At their recent conference, members of The Corporate Finance Network have pooled their expertise to prepare this toolkit for all owner-managed businesses
It appears that uncertainty around Brexit is here to stay for the foreseeable future and probably for several years, and as every new announcement about the future outlook for the UK post-EU membership seems to spook the currency markets.
Whilst the final outcome of a post-EU economy may be more advantageous to businesses, the effect on the value of sterling and uncertainty in the interim generally does no-one any good. Whilst FTSE100 companies will most likely weather the storm, irrespective of the economy, smaller businesses may be more impacted, as many were only recently feeling more optimistic after a long-drawn out recession and have already cut costs to a minimum.
Therefore, member firms of The Corporate Finance Network wanted to give SMEs a very practical approach to ensure that they are best prepared for the coming months and years, and at its recent national conference, the business advisers and accountancy firms pooled their ideas and expertise into this list of essential action for all owner-managed businesses:
- Know your numbers: Be fully aware of your current costs and whether they are increasing. Companies that don’t import directly will not be necessarily immune to importers passing on their cost increases from the weak pound, and the cost and availability of labour may also be higher in the future. Be strict about the management reporting of your latest figures and ask your accountant to implement regular accounts preparation so that timely decisions can be made whilst they are still relevant.
- Plan for A, B and C: Prepare profit and cash financial projections for various scenarios so that you can predict your financing requirements and ensure you have headroom for working capital requirements. Consider restructuring your financing so you spread your lending risk across more than one institution, as it is expected that banks will tighten their credit procedures for higher risk products such as overdrafts.
- Limit your surprises: Hedge for foreign exchange requirements or any future contingent liabilities, no matter which currency they are likely to be paid in. Future years’ insurance premiums or fuel prices may be higher, so plan to mitigate any costs in whichever way is possible to give an assured level of exposure.
- Spread your risk: Review your supplier list for concentration and reliance on any key supplier. Find alternative, trusted suppliers in case you need to move at short notice due to their ability to continue trading. Credit assess all your customers and implement strict credit control procedures.
- Look after your staff: Review your employment contracts, consider how UK legislation may remove some EU requirements or may bring uncertainty for some staff members. Assess whether your future ability to find quality staff will change and if so, consider alternative strategies for recruitment and training.
- Be present: Communicate well, with your customers, your suppliers, your staff and your industry sector as a whole. Write articles for your trade press, send emails to your customer list, share successes with your employees. Be proud, positive and live in the present, whilst the politicians and lawyers work out what our future will look like.
For any further advice about how to manage your business and prepare for the future, please contact The Corporate Finance Network at info@TheCFN.org.uk