The position on Brexit remains unclear in terms of timing and the relationships the UK will have with the EU and other trading partners in the years to come. However there are some practical financial issues which SME owners need to address now to reduce risk and put themselves in the best position possible.
Risk of Recession: While it is too early to say if the economy is going into recession it is best to prepared. In a recession cash flow is crucial and cash management is a priority. Have you clear visibility on your cash flows. Do you fully understand what drives your working capital requirements. Are your bank funding arrangements appropriate to your needs?
Currency Risk: We have seen the immediate effect of the referendum decision on Sterling making it more difficult for importers but providing opportunities for exporters. Have you a clear picture of your currency risks and do you know your net cash flows by currency? Are you managing the currency risk in your business and getting the best rates on on payment and receipt transactions?
Operating Margins: If your cost base has been impacted by currency movements it is likely that these will not be short term You may now need to review your costs and potentially adjust prices. Alternatively if your margins have been adversely affected without the ability to pass on cost increases you will need to review your overhead cost structure.
Financing: Securing appropriate funding is often an issue for SME’s. We are already seeing changes to the type of financing available to SME’s post the referendum. Interest rates have been at historical lows but getting access to funding for SME’s can be difficult. In this changing environment maintaining a strong relationship which your funding providers becomes even more critical.
Company Structures: Depending on the trading and contractual relationships in place, now may be a good time to review your company structure. Could you benefit from having a European subsidiary of could your European trading partners benefit from having a UK subsidiary?
We would be happy to provide advice on any of the above issues.