Are you confident that your SME is financially prepared for Brexit?
A recent survey by the Federation of Small Businesses (FSB) found that just one fifth of the UK’s small businesses exposed to Brexit have planned or prepared for disruption. A factor in this lack of preparation is uncertainty in knowing what to plan for – nearly two thirds said they felt unable to plan. However, you really do need to make your SME as financially prepared as possible for Brexit, in particular if you import or export to the EU.
Yesterday (29th October 2019) the EU confirmed their agreement to Britain’s request for an extension until 31st January 2020. This follows a flurry of developments over the last week or two, including a new withdrawal agreement proposal. The extension, or ‘flextension’, allows for Brexit to happen earlier than January if an agreement is approved.
So, while we have another three months to work towards an agreement, there is still a lot of uncertainty – will we leave with a deal, or without? Will there be a period of transition? If so, for how long? It’s easy to understand why some SME owners feel unable to plan and prepare for Brexit.
If this sounds like you, then we’re here to help – we now have up to another three months’ breathing space, so you need to make sure your SME is as financially prepared as possible in the time left.
How can you ensure your SME is financially prepared for Brexit?
We suggest you consider the following:
- A financial audit of your business’s resources
- Ensure a strong cash flow
- Ensure the continuity of your supply chain
- Understand financial and business procedures
- Draw up a personal budget
Let’s take a look at these in more detail:
Carry out an audit of your business’s resources
One of the first steps in making sure your SME is financially prepared for Brexit is by making sure you know where all your business’s money is coming from, and where it is being spent. Ask those tough questions about your expenditure to help identify any areas where you could detract funds to then support the areas of your business which might be most impacted by Brexit. These could include stock maintenance, business premises costs or staff salaries.
Ensure you have a strong cash flow
Being paid on time can be a challenge for small businesses, particularly if you don’t use software to manage your invoicing process. SmallBusiness.co.uk agrees that taking time to get on top of all your invoices and payments owed is an essential step in making sure that your SME is financially prepared for Brexit. You need to know that existing customers are paying on time so that your cash flow is in a strong position. You can then take the steps you need to, to prepare or protect the most exposed areas of the business.
Ensure the continuity of your supply chain
Be proactive and speak to your suppliers – you need to be confident that they too have considered the potential impacts on Brexit on their business. Suppliers should be able to detail their plans to ensure they can continue to provide you with the agreed level of service going forward. If you’re in doubt then consider alternative suppliers – if your customers experience issues then this will reflect on you, not your supply chain; just one supplier issue could lead to a negative impact on your business.
If your business or any of your suppliers are heavily reliant on EU partners or services, then it’s worth keeping in mind that trading contracts could be dissolved as a result of Brexit. TalkBusiness.co.uk suggests that easing away from these EU-reliant partners could help to reduce risk and lessen the impact of any losses experienced.
Understand financial and business procedures
Whether we leave the EU with or without a deal, there will be significant changes to business and financial processes. Some changes will affect all businesses, such as VAT and tax changes; others will have greater impact on those importing from or exporting to the EU. Part of ensuring that your SME is financially prepared for Brexit is researching the potential changes relevant to your business.
The PrepareForBrexit.Scot website has a straightforward checklist which will help you get started here. There are also a number of webinars, workshops and seminars available – take a look at the list of events.
Other websites offering clear guidance include:
Draw up a personal budget
In addition to auditing your business’s financial resources, it’s important to understand your personal financial position too. By drawing up a budget of your monthly expenditure you’ll get a clear idea of any cuts you can make – and while there may not be long to build up substantial savings, anything you can save will contribute to a financial safety net.
Ask for professional advice
There’s a plethora of information available online regarding Brexit and business planning, however this can quickly become overwhelming. Where should you start? How much is really financially viable and practicable for your small business? How can you ensure that you’ve financially protected yourself as far as possible?
If you want peace of mind that your SME really is financially prepared for Brexit, then ask for professional advice from an accountant. They’ll be able to give you an overview of your business areas of financial strength or weakness, help you to identify those most vulnerable to financial risk and then work with you to create an action plan.
How can Crunchers Edinburgh help?
We’re alternative accountants – we believe that small businesses deserve more from their accountant than accounts and tax return. We’re friendly, honest and straight-talking, and we specialise in working with small businesses and start-ups. Brexit and the feeling of never-ending uncertainty is already impacting small businesses, but we can help you protect your business.
We don’t know exactly how long we have until Brexit, so it’s important to really make the most of this additional time to ensure your SME is financially prepared for Brexit. If you’d like to find out more about how we can help you, get in touch – give Hamish and our team a call on 0131 502 0543 or email Hamish at Hamish.Sheppard@crunchers-edinburgh.co.uk.