during the ongoing pandemic. Please read our latest blog post regarding PPP applications and the employee retention credit.
4. IS THERE AN IMPACT ON PROFESSIONAL SERVICE FIRM RETIREMENT PLANS?
Several provisions in the CARES Act directly affect retirement plans for the benefit of plan participants. For example, the Act increases the maximum loan amount that can be taken from a participant’s retirement plan account. However, the adverse effect of COVID-19 on the overall economy will likely also negatively affect the plan sponsor. This could lead to a reduction in or elimination of employer matching contributions. A firm that has been forced to lay off a portion of its workforce could be subject to partial plan termination. Click to learn 5 Retirement Plan Changes from 2020.
5. WHAT OPTIONS ARE AVAILABLE TO PROFESSIONAL SERVICE FIRMS WHO MAY NOT SURVIVE AN ECONOMIC DOWNTOWN?
COVID-19 has been a trying time for businesses and maybe the right time to take advantage of business transition opportunities. Smith Schafer can assist with an evaluation by performing a business valuation. There are three options for business valuations:
All three of these options are different in content and investment, and each will provide a value or range of values. A professional services firm can use this information to focus on key drivers to improve financial results and restore value that may have been affected by the pandemic.
Contact us today to work with a qualified advisor to help you leverage opportunities and make the best decisions for your professional service firm. Our team is committed to serving over 350 Minnesota professional service firms. Smith Schafer has the experience and understanding of the industry to make a lasting positive difference in your future success.