How To Protect Your Business Against Brexit
This article helps explain how to protect your business against the effects of Brexit, although it is not possible to completely insulate your business against all possible consequences. These steps may help deal with some possible issues.
With Article 50 having been triggered Brexit, Britain leaving Europe will now become a reality. This will continue to create huge uncertainty for UK businesses, as no one really knows what the impact of Brexit is going to be.
The Possible Effects Of Brexit On UK Businesses
The issues that businesses face are varied, so we have sought to address some of them below.
Many businesses are "battening down the hatches" and waiting before they commit to new projects. This has a knock on effect on their suppliers, often smaller businesses, that may have work orders delayed or cancelled because of this.
We have seen this in practice, with clients putting expansion plans on hold, until the effects of Brexit are clearer.
Clearly, the more dependent you are upon a single order, or single customer, the more problematic this could be for your business. Building a spread of customers, without a prime debtor is of course the optimum approach. If you are struggling to find new customers, you could speak to a marketing agency, who may be able to help you grow your customer book and mitigate this risk.
In times of uncertainty companies tend to hold onto their cash, and extend the credit terms they take from their suppliers. This can cause customer payment delays, that may harm the cash flow of your company.
Brexit is likely to give rise to payment delays, and these may get worse should there be a deterioration in the UKs situation, as a result of the Brexit process e.g. If there is "no deal" - a failure to reach trade agreements with Europe for instance.
If the credit period taken to pay your invoices increases (your debt turn increases), invoice finance is a solution. An invoice finance company will provide you with the majority of the value of the invoice(s) immediately you raise them, such that you don't have to wait to get paid. If you want the ultimate flexibility, a selective invoice finance facility normally has no requirement for a minimum level of invoices to passed through the facility, so you can have the facility on standby, in case of need.
There is also the possiblity of transport delays at the ports, which could in turn lead to payment delays. Additional costs from tariffs could eat into margins.
Following publication of this article we have now completed our UK Late Payment Research about the effects of Brexit on the time customers take to pay.
Customers Going Bust
If issues arising from Brexit cause one, or more customers to go bust, you could lose both future orders and the value of any outstanding invoicing. You can mitigate the risk in several ways.
Firstly, spreading your customer base (as mentioned above) will help mitigate the risk associated with losing future orders from any one customer. Secondly, you could consider bad debt protection to protect you against the losses associated with customers becoming insolvent. This can help you avoid suffering a bad debt, which can impact your cash flow. We are currently able to introduce you to providers that are promoting special offers on bad debt protection - either discounted or free for 6 months.
Improved Access To Export Territories
On the plus side, there is the possbility that we might negotiate new, favourable trade agreements, with export territories, that you could benefit from. If you are interested in exporting there are financiers that can help you finance your exports, collect payments from foreign countries and protect against non payment by export debtors.
It is likely that there will be fluctuations in the value of the pound against other currencies. These could increase, or decrease the relative value of sterling. Depending upon the movements, it could affect importers, as the value of goods purchased abroad increase, or decrease relatively. It could also affect exporters that trade in foreign currencies. Banks or independent foreign exchange companies will be able to help you protect against such fluctuations, if required.
Interest Rate Movements
It is possible that UK base rate could be increased or reduced as a response to issues that might arise from Brexit. If you are an invoice finance user, a single fee arrangement would mitigate against the effect of any possible increase in base rate.
This article is not a comprehensive guide to the possible effects of Brexit, but there are some helpful points above that may help you reduce some of the risks to your business. If you would like to discuss any of the above mentioned issues please feel free to call Sean on: 03330 113622.