Donnchadh O’Neill explains why boards and their advisers will have to tread carefully as they work to recover their foothold in the new landscape.All professional advisers, including Chartered Accountants, are seeking new ways to support their clients. They are helping them navigate unprecedented changes in their workplaces, their financial reporting, their restructurings, and their contracts. In many cases, they are helping businesses fight for survival. Given the heightened risk of missteps in such a turbulent environment, corporate reputation management is now more vital than ever.In the short-term, clients face practical and legal considerations affecting business reopening following a Government-induced coma. Finance functions have been virtualised and governance structures tested. Workforce and workplace transformation has been sudden. Margin sustainability is the new short-term challenge as costs increase, and that is before you consider the looming recession and inevitable insolvencies that will follow.In the last crisis, services and supports to business changed with firms flexing different muscles more suited to the adverse conditions. Liquidators and receivers found themselves in the headlines, sometimes even taking strict precautions to protect their safety by avoiding media attention.Now no one can predict with any accuracy where this crisis will lead in working trends, in accountability requirements, and in ownership structures post-bailouts and business retrenchment as we face into recession. It is easy to foresee the bloodbath on Grafton Street and in specific sectors, which has already begun in terms of liquidations and receiverships. What is more intangible is the effect this long drawn out crisis will have on corporate behaviour, communications, and corporate reputation. Chartered Accountants are on the front line with their clients as these winds blow.I have worked over many years with excellent companies delivering on what they see as their mandate for their various stakeholders. They focus on delivering shareholder value, but also stakeholder value. Following the financial crisis, good corporate ethics, culture, and governance became a priority. Chartered Accountants Ireland shared a leadership role in this arena, with strong educational initiatives to teach and support members, business executives, and even directors. Accountants helped their clients develop risk management processes, including reputation risk, to embed prudence into corporate culture, prevent hubris, and guide decision-making.Regulation increased, especially in the financial services sector. The banking industry set out to address its behaviours by establishing the Irish Banking Culture Board. The EU grew its oversight activity by exercising its muscle to protect consumers. As climate change moved up the public agenda, companies began to include sustainability reports in their annual reports – and this will continue.Over the past number of years, the corporate sector has increasingly had to become more socially conscious, valuing and measuring its societal impact and its corporate reputation. This emergency has put a whole new speed and power behind what was already a growing trend. As harder decisions are taken in the months ahead, companies and clients will need sound judgement as they implement decisions that have a societal, as well as a financial, impact. The climate crisis is upon us and is already forcing its own reset. Failure to make decisions that account for the common good and the public interest can wreak enormous reputational damage and all the attendant costs of that. Great care and balanced thinking will see companies achieve their goals without being forced by political or public opinion to backtrack or revisit decisions ineptly announced or executed. Markets will judge companies ever more so on their ethical behaviour.Look at the public interest trend of late: companies and wages being kept afloat by the State;   companies declaring a pause in dividends (if only to preserve cash); others being mandated to do so (e.g. the banks). More than 300 listed companies in the UK have cut or cancelled pay-outs. Money earmarked for shareholders will be used instead to service or repay debt, or just to stay afloat. The insurance industry was elbowed by the Minister for Finance, while the courts will probably have the final say. Companies such as Aldi pledged to pay their small suppliers early to keep their cash flow healthy.I do not doubt that as governments the world over ultimately face the bill for this COVID-19 bailout, tax and tax avoidance and wealth taxes will move much faster to the top of the agenda. This will feed into director and corporate reputation management, and advisers will have to be aware of the spirit as well as the letter of the law when advising clients.Commentators are already forecasting a shift away from capitalism and globalisation – that will continue. Growing your food locally and manufacturing locally suddenly look like viable ways to manage your own future risk. Brexit and global trade wars are yet to hit, not to mention the effects of preparing businesses for a low-carbon future.Will companies and their financial advisers, expected to act as citizens, focus on protecting and building up their social capital as well as their share capital? Employee health and protection became the top priority in recent months. How do you provide for unknown bottom line impacts for employee illness, absenteeism, or indeed legal claims? Insecure, gig economy, zero-hours type jobs have also been exposed for their human cruelty, and there will be a continuing priority on workers’ economic health (possibly even a universal wage or basic income for all).While capital will naturally only go where it has a reasonable expectation of a return, will investors be