COVID-19, Industrial Automation Companies, Manufacturers & Distributors

Economic Aftershocks of COVID-19—and Five Financial Strategies

Posted on June 9, 2020 by

Tim Finerty

Tim Finerty

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Beyond basic operational concerns, many process industry users and system integrators are facing related business and financial issues due to COVID-19 and its direct and indirect effects.

“We deal with a range of automation companies, and like everyone else, they’re trying to understand what COVID-19 will mean for their businesses,” says Tim Finerty, industrial automation practice leader at accounting firm Clayton & McKervey “This includes how to take advantage of the stimulus packages, determining if their business is considered essential based on what their customers say, how to help staff work six feet apart and/or follow all the back to work guidelines, or how to help them work at home if they haven’t done it before. Some clients are doing critical projects like helping to build ventilators in two and a half weeks instead of 22 weeks. If they have to shut down parts of their operations, they’re also looking at key performance indicators (KPI) and their cash-flow projections. Some controls companies are even shipping inventory or equipment to staffers’ houses, so they can work on some projects in their garages.”

Finerty reports Clayton & McKervey’s clients are examining collaboration software and platforms usually intended to alleviate the ongoing talent shortage, but are now more urgently needed to help fill in for staff sidelined as a result COVID-19. “There are a lot of opportunities here because many customers of system integrators are now looking closer at getting more into automation,” explains Finerty. “Demand is also perking up in some areas because, if you need to get a project done in two weeks instead of eight, you likely need to implement some better processes that will also be helpful later, including how to track and make sure that a project is being managed well and that its costs are being tracked accurately.”

Finerty adds that many system integrators and other companies are already using now-familiar tools like Zoom and Microsoft Teams for video conferencing. However, this wider use of networking naturally requires more pervasive and effective cybersecurity.

On the financial side, cash flow continues to be a challenge for many system integrators because their projects are typically based on fixed prices, so Finerty states they must continue to be aggressive on terms to avoid putting themselves in a disadvantaged position. “Smaller companies can also be more nimble and temporarily reducing salaries or furloughing personnel,” says Finerty. “So far, businesses most affected by COVID-19 seem to depend on how the states where they’re located are responding in getting people back to work. We’re learning that integrators in states that are shut down are collaborating with those in states that are not shut down.”

Finerty reports Clayton & McKervey recommends five basic steps that system integrators and other companies can use to cope with COVID-19 and its impacts:

  • Take advantage of the Payroll Protection Program (PPP);
  • Use potential losses to drive future cash flow, for example, by using this year’s losses to recover taxes paid in a prior year or reduce a following year’s tax burden;
  • Look for transactional opportunities, such as buying competitors or other businesses, or forming joint ventures, which can more fully serve customers when the present crisis passes;
  • Investigate estate planning opportunities, such as company devaluations for the purposes of gifting; and
  • Deploy better data analytics to develop improved financial dashboards, which can track performance weekly or daily, and display more specific cost overruns or savings.

“Data analytics is a critical part of embracing Industry 4.0, but many internal accounting processes still don’t get the same attention as operations. They’re only used to provide an overall view at the end of the month or year. Real-time dashboards deliver insights immediately, and let users solve problems sooner,” says Bryan Powrozek, industrial automation manager at Clayton & McKervey. “Previously, much of this data wasn’t accessible or was only provided at a very high level. Most small to mid-size businesses didn’t have access to software applications that could provide real-time insights, but now they do. Tools like Microsoft Power BI and Tableau software can connect directly to QuickBooks and other accounting applications to automatically pull requested data, and display it on dashboards for better, more timely decisions.”

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

 

Tim Finerty

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Tim is known for his inclusive & solutions-oriented approach and his ability to easily connect with clients and staff.

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