COVID-19: Accounting firms suffer 50% profit drop

BUSINESS   HEALTH   VIRUS

As the deadly COVID-19 pandemic continues to wreak havoc on Uganda's economy, almost half of accounting firms have suffered 50% revenue and profit drop.

A survey conducted by the Institute of Certified Public Accountants of Uganda (ICPAU) among its members indicated that expectation of loss was uniform across businesses in all sectors.

It was aimed at understanding how businesses were impacted and measures needed in place to aid their recovery.

"Business revenues were expected to decrease. 20% of the responding organizations expected their 2020 revenues and/or profits to drop by more than 50%. Over 30% expect the drop to be more than 25%. Only about 1% of businesses anticipate an increase in their revenues," the survey indicated.

ICPAU chief executive officer, Derick Nkajja said the survey that commenced in April 2020 during the first months of the COVID-19 pandemic in Uganda and the resultant lockdown to curb the spread of the virus revealed a shift in priorities of members and the general business community in Uganda.

"There were a number of challenges as a result of the pandemic. These included; operation issues, reduction in consumer demand, revenue losses and consequently cash flow concerns, client credit defaults/credit quality deterioration, supply chain disruptions and increasing costs of operation," Nkajja said.

He noted that the majority of organizations also experienced and continue to suffer a reduction in demand for their products and services which reflects a decrease in aggregate demand due to the lockdown measures.

"This in turn increased the difficulty of financing business operations. Many of the responding organizations, about 26% actually did not anticipate demand for their products/services to increase again until 2021 or beyond, while about 25% were not sure what post-COVID-19 would be like. Only about 19% of the organizations indicated that their products/services' demand was unaffected by the COVID-19 disruptions," the survey noted.

As a result, organizations' revenue projections are also expected to drop further.

Majority of the respondents (over 40%) agreed that their organizations' revenue outlook for 2021 was a strong decrease (more than 10% reduction) and only 3% indicated there would be no effect on their revenues.

The survey recommends that due to challenges faced by businesses cut across all sectors, there is need to leverage on learnings and best practices from other organizations, including more recent innovations such as virtual meetings, online business transacting among others.

Some of the financial actions the organizations were considering as a result of COVID-19 included: implementing cost-containment measures, changing financial strategy, and deferring or cancelling planned investments during this period.

The most common investment types that organizations were looking at deferring or completely cancelling were investments in general capital expenditures, workforce and operations.

Other responses include: providing timely guidance and advice to clients, engaging and dialoguing with stakeholders, innovating and adjusting communication strategies using digital communication, implementing flexible work arrangements and safety protocols, revising operational structures and encouraging the use of digital communication and collaboration tools to stay connected and maintain productivity.

Almost 40% of the responding organizations do not expect their businesses to fully reopen until it is safe. Only about 12% expect to fully open at the end of the month of July.