The new normal is often used to refer to a post pandemic world, however it really is much more than that.
As well as being a major global health issue, the pandemic has accelerated and amplified collective awareness of issues of concern that have been with us for some time. In particular, geo-political tensions, breakdown of global systems, economic inequality, racial inequality and climate change, to name but a few.
In the new normal, the business environment is changing at an unprecedented pace, businesses are responding rapidly and, for those considering making investments, the importance of doing thorough due diligence has never been greater.
Businesses are operating in an environment that is changing quickly
The changes we are seeing in the business environment include:
Businesses are reshaping for success at high speed
There is no question that in the new normal, customer behaviours will be different. Some industries will be compelled to restructure. Market positions will shift drastically. Businesses that are taking action now will be those that come out on top.
Many business leaders have publicly discussed the desire to preserve the perceived benefits arising from the new ways of working established during the pandemic lockdown, including flattening of management structures, flexibility in responding to clients and rapid decision making. These leaders are already reshaping their businesses to be successful in the new normal:
Robust due diligence is more essential than ever before
In a well conducted due diligence the historical and prospective performance of a target business are closely assessed and an inside looking out perspective is as important as an outside looking in perspective.
Business performance in the new normal may differ drastically from past performance. Understanding past performance remains important. However, it is much more important to identify what will change in the external environment and understand how the target business needs to respond.
In every extended industry value chain, ultimately at one end there is a consumer, a person. Understanding whether and how that consumer’s buying behaviour is changing is vital to developing a view about the size and growth rates of the (possibly intermediate) market that the target business sells to.
Extended industry value chain analysis can assist with understanding how the business shifts arising from the new normal might manifest. These are likely to be significant for many industries and for the futures of businesses in those industries.
Changes in competitive landscapes require more analysis. Some companies will be acting quickly and have the cash reserves to weather a downturn, or chase new opportunities, or invest in change. Others will be slow to respond or cash strapped or both. Businesses that were previously dominant in their markets may be usurped by smaller, more nimble players.
Inside target businesses, transformation will be happening. Evaluating whether the changes are the right ones in the right timeframe, and whether management has the implementation capability required, can only be done after developing a deeply considered view about the external environment.
Even a thorough evaluation of the likely shifts in the external environment and how the target business is responding will not provide a crystal-clear picture. Sensitivity analysis is useful and should be used. Scenario analysis is even better, particularly if likelihood assessments can be assigned to base, worst and best case scenarios.
Doing a deal well requires a robust due diligence. As we move into the new normal, this has never been truer.
In the past couple of weeks most of the tax discussion has been dominated by the raft of stimulus measures that are being released, seemingly daily, by the Federal and State Governments.
Staying on top of the various stimulus measures and maximising the available benefits for your business and your employees is critical. The immediate challenges of the COVID-19 business crisis has meant a somewhat reactionary approach is necessary (practically nobody saw this coming) and the stimulus measures have been carefully targeted by the Government to help business:
But… you should start “planning ahead” now
Looking beyond the here and now, you need to be planning for a return to normal business, although “normal” may be different for some time or indeed forever. It is important to reimagine what the next normal will look like:
The key to any planning is tax forecasting
Business forecasting is critical when confronting uncertainty, as it gives you a clear base line to assess alternative outcomes. Most businesses should be currently reviewing financial assumptions and producing new forecasts. It is necessarily an ongoing process and your tax forecasts should work in parallel.
A good tax forecast model is more than multiplying accounting profit by 30% and assuming four equal tax instalments. Perhaps this is a reasonable approximate, but it does not tell you the story that is important to your business.
A good tax forecast model forecasts the key risks and tax attributes of a business. It should forecast and assess the following:
Appropriate forecasting of key tax attributes and risks enables you to understand what drives the numbers and identify what the trigger points are for key decision making.
Such a strategic approach not only manages tax risk, it ensures that when the right opportunities present themselves it is more likely that you are able to capitalise on them to drive business value through tax outcomes, and be ready for a post COVID-19 world
Some actions shots from our recent client session where we updated on our new strategy, new name, vision and mission and the general expansion of our business over the last year. We also had some really insightful and fun tax update trivia and as always some great conversations over pizza and a drink. Thanks all to those in attendance and our dedicated team at Nuwaru who presented and worked to bring the session to life.
A snapshot of our monthly training at Nuwaru and a very big thank you to Shane Peters for presenting on some of the recent developments in the payroll tax space, including the recent Optical Superstores case.
If you are interested in joining the team at Nuwaru or would like to talk with one of our specialist tax or accounting partners please reach out to Mark Oh or myself.
Congratulations to our own William Xu, who has co-authored a paper entitled “The true and fair view: exploring how managers, directors and auditors engage in practice", with Dr Matthew Egan from the University of Sydney Business School. The paper has been formally published in Accounting Forum, an international journal in accounting and business.
To find out more on the paper, please navigate to this address: https://lnkd.in/gjRREgh
If you'd like to benefit from William's expertise on this or other accounting matters, reach out to William Xu or Mark Oh.
In these unprecedented times, we wanted to give you some assurance that Nuwaru is doing, and will continue to do, everything possible to protect our clients. Our aim is to ensure that we ensure the good health of ourselves and our clients at this time, and still continue to service clients who may be needing our services.
As you know, we have always operated from virtual offices, which means that we all operate from our homes and not in a typical workplace environment. In addition, we utilise technology such as Microsoft Teams and cloud based servers to interact with each other. This means that there should be no disruption to our service to you, and we remain “open for business”.
Should you require a meeting with us, we will be flexible to your needs. Should you require a face-to-face meeting, we will observe social distancing (no handshakes and physical separation) and are able to meet. Alternatively, we can easily and effectively also meet utilising our video conference facilities. We encourage you to continue to contact us should your business needs arise. Please stay safe, and Nuwaru will continue to support you through these times.
Sincerely, The team at Nuwaru
#openforbusiness #wfh #newtax #cfos #tax #staysafe
We've moved into the Noughties ... and are now on Twitter! Find and follow our Twitter handle @nuwaru_nuwaru - we are still working on building our profile and look forward to connecting and engaging with all our new followers!
Nuwaru is very proud to have been selected as a finalist in the Client Choice Awards for the Professional Services Startup of the Year. Thanks to all our clients who have supported us and continue to support us on our journey, the entire Nuwaru team, beaton and the The Australian Financial Review (see page 21 of todays AFR for the announcement).