forced to rethink what is proper and possible for successful companies in an era of depression? How will directors and boards justify levels of executive remuneration that might look extreme and still manage to retain the permission to operate under a social contract, maintaining trust and enjoying a corporate reputation that underpins value? Apart from taxes, will companies have to become almost philanthropic in some of their behaviours?Corporate activism will grow as companies need to be seen to be responsible; to solve, not just sell. Liquidators and receivers will have to execute their mandates with an assured eye on the public and political impact of their decisions.Will companies build and wield their ‘soft power’ in focusing on purpose as well as profit? We have all admired genuine public service and public servants in recent months. Will the era of State-owned commercial entities come back into fashion by necessity, forced to step in and own hotels (remember Great Southern?), airlines, food companies (remember Irish Sugar and Erin Foods?), shops and insurance companies? We might well be facing an era of “de-privatisation”.In a perfect storm of increased costs, reduced margins, and recessionary outlook, with bankers and receivers taking hard decisions, the need for companies to communicate, to explain, to justify and most of all, to “do no harm” will be right up there among the top commandments. Boards and their advisers will have to tread carefully as they adjust, speak, and act to recover their foothold in the new landscape. Companies will sustain great reputations not just because they have great products and services, but also because they take full account, in advance, of the public impact on – and reactions to – their decisions.Donnchadh O’Neill is Managing Director of Gibney Communications.

Dr Annette Clancy explains why a growth mindset is critical to success when faced with relentless, and seemingly endless, uncertainty.COVID-19 forced companies to adapt and change with unprecedented speed. Change is always on the agenda, but the pandemic accelerated it. Right now, organisations are planning to bring people safely back to the workplace. Planning is essential to reassure workers and clients that their safety is a priority but, as COVID-19 has demonstrated, plans are only partly useful in a context where the future is complex and unpredictable. Organisations will need to cultivate adaptability to continue to respond to this ever-changing environment.AdaptabilityCarol Dweck is a Professor of Psychology at Stanford University who researches human motivation. After studying the behaviour of thousands of children and their attitude to failure, she coined the terms ‘fixed mindset’ and ‘growth mindset’ to describe people’s beliefs about learning. A fixed mindset assumes that intelligence or character is limited in the sense that it cannot change. As a result, people see effort as fruitless and obstacles as indicators that they should stop working. A growth mindset thrives on challenges and learns from criticism. It sees obstacles as opportunities to learn and persists when faced with a challenge.Dweck’s mindset theory has been enormously influential in how we think about motivation and adaptability, not only in relation to children but also because of its applicability to people and organisations more generally. Dweck’s book, Mindset, has been a best-seller since its publication in 2006. And it has particular relevance today, as a growth mindset approach to planning amid a pandemic is likely to yield more benefits than a fixed mindset approach.The power of ‘yet’Those with a growth mindset do not view obstacles or challenges as failures. Rather, they view them as challenges to be overcome. Dweck shared the following example in her 2014 TED talk.“I heard about a high school in Chicago where students had to pass a certain number of courses to graduate, and if they didn’t pass a course, they got the grade ‘Not Yet’. And I thought that was fantastic, because if you get a failing grade, you think, I’m nothing, I’m nowhere. But if you get the grade ‘Not Yet’, you understand that you’re on a learning curve. It gives you a path into the future.”The concept of ‘yet’ removes the fear of failure. It suggests that it is possible to achieve outcomes with adaptability or change, thereby increasing the likelihood of increased cooperation and the free flow of ideas. From a fixed mindset perspective, changing direction or re-strategising is a significant problem that may throw the company off direction. From a growth mindset perspective, this may be a challenge, but also an opportunity to adapt creatively.Dweck’s research suggests that the latter framing allows for psychological adaptability, which will yield practical results.The blame gameDweck tells us that blame is part of a fixed mindset, as she explains in this quote from her book: “When bosses become controlling and abusive, they put everyone into a fixed mindset. This means that instead of learning, growing, and moving the company forward, everyone starts worrying about being judged.”This type of atmosphere inhibits creativity because employees will fear being blamed for risk-taking, which is central to adaptability. Leaders who exhibit a growth mindset have a vested interest in developing people and encouraging creativity. They rarely use the company as a vehicle for narcissistic posturing. Their interest is in growing the company and supporting the creative adaptability that will ensure the success of the organisation and its people.COVID-19 is pushing everyone to adapt to new ways of working. Dweck’s research on mindsets offers one perspective on enhancing creativity at a time of uncertainty and change.Dr Annette Clancy is Assistant Professor of Management at the School of Art History and Cultural Policy at UCD.

