Brexit: What does it mean for finance leaders?

Right now, the real impact of this new deal on UK business is still yet to be fully uncovered - yet as with any change, preparation is key. But have UK businesses had the time, resources and the right information to be able to prepare? A study by EY, gauged the views of more than 2,200 businesses both domestically and internationally, to see what plans they have been putting in place for trading between the UK and EU following Brexit.

According to the results, only one in nine businesses had plans in place - with many respondents pinpointing time and a poor understanding of what actions they need to take.

While it is a topic at the forefront of all our minds, according to a poll by YouGov it’s the nation’s third biggest concern behind our health and the economy, no one can be sure what the long-lasting impact will be. Which is why even now a deal has been agreed, it is really important to manage the transition no matter what sector your business operates in.

Review supply chains

Finance teams must be able to quickly respond to the changes in business Brexit brings and help business leaders understand the impact these changes may have on the bottom-line.

One of the most profound changes impacting business operations is trading relationships. As an EU member, the UK was part of its trading system – the customs union and the single market – meaning there were no tariffs on goods traded between the two, and minimal border checks.

Fortunately for many, the deal reached little or no tariffs on many goods, as long as they meet stringent local content requirements. Yet in the short term there will still be more red tape for businesses to cut through and working with your supply chain will be vital to avoid hold-ups and delays that could cost your business.

The extent of your review into your supply chain of course depends on whether your business trades with the EU, with Britain or with both. If you currently trade with Europe, then making sure that you have compiled specific and correct data on your current international trading volume is paramount – as it will mean that you can take speedy and insightful decisions if the need arises.

Finance teams should also be working closely with business leaders in order to assess the impact of exchange rate movements on the cost of overseas labour, and changes in raw material costs and product pricing decisions, if relevant.

It’s important finance teams keep on top of the latest changes in the market, even with a zero-tariff agreement now in place, you should be auditing your supply chain to identify any possible risks, and carefully review cost management in 2020 to be able to forecast as accurately as possible, with potential delays factored in due to Brexit for the year ahead.

Charges, duties and costs, what do I need to consider?

With the uncertainties that Brexit still presents even now a deal is done, managing business performance and budgeting for unexpected costs such as inflated supply chain fees and import duties is a must.

Import duties and extra customs charges, inventory, market access requirements and delays at the border are all factors that may increase your costs no matter what sector you work in. As mentioned, the zero-tariffs deal struck covers most sectors including manufacturing, retail and pharmaceuticals - but it still leaves some questions for many businesses working in the professional services sector who work within the EU, namely around data.

The finance team’s responsibility is to plan ahead, forecast how any changes may impact your budget and consider whether charging your own customers more for your products may have a positive effect.

You’ll also want to clarify whether you are being paid in pounds or euros, and depending on currency, you’ll want to assess any associated risks. Compared to the British pound, the value of the euro has increased, making it much less attractive for UK buyers to buy your products, if you charge them in euros as your product prices will be higher.

For finance teams, it’s about weighing up the pros and cons of both sides and advising which option would best suit the organisation and the services it offers. That’s why, as a finance professional, it’s important to utilise any insights at your disposal and build flexible models to analyse a variety of scenarios for the year head.

Business as normal

With the trade deal now struck, at least some uncertainty for businesses has been cleared up. Though for finance professionals, there is much work to be done behind the scenes to steer the business towards stability.

With your finance team juggling changes in the market thanks to the challenges posed by Brexit, and driving recovery from the pandemic, their time needs to be carefully managed. Accounting automation could be key to their success, allowing them to pull off real-time reports for weeks, days – even consolidated down into hours to be able to more closely monitor spikes, trends and anomalies in data.

With the reporting automated in the background, finance professionals can focus their time on delivering strategic insights for business leaders to analyse - including reviewing product pricing and import charges, as well as identifying areas the company can capitalise on opportunities to open up new streams of revenue.

Indeed, there are still plenty of challenges ahead as the current deal means if the UK does decide to diverge further away from EU rules in the future, we could lose the benefits of the trade agreement.

With the right technology in place helping steer the organisation through this next phase, business leaders will stand a good chance of being prepared for whatever challenges come next.

Access Financials is a leading SaaS based financial management suite. Download the brochure to see how Access finance software can give you a smarter, more integrated and scalable way of working.