Rebooting the economy needs simpler solutions and faster digitalisation
It has been an unthinkably difficult year for businesses around the island of Ireland, and the imposition of Level 3 restrictions nationwide has put paid to the hope that we will be able to go “back to normal” soon.
The world has changed, and small businesses are bearing the brunt of the hardship
The Pandemic Unemployment Payment (PUP) and the wage subsidy schemes were swift and necessary supports that remain critical for many businesses, and the Covid-19 Credit Guarantee Scheme, Working Capital Scheme and Future Growth Loan scheme also provided an immediate solution to ease cash flow burdens.
But here’s the catch. Many businesses have not availed of these supports and instead are increasing overdrafts, deferring tax payments and delaying payments to creditors. There will be a need to refinance these obligations and the last recession taught us that debt cannot be the only answer. Many of the current supports address immediate cash flow issues, but businesses also need finance supports to ensure liquidity. We must not repeat the mistakes of a debt-only approach.
Chartered Accountants Ireland surveyed over 2,000 members in late summer and uncertainty, liquidity and cash flow worries and the responsibility for ensuring a safe environment for staff and customers, were chief among their concerns. Businesses, particularly small and medium enterprises (SMEs), are fighting hard to survive.
Many are finding schemes designed to support, are simply too onerous and complex to access and administer, and a high standard of regulation means that most businesses need the help of accountants to avail of them. For example, while the Temporary Wage Subsidy Scheme (TWSS) was an essential support, it was a highly complex scheme and few who benefited from the scheme could have availed of it without professional assistance.
Businesses who accessed the TWSS face Revenue compliance checks which must be responded to within five days. They must complete a reconciliation of the subsidy paid to each employee, for each payslip for each pay period, by 31 October. That date is also an important CRO deadline and if missed, the penalty is the loss of an audit exemption which impacts small businesses the most. The business owners most affected by Covid-19 restrictions may not have funds to pay their income tax liability this year and as a result, they face a late filing surcharge if they do not submit a tax return by 31 October. Therefore, the Revenue Pay and File income tax deadline extension is of no help to them.
Small accountancy firms are playing an instrumental role in helping SMEs nationwide to access supports and to meet the arduous reporting demands that arise as a result. Our Republic of Ireland members report that they are working at least eight weeks behind schedule. Covid-19 restrictions have greatly impeded the ability of small accountancy firms to meet regulatory and other reporting deadlines on behalf of the businesses they support when faced with their own remote working challenges. Many simply don’t have the time or the resources to adopt remote working practices overnight or even in the medium term.
A twin-track approach is needed, so that we can accompany immediate, shortterm supports for those most affected, with longer term, sustainable tools to stem the bleeding and start to recover beyond 2020. It is right that most State schemes, loans and supports created in response to the Covid-19 crisis focus on supporting the SME and micro-business sector, which is the backbone of the economy.
Now is not the time to rely on rigid and uncommercial approaches, but instead solutions for rebooting the economy must be simplified and accessible and this week Chartered Accountants Ireland gathered over 300 business leaders – virtually – to focus on just that.
Digitalisation is a central part of the solution, with action required by business but crucially, by Government. We have seen that businesses with digital capability and presence have fared far better in the last six months than those without. This momentum needs to be encouraged by increased support for the education and adoption of digital competencies across the SME community through grant-funded programmes.
Embracing digitalisation will strengthen the resilience of SMEs and make them less vulnerable in what is a lonely and challenging operating environment at present.
Government must help businesses to embed digitalisation in work practices by simplifying processes, lifting the myriad regulatory deadlines in these difficult times and by going fully digital; that means electronic filing of official forms and digital meetings.
There has been a good effort by Government so far but more needs to be done.
There is already a good level of acceptance of the need for change among the businesses we surveyed recently. The need to overhaul their business model post-pandemic was recognised by 33pc of our respondents, with digital transformation a priority for a quarter of them.
SMEs don’t have the luxury of waiting until ‘post-pandemic’ – for many that won’t come soon enough, and as a country we would be considerably the poorer for the irreparable damage to Ireland’s economic backbone.
Affected businesses may not have funds to pay their tax liability