Although the relentless adoption of technology is not without risk, the audit – and the profession as a whole – stand to be net beneficiaries in the long-run, writes Lynn Abbott.The COVID-19 pandemic will undoubtedly usher in a new era for business. There have already been significant changes, with some businesses creating their first online store or introducing contactless payments. Others, however, have realised that they must introduce more sweeping changes, such as offering staff the ability to work remotely. We have yet to see the impact of these changes, but the world will be a different place to the one we knew previously.The Oxford English Dictionary defines a revolution as “a great change in conditions, ways of working, beliefs, etc. that affects large numbers of people”. This accurately describes the transformation that was already underway in audit before the COVID-19 crisis. With advancements in technology, the use of data analytics, artificial intelligence and machine learning are fundamentally changing how business works. Resistance is not only futile but seems to put companies at a competitive disadvantage. The COVID-19 crisis will only serve to accelerate this process, and professional services firms are no exception.Drivers of the revolutionWhen we hear buzzwords like 'data analytics', 'artificial intelligence' and 'machine learning', it can be intimidating. Many people don’t fully understand such concepts, but in truth, you don’t need to. You just need to get comfortable with them. And you probably already are: familiar services like Netflix or Spotify use artificial intelligence to understand your preferences and make subsequent suggestions based on that knowledge. The level of consumers’ expectations is continually increasing, and the successful companies are those that are advancing with technology. The same is true for businesses and their expectations. In audit, the revolution is underway and the sections that follow highlight the key drivers for this change.Improve the audit experienceThe volume of data available to auditors is astounding, but in most cases, this data is simply not being used. If this were happening in any other industry, there would be questions to answer. Data analytics can improve the audit experience in several ways, for both the audit team and for the client.Improve audit qualityDuring the planning phase of the audit, audit teams must shift their focus away from the old mindset of “what could go wrong?” Through analytics, we can turn our attention from what could go wrong to what has gone wrong. Auditors have access to the client’s complete financial data for the period under audit – if they focus on analysing and understanding the data, they could identify an unexpected transaction or trend in the process. During the execution phase, auditors should also build on the knowledge gained in planning to truly understand the business in question and focus their attention on higher risk transactions. Finally, auditors should move away from a ‘random sample’ approach and, instead, focus on the transactions that appear unusual based on their knowledge of the client, business or industry. These are just a few areas where improvements in audit quality can be achieved using data analytics.Improve efficiencyIn the examples above, the use of data analytics in planning will identify what has gone wrong and any associated unusual transactions. In execution, these transactions will be tested as part of the audit sample. It could also cover some requirements under auditing standards concerning journal entry testing, as the journal entries will likely be the data that highlighted what went wrong in the first place. Again, this is just one example of efficiencies gained without even considering the hours saved by automating processes like creation of lead schedules and population of work papers.Post-pandemic worldThe world will be a very different place in years to come. Firms with the ability to perform in-depth analysis using data analytics undoubtedly have a significant advantage over those that do not, given the efficiencies they can gain and the potential reduction of physical evidence required from clients, among other things. Due to the changes we have all had to endure, auditors may also have additional procedures to perform (e.g. roll-back procedures where they were unable to attend stock counts at year-end due to the COVID-19 closures of businesses). Such procedures have the potential to be automated, saving even more time and effort for audit teams.Improve