MORTGAGE HOLIDAYS-WHY AN ACCOUNTANT SIMPLY CAN’T IGNORE THEIR CLIENT’S PERSONAL CASHFLOW

The pause button is on and it feels like you can take a breath before starting on building new cashflow plans for your SME clients.

Many small businesses and their owners’ personal finances are interconnected. Accountants are passionate about ensuring their clients’ businesses avoid insolvency, but you need to make sure your clients don’t go bankrupt themselves!

IS IT BUSINESS OR PERSONAL?

Much of the advice your corporate client has needed over the last few months could have been given without needing a Designated Professional Body (DPB) licence from your Institute (save ICAI and ICAS perhaps). However, it is likely some clients have asked about taking a mortgage holiday for three months, to keep personal (and by proxy company overheads) down.

How can the accountant, as “ the trusted adviser” dodge a question that impacts on the corporate cashflow? What do you do? Suggest they talk to their IFA, their bank or building society, put your hands over your ears?

Your proverbial sleeves are already rolled up, so you have to get involved. As a qualified accountant you would feel comfortable about answering the mortgage deferral question, if it was for yourself. You would look at your income and expenses and make a decision. 

IT'S NOT ABOUT COMPLIANCE, BUT CONFIDENCE

So far, not too complicated. But the “ghost of compliance” stops us advising clients personally on things we are absolutely qualified to do.

And here is the rub, how can you put your hand on your heart and produce the best cashflow for your business clients unless you have got to grips with their personal outgoings?

We all have personal outgoings, could be a mortgage, pension contributions, food and utility bills etc. Cashflow is “oxygen” for the client personally, just as it is for the business. If you can help reduce personal outgoings then this can generally be reflected in the business cashflow, in terms of lower salary etc.

You simply don’t want a client who is stressing about personal cashflow and business cashflow, all at the same time, if you can help it.

Practically, the specifics on taking a mortgage holiday may be wider, if it impacts on credit ratings (it shouldn’t), but if you have a DPB licence then you can discuss the matter with your client. Talk about the merits, the possible downside of additional personal debt and potential impact to credit history.

HOLISTIC ADVICE-IT’S NOT JUST FOR FINANCIAL ADVISERS

Your client has asked you to help prepare the next 12 months cashflow for the business.

You need to know what their personal cash needs are. Get your “hands dirty” and ready to discuss and advise your client on the thorny subject of taking a mortgage holiday, pausing pension payments, and in truth, advising your clients holistically, to optimise the outcome for the business-job done!