Covid-19 Impact on Accounting Sector

29 Apr Covid-19 Impact on Accounting Sector

Covid-19 has shaken the economy of the country. The rapid outbreak of the virus presents an alarming health crisis that the world is struggling with. In addition to the impact on humans,there is also a significant commercial impact being felt globally.

Covid-19 has affected most of the businesses in India and across the world, either directly or indirectly. India accounting sector is one such industry that has also taken a direct hit because of the pandemic and lockdown.

While the effects of the pandemic appear to expand each day, both in duration and magnitude, many accounting firms are also grappling.

Impact of Covid-19 on Business Sector

As the Covid-19 episode is quickly spreading in India, what it will mean for the accounting sector is a genuine worry for many. Businesses all over India are taking action to mitigate the effects on their activities. As accounting includes the utilization of judgment on an organization income stream and expenses, uncertainty in the business would require revision of estimates on revenues.

Given the current situation, there is a chance of postponement or inability to reimburse loans. Organizations need to sort out a different arrangement for debts. For banks, loan misfortune will be more since their customers will most likely be unable to repay in due time. Because of the continuous Covid-19 case growth, absence of support, and overhauling of machines, the life of an actual resource should be reassessed.

With the predominance of many holding organizations and their subsidiaries in India, the unstable securities exchange has seriously hit the accounting report of holding organizations. Since the stock cost of numerous organizations is at their record low, holding organizations need to change investment subsidiaries in their accounting report. Firms likewise need to set themselves up with certain inconsistent things in their records (e.g., wages to everyday workers during the lockdown and other transitory government-managed retirement estimates received).

In addition, the greater part of the accounting depends on the understanding of “going concern”, which says that the organization will always exist, and bookkeepers make gauges dependent on this presumption. As the Covid-19 disaster is spreading across the globe, there should be cautious while making decisions on estimates dependent on the “going concern” rule.

Effects on the Accounting Business

Dramatic Increase in Work from Home and Flexible-Timing:

While working from home existed as a concept, it was tightly controlled and tacitly discouraged. As they say, necessity is the mother of invention. Accounting firms have had to speedily ramp up their IT infrastructure to allow working from home. Over a period of time, the realization will set in that productivity and efficiency can be maintained in most departments even if the staff is largely working from home. That realization will bring a paradigm shift in talent acquisition and management even in the Covid-19 era.

Rebuilding Plans:

During these difficult times when economic slowdown has done enough harm, accounting has gotten significantly harder for small-size accounting firms. Accordingly, numerous such firms are reacting to the emergency by either selling their business or scaling back tasks as an expense-cutting measure. While selling their organizations at such critical times at less costs that is definitely not a reasonable incentive for the business, scaling down is bringing about firms losing customers because of clients.

Delayed Payments: 

All organisations are going through a nightmare and looking for survival; accounting firms and particularly little estimated ones that offer services to private companies are seeing either delay in their payments or end of agreements. Despite the fact that the government declared different aids for organisations as a reaction to the pandemic, the effects have effectively gotten further into the economy.

Incapable of Adapting up to the Digitisation: 

The most affected by the pandemic are the small firms that have seized to adjust to the rising requirement for cloud accounting programming over the customary practices. Small accounting firms in India have declined because of the inability to adjust to the tax digitisation needs. Furthermore, the Covid-19 has made it harder for them to endure when exchanging over to innovations like cloud accounting.

Continuous Contemplations: 

We are amidst a worldwide emergency that is changing each day, and it obviously recommends that the accounting sectors will be bankrupt if we are not prepared for the new normal. This is the place where firms need money and capital to design out emergency courses of action.

Greater Investment in IT Infrastructure, Data Security, and Collaborative Platforms

With more and more people working from homes out of choice even after the lockdown, the accounting firms will need to beef up their IT infrastructure and security to enable access of their IT systems, servers, etc., from remote locations in a reliable and secure manner.

Employees are provided data cards to ensure adequate broadband speeds to securely access their data. More and more data will be stored digitally than in paper files to enable sharing and portability. Client waivers will be obtained so that people can access client-sensitive information from their homes. Risk management protocols and requisite training will be needed to work under this new paradigm.