CPA Conversations: How Australia can learn from Asia’s COVID-19 response

Being alert for early signs of financial distress can give you a crucial head start on your competitors.

The coronavirus pandemic has had a devastating impact worldwide, spreading at varying rates across continents. For the Australian government, Asia may prove the most telling case study.

The time lag between COVID-19’s impact on Asia and Australia (CPA Australia forecasts Australia is between six and 10 weeks behind) gives the Australian government an advantage denied to other parts of the world.

By paying attention to the experiences of businesses in China and Hong Kong, and shared in case studies produced by CPA Australia, we have access to prior knowledge as we plan and prepare for the challenges the pandemic threatens to throw at us here in the Pacific.

Watch closely, act early

Being alert for early signs of financial distress can give you a crucial head start on your competitors.

Monitor your financial health, review cash flow forecasts, implement contingency plans, consider ring fencing to survive the fallout or restructure for future viability. Whatever it is you need to do, the warning from Asia is: Do not be complacent.

SF Express is an integrated logistics company based in mainland China. The government’s lockdowns left many of SF Express’s frontline workers stranded in their hometowns after Chinese New Year celebrations.

Grace Ng CPA is the company’s CFO and director. She says early investment in sourcing enough protective masks and equipment for their couriers, and providing accommodation and food for two weeks’ quarantine, enabled SF Express to be ready to return to business earlier than many of their competitors.

The pandemic also changed people’s behaviour. Workers are having documents sent to their homes, medical supplies are in high demand and there has been a significant increase in online consumer spending – all new markets which SF Express’s foresight has allowed them to capture.

Protect your cash flow

Ernst & Young partner Bernard Poon FCPA says a decrease in productivity is inevitable. He believes liquidity and insolvency will continue to be serious issues for Hong Kong businesses, particularly for those in retail, catering, tourism, and hospitality. A healthy cash flow is necessary for all businesses to manage through the difficult times.

Strengthen your cash collection, don’t wait for debts to become outstanding, delay non-urgent payments and look at getting rid of non-core assets.

Investigate where you can cut operating costs. Some businesses negotiated rent deferral with landlords, while others repurposed or reduced rental space by making better work-from-home arrangements.

Apply early for temporary credit lines, loan restructuring or government relief measures.

Nurture relationships

Thomas Wong FCPA is a partner with CW CPA Accounting Practice in the People’s Republic of China and Hong Kong. He says while external assistance can be useful, it is equally important to build and enhance relationships at this time.

“Family is one of the fundamentals in life and in times like this we need to be compassionate and treat staff as family,” says Wong. He says he has refused to lay off staff during the crisis, instead delivering them computers and continuing to pay their salaries despite the downturn.

Wong has put a freeze on salary increments to keep the firm afloat, but is offering incentives to encourage staff to find new clients or direct existing clients to new business deals the company has introduced to counter the expected decline in revenue.

“Staff are the greatest asset a company can have,” he says. “They are fundamental to the vibrancy and success of our firm.”

In anticipation of clients requesting discounts, CW CPA analysed how much of the company’s billing would be affected in the next six months and, based on these results, offered a percentage fee cut to all clients. Wong is working to grow his business networks through webinars and has established new services to support clients through the economic crisis.

Invest in technology

The use of digital technologies by both business and consumers has been accelerated by COVID-19. The experience in China and Hong Kong has shown technology is key to sustaining efficient operations, opening communication channels, and keeping staff productive and engaged.

ShineWing Hong Kong’s managing partner Roy Lo FCPA says it is imperative for businesses to move with the market. He sees it as essential to continue with planned technology investment while other investments may be delayed or cancelled.

He is also seeking to recruit more skilled staff, especially those with strong knowledge of information technology, financial technology, or cyber security.

Be innovative

SF Express supported its staff with a virtual private network (VPN) to access the corporate system, upped its cyber security protection, and expanded insurance schemes to cover work-from-home arrangements.

The COVID-19 outbreak has shifted consumer behaviour and developed trust in flexible working arrangements and online capabilities. It is a time ripe for innovation.

At SF Express, lockdown road closures put a significant restraint on its China-wide courier service. However, the company already had its own airline and was able to move much of its cargo into the air, giving it an edge over competitors that relied solely on land transport.

“Keeping a diversified source is a key to survival,” says Ng, whose frontline workers were back operating at normal capacity within two months. As a result, the company’s March figures were better than anticipated.

“In this unprecedented time, we need to be cautious, but we need to be bold. We need to see the opportunities ahead and put in the money to get the business ready for opportunity.”

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October 2021
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