Directors encouraged to seek advice soonerDOWNLOAD
Contact: Karina Randall
Corporate Affairs & Communications
Mobile: 0414 823 712
Tel: +61 (0) 2 9322 3778
Over 80% of clients of suburban accounting and legal firms are indicating some level of financial difficulty in the three months to December, according to a survey of Black Ink® Members conducted by Deloitte.
According to Simon Cathro, Deloitte Partner in Charge of Black Ink®, this level of financial difficulty emphasises the need for Directors to seek advice sooner, and is likely to result in a greater demand for advice on refinancing and restructuring options, small business scenario planning and insolvency advice on suburban accounting and legal firms in 2009.
Indeed, the survey shows that 57% of all respondents have had one or more clients making enquiries about insolvency or bankruptcy in the last three months.
“It is vital that Directors seek the right specialist advice and do so sooner rather than later. Prompt action will be the key to managing these volatile times for many companies in 2009,” says Mr Cathro.
A surprising 83% of respondents to the survey are receiving one or more enquiries a month about refinancing, which Mr Cathro attributes to the current volatility in the markets and the difficulty in obtaining financing. Further, 83% of all respondents revealed that they have received more than one client enquiry a month to sell the clients business off, an action which is often a precursor to financial distress and insolvency.
The accounting and legal firms have identified the main barriers in achieving business goals by their clients are cash flow and working capital (26.9%) and consumer sentiment/drop in sales (22.7%).
“This reveals the strong need for specialist scenario planning services, which should take into account the common indicators of where we would see business not achieving their goals,” says Mr Cathro. “It is essential that planning and budgets are up to date, and that all assumptions have been checked. Also, ongoing financial reviews are essential.”
Mr Cathro says that this current economic environment is likely to create greater demand for quick access to specialist technical expertise.
“The recent economic downturn and the changes to the availability of funds from financiers has meant that a number of suburban accountants have found themselves increasingly challenged to be able to deal with clients facing urgent liquidity and trading issues,” says Mr Cathro. “Often this information is required quickly, before the position of the client becomes too difficult to recover.”
Given the resources of many suburban accounting and legal firms, technical training is not always easy to come by. The survey revealed that although technical knowledge and updates are considered vital by 80% of the respondents, around 18% of all advice required is in non-core fields such as insolvency and forensic services.
Mr Cathro says demand for specialist advice to smaller accounting and legal firms has increased of late. Since Black Ink® started in April 2008, it already has a membership of over 350 accountants and lawyers. Mr Cathro believes that by the end of the financial year, the Black Ink membership is likely to have grown to around 1000 members.
Deloitte’s Black Ink® is an exclusive member network supported by Deloitte providing a range of specialist accounting and financial service advice, but most particularly in the insolvency, restructuring, forensic, superannuation and tax fields.
“Suburban accounting and legal firms are often not able to compete with the mid tier and large firms if a clients brief expands to need a larger range of requirements outside a simple tax return. Membership to Black Ink® can provide the member a unique opportunity to service their client better by being part of the Black Ink® network,” says Mr Cathro.
One in five of the suburban accounting and legal firms hold a negative outlook for their own business. In December 2008, 20% of respondents had a somewhat negative outlook in the next 12 months for smaller accounting or legal firms.
Of the 46 respondents to the survey conducted in December, the majority of respondents are typically from accounting firms of less than five people (52.5%), with 15% above 40 employees. 80% are located in NSW, and 93% are the principal or partner.
NB: See our media releases and research at www.deloitte.com.au. To view the full report, please click on this link: http://www.deloitte.com/dtt/0,1002,cid%253D249203,00.html
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