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2021 Accounting & Finance Trends to Look Out For

It’s no secret that 2020 was a whirlwind year that left many business owners wondering “What’s next?” According to PNAS, 43% of businesses had temporarily closed, and nearly all of these closures were due to COVID-19. What’s more, a quarterly poll conducted by the U.S. Chamber-MetLife found that 62% of small business owners fear that the worst is still to come with COVID-19’s economic impact. 

As financially devastating as the year was for some businesses, other sectors managed to flourish. Between the months of April and September, 45 of the 50 most valuable publicly traded U.S. companies turned a profit, and industries such as home improvement, e-commerce, and health/beauty products found success in the wake of the pandemic. At AdaptCFO, we saw firsthand how the online fantasy sports industry managed an impressive recovery after one of our clients was able to hit a $30 million valuation under our guidance, compared to a pre-pandemic valuation of $10 million.

So what does that mean for your accounting services in the year ahead? While we’re still faced with many uncertainties regarding the pandemic, the economy, and even the political climate, there are a few emerging trends and strategies that businesses can expect to see in regards to their financial operations in 2021. 

Accounting Services: What Businesses are Now Doing Differently 

Last year required us to pivot in more ways than one, and those shifts have the accounting services industry doing things a little differently this time around. Here's what we’ve found:

Preserving Cash:

Businesses are now raising as much money through equity/debt financing as possible. Even when it might seem “unnecessary,” raising funds can fuel growth and cover things like marketing expenses.

For example, companies like Clearbanc specialize in providing discounted interest rates if the funds are spent on marketing costs. If you qualify for funding, Clearbanc’s predictive models examine your revenue, ad performance, and other third-party data to generate funding offers that can range from $10,000 up to $10,000,000. They do charge a fee (between 6% - 12%, according to their website) depending on how you spend the funds, and while it’s on the pricier side, it’s still a good alternative if you can’t secure traditional funding.

That’s some serious capital that can enable your company to preserve more cash at a small added cost without having to tap into your operating account. Even considering the additional cost of capital, the “emergency fund” might be necessary. There are strategies to invest the savings and ultimately allow you to break even on the added costs. 

Taking Advantage of Contracts:

The ability to negotiate better terms on contracts has been much stronger since the pandemic started. From software to office space to countless other vendor agreements, the advantage for negotiation falls to the buyer. With the exception of some high-demand software, such as Zoom, the majority of contracts companies are looking to sign can be negotiated. 

Terms such as contract length, payment terms, and discounts are considerably more flexible. Why? Vendors want your business — it’s as simple as that. Many companies whose software is in high demand have been able to negotiate two-year contracts with a quarterly/annual payment schedule. As for discounts, companies are able to get more comps such as free months of office space, free increased volume/usage, and other incentives to sign contracts. 

In short, don’t sleep on these favorable opportunities to negotiate in 2021.

SBA Funding, PPP Loans & More:

The CARES Act, along with the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, was created to provide small businesses and individuals with much-needed economic relief — but navigating the various types of assistance isn’t easy for everyone. Accounting service providers are poised to assist businesses with securing government funding and advising them on the best course of action when it comes to these programs. 

Traditional lenders such as banks and government funding such as the SBA tend to have more favorable rates when compared to other lenders. Be wary of “tricks” that new online lenders are advertising — for example, statements like “rates as low as 1.5%” really mean that interest is applied to the original balance charged monthly. Even when you pay down the balance, you are still paying the same interest until the total is paid off. 

Finally, businesses might want to consider a line of credit or a term loan. A line of credit is essentially when a bank or financial institution agrees on a defined amount of money that you can access as needed, while a term loan is one that is repaid in regular payments over a set period of time. 

No matter how you secure financing, AdaptCFO can guide your business in the next stage of growth. That means preparing financial statements for investors, managing budgets, planning for the future, and so much more.

Strategic Planning:

Companies are recognizing the need for financial planning and analysis as cash flow management, AR/AP strategies, fiscal planning, and more all play a vital role in the financial success of a business — especially during uncertain times. 

Nonetheless, many businesses are facing roadblocks, such as incorrect data and misinformation, by relying solely on their accountants for FP&A and Strategic Planning. It’s simply not the role they were meant to play, and the end result of that is tragic to a business. 

Instead, businesses should trust and rely on an expert CFO to provide the transparency they need to succeed. Our extensive CFO services provide your innovative and fast-growing company with a high-level understanding of your path to financial success in the year ahead.

Cloud-Based Accounting:

While cloud accounting is nothing new, it’s certainly more important than ever. With more and more businesses relying on remote work, cloud accounting makes it easy for companies to access their financial information anytime, anywhere. 

Many companies are still relying on server-based products such as Quickbooks Desktop, which ultimately limits the user’s capabilities. It’s also a common misconception that cloud-based ERPs provide less functionality, when in reality, that couldn’t be further from the truth. In 2021, it’s our belief that more and more companies will make the transition to forward-thinking, cloud-based methods if they haven’t already.

While we can’t predict what, exactly, will happen in the year ahead, we can control how well we plan for it. From securing government financing to preserving cash and focusing on strategic planning, you can take control of your company’s financial success with forward-thinking financial services from AdaptCFO. 

There’s still time to get ahead in 2021 — contact us today to get started. 

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