engagementRather than spend time performing mundane tasks such as testing large randomised samples, data analytics allows audit teams to jump into the unusual transactions. This will make the job more interesting to auditors and cultivate a curious and questioning mindset, which will, in turn, lead to improved scepticism and audit quality.Improve client experienceThis might happen in two ways. First, the time saved by the client’s staff (who, in theory, will have fewer samples for which to provide support) and second, through the value the audit adds to the business. As an example, consider an audit team performing data analysis on the payroll for their client. As payroll is a standardised process, the audit team has an expectation around the number of debits and credits they would see posted to the respective payroll accounts each month. As part of their analysis, however, they find an inconsistent pattern. This can be queried as part of the audit and the client will be better able to understand a payroll problem, which they were previously oblivious to.Client expectationsGiven the level of data analysis that occurs daily in the life of anyone using a smartphone, a consistent, high quality is understandably expected in people’s professional lives, too. Audit clients, like all consumers, want more. They want a better and faster audit. They want an audit that requires minimal interference with the day-to-day running of their business, without compromising the quality of the auditor’s work. With troves of data now available to auditors, such expectations are not entirely unreasonable. Audit firms have access to vast amounts of financial and related data – in some instances, millions of lines of information – that, if analysed robustly and adequately, would improve their processes, their clients’ experience, and the quality of their audit files.Aspirations of professionalsAudit professionals can often struggle with work-life balance. Though most firms are getting on top of remote working, the hours in busy season are long. In a time of continuous connectivity, the time frame around ‘busy season’ is also becoming blurred. Through the use of technology, we will one day make auditing a 'nine to five' job. Many will scoff at that idea and, although I do not expect this to happen in the next five years, or even ten years, it is possible. By automating mundane tasks and continuously upskilling our graduates, we can transform how an audit team completes work. There will be more scope to complete work before clients’ financial year-ends, thus moving much of the audit out of the traditional ‘busy season’. Machines can complete specific tasks overnight so that auditors could arrive at their desk, ready to work on a pre-populated work paper that needs to be analysed by a person with the right knowledge. With appropriate engagement by all parties (i.e. audit teams, senior management, and audit clients), we could significantly reduce the hours spent on audit engagements and give this time back to auditors. Along with attracting high-calibre graduates, we will retain high-quality auditors in the industry while also avoiding mental fatigue and burnout, which will again lead to better quality audits.Graduate recruitmentGraduates joining firms in recent years have particular expectations of the working world. They want job satisfaction, flexible hours, remote working, and an engaging role that will challenge them. Professional services firms have to compete for the very best graduates, and no longer just against each other – a host of technology-enabled businesses are attracting talent on an unprecedented scale by meeting the needs listed above. Technology, and data analytics, in particular, can offer the solution to the graduate recruitment challenge – by making the work more efficient and automating mundane and repetitive tasks, graduates can instead focus on analysis. When people find their work challenging and interesting, they will feel more engaged.ChallengesThis move towards technology is not without its risks to the profession. Automating basic tasks removes the opportunity for graduates to form a deep understanding of these sections of the audit file. The onus is therefore on the current cohort of Chartered Accountants to take the reins, both to drive technology advancement forward and also provide practical, on-the-job coaching to ensure that this knowledge is not lost for the generations that follow.Lynn Abbott ACA is an Audit Inspector and Audit Analytics Expert in the Audit Quality Unit at IAASA.

