Amid the uncertainty of Britain’s departure from the EU, we look at a few key financial management improvements SMEs can make in order to achieve a little more certainty within their individual business. 

Brexit top source of uncertainty for 23% of UK business

 

Be it good or bad, there is no doubt that Brexit will be a disruptive force for UK SMEs.  According to a recent article in Harvard Business Review Brexit has been different to most other “uncertainty shocks” throughout history.  They explain that events such as the 9/11 attacks, or the assassination of President John F. Kennedy generate a sudden surge in uncertainty which subsides quickly as markets adapt and confidence returns.    

Brexit, they say, has given us uncertainty which builds gradually over time.  A situation not experienced since the Great Depression – which started in 1929 and went on until 1932.  

To help better understand the uncertainties created by Brexit, the Harvard Business Review team from the Bank of England, University of Nottingham, and Stanford University has been running the Decision Maker Panel, a survey of around 7,500 business executives in the UK.  They report that Brexit has been an increasing source of uncertainty for many UK businesses, and that’s certainly been reflected across the range of ambitious SME clients we support across London, Hertfordshire and Essex. 

 

Harvard Business Review – Decision Maker Panel  

We estimate that uncertainty linked to Brexit has led to a 6% reduction in investment in the first two years after the referendum, with employment also around 1.5% lower. And Brexit is likely to reduce future UK productivity by around half a percentage point via a batting average effect of output being reallocated away from higher productivity firms toward lower productivity ones. The majority of businesses anticipate that Brexit will eventually reduce sales and increase costs. 

 Prepare for Brexit in the best way you can 

 At Oscar Fairchild we’ve been helping businesses for over 30 years, through good times and bad.  We’ve supported owners and directors as they address a changing landscape of challenges – all of which have kept them awake at night.  And right now Brexit uncertainty is top of the list for many.  The advice we’re giving is to worry about the things you have control over, and not the things you don’t. 

Kim Redwood-Lee says, “Sensible SMEs are focusing on creating as much certainty in their business as possible.  This is how to prepare for Brexit in the best way you can.” 

 

Here’s how…

1- Don’t rely on untrained staff 

SMEs can often expose themselves to financial uncertainty by leaving unqualified staff in charge of their bookkeeping and general financial management. Now is the time to find your go-to expert. 

2- Plan for beyond Brexit 

With an accountancy & bookkeeping expert on speed dial, you’re able to begin to build certainty.  Create a financial strategy; concentrate on tax planning; and cash flow that works for you, rather than against you. 

Focus on these four points up front: 

• Tax planning 
• Ring-fencing income 
• Rainy-day planning 
• Strategic investment 

3 – Invest in precision management accounts 

To achieve thorough certainty, we recommend business owners and directors accurately monitor continuity of profit.  Not only tracking the profitability of client projects, or the sales of products and services.  But also monitoring efficiency of employees, departmental expenses, materials and overheads before plotting actual performance compared to budgeted performance. 

Kim Redwood-Lee continues – “Affordable, sustainable finance underpins business growth. The Bank of England has said it believes UK banks are strong enough to survive a disorderly Brexit.  Nevertheless, ambitious SMEs should consider that when times are hard banks tend to reduce lending to smaller firms.  We’re helping clients to plan beyond Brexit, with tax planning, ring-fenced income, rainy-day planning and strategic investment planning all designed to give more certainty in uncertain times.” 

 

Get expert advice to help you get it right

Whatever questions you have around Brexit planning, working with Oscar Fairchild’s specialist ACCA, AAT bookkeeping and accountancy team will mean you can address them with accuracy, confidence and trust.

 

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About Oscar Fairchild

Oscar Fairchild is an experienced accountancy and bookkeeping practice based in Billericay, Essex. We offer a comprehensive range of services including Self-Assessment, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pensions, and Management Accounts. We work with SMEs, businesses in the construction sector, and a wide range of industries in between – including licensed London taxi drivers – across London, Essex, and Hertfordshire.

Contact us today to learn how our flexible, outsourced accountancy and bookkeeping services can provide reliable, expert support for your business.