We live in a highly dynamic world, and keeping a small business afloat amidst economic chaos is challenging, even for seasoned entrepreneurs and experienced accountants.
There is a technical term for that kind of chaos – VUCA, a military term coined in the 1960s, which stands for Volatility, Uncertainty, Complexity and Ambiguity. Do not let all these words scare you off, though. There are strategies to overcome them all and keep your business tip-top.
In this blog post, we will discuss VUCA from the perspective of accountants and bookkeepers to small businesses. Let us start by breaking down each of the four concepts in the acronym:
1. Volatility
This refers to unexpected challenges that occur during the normal course of business, such as a supplier going out of business or a natural disaster that blocks road transport. Volatility can be weathered by adjusting the business cash flow and budget to reduce costs and run leaner operations so that business does not cease when challenges occur.
2. Uncertainty
This refers to a lack of awareness about how an event, trend, technological advance or competitor will impact one’s business. Keeping oneself informed about trends, having industry mentors to consult and keeping watch on the profit and loss statement will ensure that the business is always up to speed with potential opportunities.
3. Complexity
This refers to the interconnectedness of business processes and decisions, some of which are inevitable but too much of which can cause confusion and a lack of clarity. Resolving this requires timely bookkeeping and inputs from accountants and strategy experts on how to simplify processes and let go of what is unnecessary.
4. Ambiguity
This involves hesitation about entering a new market or launching a new product owing to many unknown elements. Sufficient market research, consultations with experts and constant ROI tracking will give the business owner the necessary insights about whether the new venture is going as planned.
Put yourself in the best position as an accountant in a VUCA environment:
1. Upgrade accounting software as needed
Not all software solutions are created equally. As technology evolves, tools will evolve too, and accountants and bookkeepers need to be the first to embrace upgrades and explain to business owners why those upgrades are worthwhile.
In a VUCA world, there is no scope for resistance to change or clinging to old tech because it is familiar. If a new tool has better features, that’s what needs to be used.
2. Maintain complete digital records
If the business does not already maintain digital records, it is vital to do so immediately. Several tools can make transcription easier, such as apps that scan handwritten documents for transaction information. You need to have access to the full picture your client is experiencing.
3. Develop critical thinking skills
VUCA environments require accountants and bookkeeping to think creatively and critically, evaluating complex information and developing innovative solutions. Sure, going by the book is vital, but it is essential to think out of the box too!
4. Have clear lines of communication
To achieve simplicity and productivity, it is essential to be transparent about how things are going with the business. Accountants and bookkeepers need to immediately inform business owners of any unexpected costs, losses or changes in the law that need attention.
Similarly, the latter need to keep their accountants informed about any changes in suppliers, expansion plans, disputes, errors or anything else that has a bearing on the books of accounts.
5. Reexamine the business model
A top-to-bottom assessment of the small business model is vital to weed out inefficiencies, even small ones. Are there buyers who consistently fail to pay on time? Are there regular delays in supply from a specific location? Are there bottlenecks in production?
Are there too many approvals needed for routine tasks? Time savings matter as much as money savings – corrective action taken at the right time can boost profitability down the line – and accountants can help substantially with that.
6. Set up contingency budgets
It is good practice to have extra funds on hand for unexpected situations. Apart from a general emergency fund, the business can set aside money for specific contingencies depending on the nature of the industry. For instance, if the business relies on seasonal labour or if the place of business is in an area prone to natural disasters, an extra budget can help to tide over such occurrences.
7. Build strong relationships
Collaboration and communication are key in a VUCA world, and accountants must work closely with other departments, stakeholders and clients to ensure successful outcomes.
8. Have clear KPIs
Every small business needs to have KPIs for the quarter and the year. In addition, the accountant should reassess these KPIs at intervals so that the numbers can be changed if required, such as if the business decides to cut back production owing to a sudden drop in raw material supply.
9. Stay informed
Accountants in a VUCA environment need to be strategists as much as they are bookkeepers and financial advisors. They need to keep abreast of industry trends and changes to business law so that they can advise their clients in advance of any sudden negative impact.
10. Be proactive
Accountants and bookkeepers must proactively identify and address potential risks and opportunities and have contingency plans for potential scenarios.
Is outsourcing useful for accountants and bookkeepers in a VUCA environment?
Outsourcing can be helpful for them in a VUCA environment as it can help them focus on core tasks, reduce workload, access specialised expertise, and lower costs.
Outsourcing non-core functions such as bookkeeping, payroll, tax preparation, and other administrative tasks gives them more time and resources to focus on strategic planning and decision-making.
Additionally, outsourcing provides access to the latest technology and best practices, helping them stay competitive in a rapidly changing business environment.
Over to you
In conclusion, accounting in a VUCA environment should not be a nightmare. It simply calls for a higher degree of vigilance and an eye for detail, as well as an adequately formulated accounting model that’s resilient to change.
Accountants and bookkeepers play a significant role here, as their expertise can guide small businesses toward the best financial strategies for their specific needs.
So if you are an accountant, you have a whole new target audience to pitch your services to, enabling your clients to enjoy hassle-free financial management. Contact Stellaripe to learn how we help accountants and bookkeepers perform superiorly in a VUCA environment.