John Kennedy explains how Chartered Accountants can help their clients break free from the shackles of their current challenges and, instead, work towards a brighter future.As we continue to deal with the implications of the untamed coronavirus, we have all been forced to pause and take stock. Many things we historically assumed can no longer be taken for granted. We, therefore, need to learn new habits, develop new routines, and adopt new ways of thinking.At the core of that change is the need to secure our future by identifying, and wisely investing in, our most precious assets. Take a moment to pause and think of the most valuable assets your practice holds – what are they?In my opinion, there are two: attention and energy. Your future success will be determined by your ability to take control of your attention and energy and, in turn, by how you guide your clients to invest their attention and energy where it is most productive and provides the greatest return. You and your clients must stop wasting your attention and energy on unproductive, corrosive thinking.Corrosive and constructive thinkingThe world is flooded with corrosive thinking right now. And, like anything with massive oversupply, it has no value. Corrosive thinking keeps you in a closed loop of negativity, consuming your attention and energy by focusing on the missteps, the problems, and how costly they will be. You will get no positive return on the attention and energy you invest in corrosive thinking.Constructive thinking, on the other hand, is entirely different. It is scarce and, therefore, has an unusually high value. Constructive thinking moves you away from worrying about how you and your clients reached this difficult place and, instead, focuses your attention and energy on reaching a better place. To move from A to B, however, requires the wise and judicious investment of your vital resources.The key is to take control of your future decisively. This is not an invitation to undertake some form of positive thinking or encourage you to merely wish or hope for better times. It is quite the opposite. It is a specific and practical skill that will enable you to create a clear image of a better future and identify the steps to reach that destination.The kitchen testNeuroscience has helped us understand how to harness the power of our brain and use our capacity to think more effectively. If you don’t take control of this capacity, your brain can easily work against you or steer you off-course. But when you know how to harness the power of your brain and focus it on success, profound change is possible.Achieving the success you seek always begins with creating a clear image of that success. Let us put it to the test.Take a moment to think about a room you are familiar with. Your kitchen is a good place to start. As you develop a clear and vivid image of your kitchen, your mind will work with you and help you set out in great detail the many specific aspects of your kitchen. You will be able to give this image real substance – the colour of the walls, the type of floor, or any paintings, pictures or posters on the walls, for example. You can create an image that is clear, vivid and substantial – and that is a very useful talent.The kitchen test shows that you can harness your thinking to work your way through the recent crisis and create a clear image of a better future. This is key to your investment strategy, as you can create an image of future success that has the same level of detail and clarity as to the image of your kitchenWhy is this important in terms of your future success and your success with clients? Left uncontrolled, your mind will come up with detailed and comprehensive images of the difficult situation you are in. It will default to wasting your much-needed energy by placing too much emphasis on the worries of the present. However, the troublesome present is where the problems lie. You want to be in a better place, but you have – at best – a vague and hazy image of that destination.The difficulties of your current reality will appear more potent than any possible future success. And since the mind values clear and detailed images, it will be drawn to where clarity and detail already exist – in this case, on the difficulties of the present situation. This is why the strength and scale of your problems seem to grow and grow. The more you focus your attention and energy on your current difficulties, the more vivid they become to the point that you may not be able to discern a successful future at all.This is where your investment strategy can provide its most significant return.The high-return investment strategyIn taking active control of your thoughts, you can switch your attention and actively invest your energy where it can deliver a more valuable outcome. This is not a trivial skill – it is scarce, of high value, and the vital key to future success for you, your practice, and your clients.To get full value from this insight, you need to establish a new habit. From this point on, every time a client falls into the routine of talking about the worry and stress they face, take active control of the dialogue and help them create an image of a better future.Don’t waste their attention and energy on vague or wishful thinking. Instead, guide them to create a clear and vivid image of a better place, an image that is as clear and real as the image of your kitchen.Rather than dwell on familiar problems, set them on a quest to establish what a successful future would be like. Your client has already built a business that is successful enough to need your accountancy expertise. Now, you can use your insights to help them leverage their knowledge and experience to create an image of a successful future.Research has conclusively shown that this ability is central to the success of the very highest achievers, those who achieve great success and prevail at times of stress or uncertainty. By helping your clients invest their attention and energy in creating a clear and specific image of future success, you are providing them with an immediate and powerful resource. They turn their thinking, attention and, therefore, energy to what they want to accomplish.For more than three decades, I have encountered a habitual pattern of clients focusing on current problems rather than investing actively in future success. Ironically, this habit can be most pronounced at the very time when it is least useful – when the problems seem so large and so vivid and are the cause of significant corrosive stress.When managers, groups or teams spend their time thinking about their most challenging problems, they tend to become dispirited and demotivated. When you help your clients do the opposite, however, you will become a scarce resource: the route to a better place.John Kennedy is a strategic advisor. He has worked with leaders and senior management teams in a range of organisations and sectors.

