COVID-19 Impact: Accounts Body Report Indicates Drop in Organisation’s 2021 Revenue Projections

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The effects of the COVID-19 pandemic were and continue to be felt across all economies and no country or sector has been spared. This prompted Institute of Certified Public Accountants of Uganda (ICPAU)to conduct a survey of its members in order to understand how businesses were impacted particularly, how and when they envisioned reopening, and what measures needed to be put in place to aid their recovery.

The survey that commenced in April 2020 during the first months of the COVID-19 pandemic in Uganda and the resultant lockdown to curb the spread of the virus revealed a shift in priorities of members and the general business community in Uganda. This meant that were as businesses were facing many challenges, these were not unique to a section of businesses, but common and cut across, and therefore businesses would need to work and learn from each other in order to adapt to the “new normal”

 

The report identified a number of challenges as a result of the pandemic. These included; operation issues, reduction in consumer demand, revenue losses and consequently cash flow concerns, client credit defaults/credit quality deterioration, supply chain disruptions and increasing costs of operation.

Among the challenges businesses operations were the most affected by the pandemic. This was reflective of the limited access to resources – people, finances or technology. The lockdown and other containment measures created a lot of uncertainty for many businesses and organizations had to quickly adapt or sink.

Majority of organizations also experienced and continue to experience a reduction in demand for their products/ services, which reflects a decrease in aggregate demand due to the lockdown measures. This in turn increased the difficulty of financing business operations.

Many of the responding organizations, about 26% actually did not anticipate demand for their products/services to increase again until 2021 or beyond, while about 25% were not sure what post COVID-19 would be like. Only about 19% of the organizations indicated that their products/services’ demand was unaffected by the COVID-19 disruptions.

The expectation of loss was uniform across businesses in all sectors. Business revenues were expected to decrease. 20 percent of the responding organizations expected their 2020 revenues and/or profits to drop by more than 50 percent, over 30percent expect the drop to be more than 25 percent. Only about 1 percent of businesses anticipate an increase in their revenues.

Organizations’ revenue projections are also expected to drop further. Majority of the respondents (over 40%) agreed that their organizations’ revenue outlook for 2021 was a strong decrease (more than 10% reduction) and only 3% indicated there would be no effect on their revenues.

Because the challenges faced by businesses cut across all sector, there is need to leverage on learnings and best practices from other organizations, including more recent innovations such as, virtual meetings, online business transacting among others. However, businesses needed to further study their situations and apply the responses in line with their circumstances.

Some of the financial actions that organizations were considering as a result of COVID-19 included: implementing cost containment measures (82.5 percent); changing financial strategy (48.3 percent); and deferring or cancelling planned investments (46.6 percent) during this period.

The most common investment types that organizations were looking at deferring or completely cancelling were investments in general capital expenditures (63.3 percent; workforce (39 percent); and operations (29 percent).

Other responses include: providing timely guidance and advice to clients; engaging and dialoguing with stakeholders; innovating and adjusting communication strategies to keep connected (e.g. use of social media); implementing flexible work arrangements and safety protocols; revising operational structures and encouraging use of digital communication and collaboration tools to stay connected and maintain productivity.

Almost 40 percent of the responding organizations do not expect their businesses to fully reopen until it is safe. Only about 12 percent expect to fully open at the end of the month of July.

Members indicated some of the measures their organizations had been taking to prepare for reopening, including: developing policies and procedures to prevent the virus spread in the workplace (83.3 percent); procuring masks and other protective equipment (73.3 percent); and procuring necessary supplies/services to ensure effective workplace sanitation (73.3 percent), among others. Nearly all the responding organizations (over 90 percent) were confident about their organization’s ability to meet customers’ safety expectations and provide a safe working environment for employees.

Employee attendance has dropped significantly on account of containment measures such as restrictions on travel. Organizations missed a big percentage of their employees who were unable to travel to work due to the lockdown. Over 50 percent of the responding organizations indicated that their employees commute to office using public transport, and given the need to ensure social distancing in a reopened office setting, not all their staff could be safe in office on any given day.

Organizations have adapted or will have to adapt new innovations, adjust their business models and use more technology innovations to aid operations going forward.

The most popular adaptation measures include; the use of digital and communication technologies as well as online channels to reach out to customers, to receive orders and payments, to aide remote work arrangements, etc.

Report compiled by CPA Derick Nkajja, Chief Executive Officer, Institute of Certified Public Accountants of Uganda (ICPAU).