Finance director Know Your Money
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How can finance directors prepare for Brexit?

Nic Redfern examines how finance leaders can steel their organisations against the changing business backdrop created by the UK’s exit from the EU.

23rd Oct 2019
Finance director Know Your Money
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folders with brexit post-it notes

As Brexit looms ever closer, the political climate is still rife with uncertainty. With so many unanswered questions still lingering in the air, businesses and consumers alike watch on as Prime Minister Boris Johnson attempts to make progress. 

Perhaps one of the most pressing concerns for businesses is how the forthcoming upheaval will impact the UK, EU and world economies. Indeed, the answer to that question will determine whether Brexit is deemed to be a success or failure.

As ever, in the face of uncertain times, finance directors need to be armed with the right information to steel their organisations against the changing business landscape, and there are several areas that will require particularly intimate management.

Understand the risks

Firstly, an in-depth understanding of the risks posed by Brexit is vital. Changes to customs are, of course, inevitable – as are new legal and administrative barriers. But how will these adjustments affect your financing? Will new duties disrupt your supply chains or sales?

 It’s likely, so make sure you have all the details fully ironed out. Research the different commodity codes on your imports and exports and see how their respective rates will change in each scenario.

Invest in new technologies

It may seem counterintuitive to invest in times of uncertainty but this may be the time to focus on efficiency and small investments can deliver potentially massive time savings. Supporting your workforce by investing in new technology will be an invaluable addition to your business.

Brexit will inevitably slow processes down due to new rules and regulations, but you can speed it up again with changes to IT. For example, scrapping Excel and switching to a specialist online platform that removes the need to complete laborious data management tasks – as many FTSE100 companies have over the past few years – can massively shorten the time taken on administration.

Such technological investment will pay for itself when it comes to consolidating and updating your workforce data.

By using automated processes, for example, your analytics will be dynamic and can reflect the immediate financial impact of Brexit on your business. Getting ahead by implementing new processes quickly, even if Brexit is delayed or even cancelled, means you’ll have made valuable changes regardless.

Undertake detailed forecasts

Next on the agenda should be the creation of detailed forecasts, each with alternative operational and financial schedules.

Consider how workforces are assigned, the possibility of redeployment and whether you’ll need to make some new hires. All moving parts need to be fully accounted for. Understanding the impact of the various scenarios is key to being able to respond to the changes as the impacts become clearer.

If things don’t go to plan, it’s important to have some cash saved to help you ride out the choppy waters. Cash is the lifeblood of day-to-day operations and having enough in the bank could provide a crucial buffer in difficult circumstances.

Indeed, with the seemingly infinite complexities presented by Brexit, this financial cushion will help you sleep a little easier at night.

Be open and transparent to your employees

It’s not all about money and data. Finance directors will also need to consider the qualitative, human side of Brexit. Clear, concise financial communication is crucial for keeping things moving in uncertain times.

Internal and external audiences need reassurance, and swift communication of strategies, prospects and results will calm the nerves of employees and clients alike.

For some businesses, people management also needs to be front and centre. Determining which employees will be affected by citizenship changes will need delicate, considered management. Naturally, this will be achieved through effectively utilising the expertise of your HR team, if you have one. A strategic partnership will help you rapidly realise which roles, departments and functions need additional resource.

Brexit will throw up a host of challenges for businesses, but that doesn’t mean it can’t also proffer significant opportunities for growth. By preparing your team, cash flow, data and tech strategy, the shock of Brexit can be mitigated. If the wider economy goes against predictions and fairs well, preparations of this sort may even set you up for greater success.

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Hallerud at Easter
24th Oct 2019 10:20

Given we are a service industry (we lease commercial space to other business entities) and have no exposure to overseas sales directly and a limited purchasing function, the main "purchases" being funding from our bank (interest ) , utilities re properties , property repairs and upkeep, professional costs managing properties.

I have,

1. ensured bank covenants are easily covered (they are though not convinced we will see interest rate rises though not impossible if sterling tumbled so fast and far it needed supported) Bank borrowing are on 10 year deals and we are only at year 3 so feel comfortable, LTVs are very low for industry so even if a domestic shock freezing the UK lending market and leading to commercial property price drops we are covered as long as we stay within 60% LTV (and we are miles below that, nearer 25%)

2. hoarded cash so that we are sitting with 6 months turnover in cash.

3. stockpiled hand towels/toilet rolls as we do a serviced office/studio offering so need to have these, we always carry light bulb stocks but this article has prompted me to check where we are re these.

4. printer toners are being bought to have in store.

Utilities are under contract and most on fixed term and pricing so any supply issues resulting in any potential surge in market pricing should not be an issue- power cuts I really do not see as a problem but if they are not a lot I can do about them.

Re tenants hard to really know which have exposure- we had one yesterday telling us they are effectively closing Edinburgh offices we rent to them and relocating to their Canada offices but really not convinced anything to do with Brexit and their lease runs another two years so not an issue to our cashflow; may ask them if Brexit was a factor and they may tell us but I do really doubt it, they have just done chunky share issue and I expect it is more to do with business direction.

The main thing I would say for those not directly impacted is do not be off balance- extending/expanding on a shoestring with no reserves of cash would for me be the poorest preparation, unlike 2007/2008 we have all had plenty of time to ensure our balance sheets are robust enough to let any adverse consequences wash over us, albeit this may not be enough for those whose business is enmeshed with cross border sales/purchases/operations or whose supply chains are and they are critical to the business.

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