David Lucas explains how businesses can access funding and trade through the COVID-19 crisis.The COVID-19 pandemic has impacted businesses throughout the country. Cash flow is scant, debt is mounting, and many companies have yet to resume trading in any meaningful way. Those that are trading again have returned to a desolate and unfamiliar environment. Shops and high streets are empty, many stores remain shuttered and, with further restrictions in the pipeline, dented consumer confidence in certain sectors looks unlikely to rebound fully until a vaccine is developed.SME supportsWithout access to significant cash reserves, liquidity and cashflow are critical concerns for many small- and medium-sized enterprises (SMEs). Fortunately, SMEs adversely affected by the COVID-19 crisis can access a range of Government supports. The schemes listed below have been well-received by business owners, but preparation is the key to a successful application.SBCI COVID-19 Working Capital SchemeThis scheme offers loans from €25,000 to €1.5 million at a maximum of 4% interest to SMEs and small mid-cap enterprises. Applicants must meet at least one criterion related to the impact of COVID-19 on their business and one innovation criterion as per the European Investment Fund’s (EIF) standard conditions. No security is required on loans up to €500,000.Future Growth Loan SchemeThis scheme aims to make up to €800 million in loans available for terms of seven to ten years to SMEs and small mid-cap businesses. Loans range from €25,000 to €3 million per eligible company, with loans up to €500,000 available without security. The initial maximum interest rate is capped at 4.5% for loans under €250,000 and 3.5% for loans more than or equal to €250,000 for the first six months. The rates after that are variable.Sustaining Enterprise FundSupport of up to €800,000 can be provided to eligible companies that have been negatively impacted by COVID-19. Funding will be provided for five years using repayable advances, grant aid, equity, or loan note, comprising a combination of repayable and up to 50% non-repayable support. Administration fees on repayable support will be 0% over the first six months and 4% per annum after that. Repayments will be due in years four and five.Restart Grant PlusRestart Grant Plus is an expansion of the Restart Grant scheme. It provides grants of €4,000 to €25,000 to businesses with 250 employees or less, turnover of less than €100,000 per employee, and a 25% reduction in turnover as a result of COVID-19.Trading Online VoucherGrants of up to €2,500 (with 10% co-funding from the business) are available to companies with ten employees or less seeking to build an online presence. The voucher is targeted at small businesses with little or no online presence, turnover of €2 million or less, and at least six months’ trading history.Business Continuity VoucherBusinesses employing up to 50 staff are eligible to apply for a Business Continuity Voucher to the value of €2,500 towards third-party consultancy costs to assist with developing short- and long-term strategies to deal with the COVID-19 pandemic.Pandemic Stabilisation and Recovery Fund (PSRF)The PSRF is set up to invest in large- and medium-sized enterprises employing more than 250 employees or with annual turnover of over €50 million. Enterprises must be able to demonstrate their business was commercially viable prior to the COVID-19 pandemic, and that they can return to viability and contribute to the Irish economy. Investments are made on a commercial basis and they will seek a return for this and can invest across the capital structure, from equity to debt.Temporary Wage Subsidy SchemeBusinesses have also relied on the Temporary Wage Subsidy Scheme (TWSS), which was replaced by the Employment Wage Subsidy Scheme (EWSS) in September. The main elements of the EWSS are as follows:A €203 flat-rate subsidy per employee per week for businesses with a decrease in turnover of 30% or more;Employers in all sectors may qualify, subject to meeting certain qualifying conditions; andThe EWSS will expire on 31 March 2021. The legislation, however, provides that it may be extended beyond that date.CashflowThe measures above can provide critical relief and cash support to businesses. However, there are other proactive and straightforward ways in which companies can meet their liquidity needs before repayment moratoriums expire in Q4.Businesses can optimise by selling slow-moving stock to generate cash, for example. Also, debtor management might sound obvious, but assets can become tied up and the longer a debt remains unpaid, the less likely it