After years of heated debate and soap opera style ‘will we/won’t we’ plot twists, Britain is finally having a referendum on leaving the EU.
Regardless of your personal view on the issue, as a business owner this is one debate you can’t ignore.
This month the Financial Reporting Council urged companies to include the potential cost of quitting the EU in their financial statements. While the warning was aimed at major FTSE companies, SMEs and other high growth companies would do well to listen.
Legal and business experts have convincingly argued that ‘there will inevitably be a knock-on effect to smaller businesses’ if a Brexit materialised and six in 10 small firms already in a survey confirmed this week, that they want to stay in EU.
However, even the smallest of SMEs will benefit from making forecasts that try and plan for the many scenarios that may play out if we leave Europe, such as changes in tax and restrictions on international trade. Taking steps now to think what the financial implication may be for your business if the UK leaves could give you a huge advantage down the line.
Being prepared for whatever the future holds
Considering how your outgoings and ingoings may be affected by a Brexit allows you to start forecasting and planning from a position of strength, helping you to safeguard your future. This shouldn’t be a lengthy exercise that takes hours, but a process of getting yourself in the zone of ‘what-if’ and challenging yourself to think through those scenarios.
With so many variables in the mix after a Brexit, it’s a good idea to start by focusing on some of the more obvious areas that would be affected, such as staff, suppliers and customers.
For instance, if one of your main suppliers decided it was better for them to remain in the EU and upped sticks to mainland Europe, your dealings with them would then be subject to new taxes, custom costs and slower admin processes. How much could this hit your bottom line?
A similar scenario may arise with those you sell to. How many of your customers – individuals or businesses – could feasibly leave the country? Could you still sell to them outside the UK or would you have to find new ones to replace them?
And if you employ non-British nationals, a Brexit may require them to have a visa or work permit. If several of them left as a result, what impact would that have on your productivity, HR costs and projected growth?
By including these kind of scenarios in your financial plans, you can make more informed decisions about what investment or preparations you should make to ensure your business continues to grow if the UK left the EU.
Don’t fear the future, prepare for it
Forecasting and scenario planning like this isn’t anything to be scared of. And thanks to cloud computing, what used to take days or even weeks, can now be done in a matter of minutes and is available to even the smallest of SMEs.
With so much at stake, surely it is better to consider these points now, before the storm, rather than later in the inevitable chaos and panic Brexit would likely bring about.
Nobody knows exactly what will happen if the voters vote to leave, but those SMEs and high growth companies who have planned for all eventualities will be several steps ahead of the rest of the pack who sat and waited.