You really can’t escape ‘Brexit’ in the news right now.
At the moment, there is a lot of speculation about what might happen next, but not a lot of concrete answers. Certainly we’ll learn more about the implications in the coming weeks and months but for now, please read on for our advice in the short term.
Change…but not as fast as all that:
It is unlikely that any major changes will happen quickly. The process of exiting the EU is expected to take around two years, and we may not start even start doing so for many months yet. Some change may happen sooner, but there is certainly a good runway of time to consider the longer term issues that may arise.
Our view is that much of the headlines will focus on the shorter term ‘reaction’ changes, rather than the longer term fundamentals which were strong prior to Brexit…This is more than can be said of other EU countries! So, we are bullish about the UK’s (and small businesses’ ability in particular) to weather the storm, and will even take advantage of the opportunities that will arise with some careful thought, advice and planning.
What we know so far:
• The referendum result has sparked a surge of political instability in the UK – this will take time to work through
• A departure process will last years and has not yet been formally triggered
• Sterling hit a 31-year low, but UK stock markets dipped much less severely
• The Bank of England stepped in quickly with reassurance it was ready to act
Our 10 practical top tips:
1. Build financial headroom – the larger your financial headroom, the more insulated you will be from any potential shocks as they come along. We like to recommend having 3 months of costs available in cash or facilities should you need it. With overdraft arrangement fees minimal, now might be a good time to arrange one with your bank, whether or not you need it. Likewise pre-approval for loans can be advantageous, in that you can call on them quickly should you need to. Other lines of credit such as credit cards can be useful to absorb any short term impacts and worth considering even if they end up not being used. Of course even retaining a little bit more cash in the business can help build reserves in the short term.
2. Get a good deal on foreign currencies – exchange rates have varied by around 10% since Brexit and as such it has never been more important to get a good deal when dealing with foreign currencies, both in the rate and charges that apply. With banks often charging fees and giving poor exchange rates, we find you can save up to 90% by using new online providers such as Transferwise HERE or HiFX HERE for both business and personal transfers.
3. Get paid faster – no matter what line of business you are in, getting paid faster is always a good idea. We offer all our clients the ability to raise online invoices, where you can send via email and track who has opened them etc. Studies have shown implementing this can remove a third of the time it normally takes to get paid. Once you have done this, why not add a payment facility directly to the invoice. One click and you can be paid using debit or credit card from almost any country. Direct Debits are even better for across the UK and Europe too – get in touch to talk to us about these services, which we can have set up for you in under 48 hours.
4. Track your debtors – other companies might be looking to conserve cash and as such delay paying your invoice. Ensure you have full visibility of who owes what and who has paid by using our bolt on digital credit control services. These can track, update and chase your outstanding invoices for you ensuring you get paid when you are due. Ask us about this service.
5. Selling opportunities – the pound has weakened against most currencies and therefore if you sell your goods and services in other currencies you can now get more pounds for that. Useful to improve your margins or invest that difference to win those additional sales. Talk to us about how we can help you deal with multiple currencies with ease.
6. Buying opportunities – a weak Pound makes goods and services from overseas, or even those just imported into the UK and sold in pounds, more expensive. There might be opportunity to review whether you can buy more locally as an alternative and offset any potential cost increases that way. Failing that, asking for discounts or extended credit terms from existing suppliers can yield surprising results.
7. Don’t get distracted – chances are a lot of what is happening is largely out of your control and even the impacts are only potentials rather than actuals at this stage. It will be important to not get too distracted and ensure your business runs at its best over the coming months. Keep calm and carry on!
8. HMRC / Tax – there is no change to the tax you owe or pay at this stage and therefore no point in calling HMRC to ask the question or enquire, as they won’t know any more than you at this point. What is important is that you have access to the right information and can change as required….and our next point covers this one!
9. Advisor – having access to a good advisor who can deal quickly with any changes as and when they arise is always sensible. If you have not got one we can thoroughly recommend finding one. The best ones will be able to see how your business is performing in near real time and advise any actions as appropriate. Traditional annual accounting practices and models simply can’t keep up with fast change so make sure you find one more suited to current times.
10. Cash is ‘king’ – finally, as we like to tell almost anyone that listens cash is still king, and the most important thing for a business. You can afford to be unprofitable many times, but only run out of cash once. Making sure you turn your efforts into cash as quickly and productively as possible, whilst maintaining sufficient reserves to deal with any bumps as they come along, gives you the best chance of success and the ability to capitalise on any opportunities as they arise.