is to materialise.Debt fundingMany people talk about loan-to-value and property, but at the end of the day, cash repays debt. Property and asset values are significant from a security perspective, and the banks draw comfort from having this as security. However, in recent years, cashflow (and its recurring nature as the first port of call in servicing debt) has been increasingly analysed. Banks are not in the business of selling companies or property unless they have to, but they do need to see cash being generated to service the existing debt quantum.In this volatile business landscape, SMEs may need to renegotiate covenants or restructure debt. Many businesses will find themselves over-leveraged and unable to make their debt repayments as they fall due. Banks expect this in cases where COVID-19 has hit businesses hard, but the key to success is open communication with the bank or funder.Think of it as a partnership approach. Businesses must be extremely well-prepared as approaching a bank can be painstaking and time-consuming. That said, they do understand the position you are in; all business owner/managers want to be able to pay down debt and keep their businesses alive.The standard suite of bank covenants comprises leverage (net debt/EBITDA), interest cover, and debt service cover ratio (DSCR), with the latter often proving the most difficult to manage. As a result of existing trading circumstances, all three may have been breached or be approaching a breach. The banks have provided moratoriums in many cases, but they will need to be looked at and renegotiated as they expire later in the year.The amortisation or repayment profile on debt may also need to be readjusted to match the company’s ability to repay. COVID-19 has devastated many businesses, and some may never return to the same trading levels as before. This outcome would, therefore, require a re-calibration of amortisation; back-ending or reducing it may be the only option. Banks will likely begin to pursue ‘cash sweep’ mechanisms to reduce debt positions in a restructure. Cash sweeps can be administratively cumbersome but show the bank that you intend to work with them to pay down debt.Meanwhile, businesses seeking access to further funding must become familiar with the various options available. Alternative lenders can be less onerous in terms of covenants. They tend to lend a little bit more than the traditional banks and offer increased flexibility, but they also charge higher interest, often as high as 7%.Invoice discounting, where banks lend based on an entity’s debtor book, has also become a popular form of lending from a working capital perspective. It gives the lender increased security, as they have direct access to the debtor book. The facility limits can also grow concurrently with business growth.Private equityEquity is another potential option for SMEs in need of a capital injection. This route has become increasingly popular in recent years, as investors provide experience and growth potential as well as capital.Many business owners are apprehensive about trading a piece of their business, but it is always better to own 70% of a thriving venture than 100% of a failing one.ConclusionOpen communication is crucial at this uncertain time. Lenders understand the position many businesses are in and will expect requests to pay down debt at a slower rate, given that earning profiles may have changed. The key to success, however, is organisation and planning.Seven tips for approaching a bank during a crisisSeek expert advice. A skilled and experienced adviser will know what the bank and its advisers want and will be able to communicate this effectively.Accept the situation. Look for the positives and work with the advice given to you to identify areas for improvement in the business. Listen to recommendations and have robust discussions about solutions.Be honest. A bank likes certainty and predictability. These are uncertain times, so work with the bank and do your best.Prepare a deliverable plan. Create a budget that is real and deliverable, with actions and assumptions clearly laid out. Communicate. Deliver the information clearly and precisely to reduce the potential for misinterpretation and confusion. Don’t ignore the bank and hope that the problem will go away.Prepare. Talking to your bank can be a very confronting and stressful process. Be prepared for hard questions, and don’t take it personally.Have back-up plans. Speak to your adviser about alternatives in the market, be it a direct lender or private equity investment.David Lucas FCA is Corporate Finance Partner at PKF O’Connor, Leddy & Holmes.

