Pub. 3 2020-2021 Issue 3

16 A ccounting is a valuable tool in any organization, but it can be most effective during tough times. The pandemic has proved itself to be one of those times, and as a result, accounting has helped some companies stay profitable through the pandemic’s unpredictable economic landscape. More specifically, CPAs have had to identify and analyze cash-flow concerns, review budgets containing safety- related equipment and material prices that have increased because of supply chain shortages, and understand federal stimulus programs. Some of the biggest tasks have included: • Cash flow management • Cybersecurity • Supply chain stability • Tax plans The asphalt industry is not exempt from these concerns. For example, part of the U.S. response to the pandemic on a state- by-state basis was to separate its businesses into two types, essential and nonessential. Although asphalt businesses that work on infrastructure projects were generally classified as essential, U.S. asphalt industry revenue declined 2.9% because of factors that included global supply chain disruptions, labor shortages, the lockdown, and project postponements. Reduced traffic translated to lower gas tax revenues. Experts think a continued slowdown in 2021, attributable to the pandemic, will be followed by industry growth from 2022 to 2026. Another big issue for the asphalt industry has been labor. Most construction businesses (90%) are small and involve capital- intensive demands to finish projects. They need reliable supply chains and cash flows. Pandemic-related data analysis can help companies decide the best ways to allocate resources and build for the future. Cash Flow Cash flow can be thought about on two levels: cash management and treasury management. As you might expect, treasury management has to do with large-scale decisions about borrowing, deficit spending, and liquidity. Cash management is a subfunction because it involves ensuring liquidity by moving the funds needed to maintain daily cash flow and short-term assets. Many companies have outdated financial processes. During events such as the pandemic, those outdated processes affected cash flow and provided a real incentive for improving financial resiliency by streamlining them. Consider using a 13-week cash flowmodel with one-week actuals. This model is particularly useful during times of financial distress when you need to look at your short-termoptions. A 13-week cash flow forecast can help if you need financing to survive. You can take it to stakeholders such as managers, accountants, other financial and legal partners, and creditors. You will see your pressure points and find out howmuch financing you need, and it creates transparency, which increases people’s confidence in the forecast. It might also help you avoid liquidation. Whatever cash flow model you use, the idea is to define fixed and negotiable costs, figure out what you can do to improve cash flow if necessary, and identify the non-core assets to divest when you need cash. In addition: • Make sure you have a plan for treasury management. • Ensure your current financing options are still available to you. • Manage receivables proactively by auditing transactions and managing inventory. PANDEMIC ACCOUNTING