Accountants and lawyers say 80% of clients are under pressure

A network of suburban accountants and lawyers have reported a staggering 80% of their clients experienced some level of financial difficulty during the last three months of last year.

The survey was conducted of members of the Black Ink group, a network of 350 small accounting and legal firms that is supported by accounting firm Deloitte. While the survey should be treated as a snapshot – 46 firms responded to the December survey – the results are surprising.

The survey showed that 57% of respondents have had one or more clients making inquiries about insolvency or bankruptcy in the last three months, and 83% of respondents revealed that they have received more than one client inquiry a month from clients looking to sell a business off, which is often a precursor to a business hitting financial distress and even insolvency.

Deloitte partner Simon Cathro, who manages the Black Ink network and works in Deloitte’s insolvency division, said the results of the survey were surprising, even for an insolvency practitioner.

Deloitte has increased the size of its insolvency team by around 30% and Cathro is bracing for a rush of work.

“We’ve basically been building up our staff numbers for nine months. We’re pretty well positioned.”

Cathro says the survey results should serve as a warning for directors of small companies, who need to be watching closely and need to act quickly to prevent their companies getting into trouble.

“Directors need to make sure they’ve got proper forecasting and budgeting systems set up so they are tracking the business as closely as possible. I think the big issue at the moment is the unpredictability, so you would want to be looking at this almost weekly at the moment.”

The survey also sounds a worrying note for the suburban lawyers and accountants themselves, with one in five reporting a negative outlook for their own business over the next 12 months.

Cathro says these professional services firms need to be watching their own debtors very closely, and may have to consider stopping work for clients who are in financial difficulty.

“There is a huge risk about not being paid. Firms should considering asking for money up front, although it’s a difficult conversation because generally the relationships at a small firm are very close.”

Related article:

• How to survive insolvency – and prosper