John Convery discusses the important elements when creating a start-up and how you can improve its chances of success.Entrepreneurship is actively promoted and regularly encouraged. Being a business owner can be very fulfilling but starting a business is no easy task. This is a journey where you will meet a rollercoaster of highs and lows. It is a challenging, demanding, frustrating, testing, isolating, lonely, long road on the way to – hopefully – profitability and success.Research suggests 20% of start-ups fail in year one, just under 50% make it to year five, 66% have failed by year 10, and by year 15 only 25% are still surviving. Some businesses deemed to survive merely limp along for years, often referred to as 'the living dead'. However, with the right planning, mindset, and funding, improving start-up survival rates is achievable.Why start-ups failThere is a myriad of reasons why start-ups fail. In my view, it is usually due to a combination of factors rather than just one. Figure 1 summarises the most common reasons start-ups fail. They are broken into four areas:  market, founder, finance and other.Improving your chances of successTo improve your chances of having a successful start-up, you must get some fundamentals right.Sell a product/service that customers want A key reason start-ups fail is because there is an insufficient market need for the product or service. This can be mitigated through focus on the customer from the start. You must be customer-centric before you build, design, or develop anything. Take the time to put your ideas down on paper, and then go out to customers.Talk to potential customers or users, listen to them, try to identify their biggest pain points or struggles. Do market research.Build a basic, early version of the product.Go back to some potential customers, get their views and feedback.Refine, modify and enhance your product based on the feedback. Go back to potential customers again, get their views and any further changes or improvements needed.Enhance your product again.It is only with constant feedback and user reaction that you can improve the product and arrive at a point where it can begin to appeal to potential customers. It is a test and feedback loop. After the testing is done, you will begin to get a feel for a business model and pricing.Create a balanced teamFind good people with complementary skills who gel with one another – preferably a designer, engineer and marketeer. Teams build companies, not individuals. Investors also want to see a team, not a single founder.Control cashflow tightlyIt’s the job of the main founder or appointed finance person to make sure the company does not run out of money and to control finances tightly.Write a business plan The process of writing a business plan is not an academic exercise, it is a validation exercise on the product and overall business. The business plan should corroborate whether the product and overall business has potential. Appoint a savvy external business mentor or adviserTheir role is to ask hard questions, challenge you, objectively evaluate progress against targets set and hold you accountable. This person should not be a close relative or friend.Is entrepreneurship right for you?Creating a start-up is not for everyone. Like any career choice, not everyone is cut out for certain roles. It may not suit your interests, temperament, passion, or skills. The requirements or skillset for an entrepreneur are not specified, yet the skills required to be successful are rarely discussed other than in academic textbooks.Your character and resilience will be severely tested in a start-up, especially in the early stages. Delays, disappointments, criticism, rejection, frustrations, travel, endless presentations, knockbacks and 80-hour weeks with little pay is what a founder is facing. Fundraising is arduous, where it can take six months of meetings, calls, presentations and visits to secure investment. This takes a toll on you mentally and physically, and your ability to face these knocks and challenges while remaining optimistic is difficult. Successful entrepreneurs show some essential personality characteristics such as patience, an ability to listen, learn, accept criticism, and stay positive. They are a people person, and able to get along and deal with all types of individuals. Failure does not defeat them, and they learn from mistakes. They can take things in their stride and are willing to adjust or pivot when required. Successful entrepreneurs possess drive, ambition, and determination.Anyone who might be considering creating a start-up should do some self-examination as part of the planning. They need to ask themselves honestly if they have some or any of the requirements that an entrepreneur needs to have. Ask yourself questions such as:Do I have that entrepreneurial drive and determination?Am I cut out for this?Why do I want to start a business? You should only start a business for the right reasons. Self-indulgence, fulfilling a dream and pleasing someone else are not valid reasons.You fail and you learnThe aim of a start-up is to solve a problem for a customer. The customer comes first. Your starting point is talking to customers, discovering their pain points, and then using that feedback.If you are not getting good market traction, be prepared to pivot and change. If the business is still struggling to get off the ground, be prepared to disengage. This can be a difficult decision but necessary. You can always start again. Remember: you will pass failure on the way to success. A failed start-up is a valuable lesson. You fail, you learn, you start again and you do things better.I believe it is possible to improve start-up survival rates with good planning, the right mindset, and a funding plan. If your product/service is good enough, you will always secure funding. While the risks of failure in a start-up are high, the entrepreneurial spirit will nevertheless always be alive.John Convery FCA is a business adviser to start-ups and small businesses.