Take a positive approach to business restructure during COVID
Many businesses have had a horror year, and accountants play a big role in what comes next. Brought to you by Olvera Advisors
It may be a cliché, but it still rings true: these are unprecedented times. For Australian businesses, once-rosy financial outlooks evaporated almost overnight as the coronavirus pandemic laid waste to our economic certainties.
Storefronts and offices have been shuttered, workforces laid off and entire business models rendered obsolete. For some companies, government assistance is the only thing keeping them afloat.
Against such a challenging backdrop, it's understandable many business owners might adopt a purely survival mindset. Yet, according to Hugh Armenis, a principal with business advisory firm Olvera Advisors, now is the time for companies to start planning how they're going to thrive in the new normal.
The right support during a pandemic
Olvera Advisors launched in the wake of COVID-19 to provide support to businesses experiencing distress under the current circumstances. The company works with small to medium enterprises (SMEs), small cap ASX entities and family groups where management and ownership interests are closely intertwined.
“Thanks to COVID-19, past performance no longer has much bearing on a business's future,” says Armenis, who specialises in business transformation, distressed debt and capital and crisis management.
Given the scale and volume of clients many accountants have, he believes accountants should be open to reaching out to advisers to better service their clients.
“Accountants must be proactive and appreciate there is no perfect answer or solution to getting their clients through COVID-19,” he says. “It’s important accountants engage with other advisers and experts to help them execute plans to get their clients through the now and the future.
“Accountants must be proactive and appreciate there is no perfect answer or solution to getting their clients through COVID-19.”
“Companies are facing challenges they've never faced before, which might require them to make really hard decisions about the way they do business. I believe accountants have an important role in starting these conversations – while there's still time to change the outcome.”
Two ways to help clients
Armenis says there are two major areas accountants can explore to help their clients manage this transition: divestment and asset management, and cash-flow optimisation.
“The transition from physical to digital working and commerce is one that's unlikely to ever fully revert,” says Armenis. “This means businesses have an opportunity to assess their business model and balance sheet and see how they might be able to secure their cash flow for the future.”
Cash flow is perhaps the single most significant concern for many companies right now and it's only going to become more pressing as lines of credit tighten in a recessionary economy and measures such as JobKeeper come to an end.
“Starting the conversation now means you can consider a full range of options, rather than having to head straight for the insolvency toolkit,” he says.
The role of a trusted adviser
Given the complexity of some of these topics, not all accountants will be comfortable offering detailed restructuring advice to their clients. Armenis says this is an opportunity for collaboration.
“We like to talk about the trusted adviser model,” he says. “Trusted advisers play to their strengths, but they also acknowledge when a different brand of expertise is required.”
To put it another way, it's not about displacing the established accountant relationship, but rather building a team that can work together to create the best outcomes for their clients.
Olvera Advisors’ experts have worked for decades in distressed asset management and the firm aims to offer clients a more positive approach to business transformation.
“A lot of restructuring practitioners begin with the worst-case scenario: formal appointments and asset liquidations,” Armenis explains. “Instead, we want our clients to look at different ways they can change the way they do business so they're well positioned for what comes next.”
Armenis doesn't shy away from the difficulty of some of these conversations.
“We are seeing even the biggest and most sophisticated companies struggle adapting to the new economic climate,” he says. “But no matter how big or small they are, it's about giving management the right information and direction so they can make business decisions about the future with confidence.”
Find out more:
For more information go to www.olveraadvisors.com