Accounting is a valuable tool in any organization, but it can be most effective during tough times. The pandemic has proved itself to be one of those times, and as a result, accounting has helped some companies stay profitable through the pandemic’s unpredictable economic landscape. More specifically, CPAs have had to identify and analyze cash-flow concerns, review budgets containing safety-related equipment and material prices that have increased because of supply chain shortages, and understand federal stimulus programs. Some of the biggest tasks have included:

• Cash flow management
• Cybersecurity
• Supply chain stability
• Tax plans

The asphalt industry is not exempt from these concerns. For example, part of the U.S. response to the pandemic on a state-by-state basis was to separate its businesses into two types, essential and nonessential. Although asphalt businesses that work on infrastructure projects were generally classified as essential, U.S. asphalt industry revenue declined 2.9% because of factors that included global supply chain disruptions, labor shortages, the lockdown, and project postponements. Reduced traffic translated to lower gas tax revenues. Experts think a continued slowdown in 2021, attributable to the pandemic, will be followed by industry growth from 2022 to 2026.

Another big issue for the asphalt industry has been labor. Most construction businesses (90%) are small and involve capital-intensive demands to finish projects. They need reliable supply chains and cash flows.

Pandemic-related data analysis can help companies decide the best ways to allocate resources and build for the future.

Cash Flow

Cash flow can be thought about on two levels: cash management and treasury management. As you might expect, treasury management has to do with large-scale decisions about borrowing, deficit spending, and liquidity. Cash management is a subfunction because it involves ensuring liquidity by moving the funds needed to maintain daily cash flow and short-term assets.

Many companies have outdated financial processes. During events such as the pandemic, those outdated processes affected cash flow and provided a real incentive for improving financial resiliency by streamlining them.

Consider using a 13-week cash flow model with one-week actuals. This model is particularly useful during times of financial distress when you need to look at your short-term options. A 13-week cash flow forecast can help if you need financing to survive. You can take it to stakeholders such as managers, accountants, other financial and legal partners, and creditors. You will see your pressure points and find out how much financing you need, and it creates transparency, which increases people’s confidence in the forecast. It might also help you avoid liquidation.

Whatever cash flow model you use, the idea is to define fixed and negotiable costs, figure out what you can do to improve cash flow if necessary, and identify the non-core assets to divest when you need cash. In addition:

• Make sure you have a plan for treasury management.
• Ensure your current financing options are still available to you.
• Manage receivables proactively by auditing transactions and managing inventory.

Cybersecurity

Anyone who uses computers (that is, pretty much everyone in the business world) should be aware of the need for cybersecurity. Fraud in the form of phishing and ransomware can damage your company, and the pandemic seems to have encouraged cybercriminals to pick up the pace on their attacks. You should protect your company by doing the following:

• Consider hiring a cybersecurity company. Their employees can help you assess and reduce risks, develop protocols, and review your plans to keep the business going during disruptions.
• Write and enforce strict protocols to protect financial information.
• Buy cyber insurance, and take the time to understand what you bought. Know what is or isn’t covered. Cyber insurance is a great option if you don’t have a full-time IT employee.
• Train employees. One person clicking the wrong link is enough to cause real trouble.
• Talk with employees about the risks of remote work, too. Unmonitored home office settings and smartphone usage are potential problems. Cybercriminals can change accounts, addresses, or other key business information more easily than might be possible at work.
• Maintain a backup system. Test it regularly. Experts recommend a one-two-three system:
  • One offline data copy
  • Two different backup methods
  • Three copies of data

The Supply Chain

There are several steps a company can take to protect itself from supply chain problems:

• Contracts matter. Since many companies have increased material prices and have had unavoidable delivery delays, it’s important to put escalation clauses for materials in the contract. Pass increased costs on to customers when possible.
• Strong partnerships and good relationships are more important than getting the lowest possible price. If you don’t have a good business relationship, it doesn’t matter whether you got the lowest possible price because the money you spent might not get you what you need: responsiveness when a problem occurs. A company’s reliability is more important than the price they charge.
• Be friendly and professional, and expect the same in return. Someone who is pleasant is much more likely to get a heads-up about news such as an upcoming price increase. Supply chain issues are real, too, and your reasonable attitude and friendliness will go a long way toward making those issues easier to handle.
• Look at alternative suppliers. Ideally, you should have more than one way to get the materials you need.
• Financial forecasting can be extremely useful because of the insights it provides. Use financial planning and analysis (FP&A) to know what will happen to profits under different scenarios such as increasing or decreasing costs.

Tax Plans

Tax planning matters because tax rules get changed regularly. Despite their direction (up or down), you need to know how those changes will affect the taxes you pay. Therefore, your business plan should include a section about the tax planning process. It’s a good idea to hire someone who can focus on the specifics because the details can impact your bottom line enormously. However, there are a couple of guidelines you can implement:

• Know the current rules, and use them to your benefit.
• Talk to an expert about your succession plan and estate plan now, before the rules change.
• Some experts think tax increases are coming, too. It might be better to make tax-related changes in 2021 than to wait for 2022.