For better or worse, it’s happening.
By the end of March 2019, the UK will be leaving the EU. And while there’s still a huge amount of uncertainty in the details, one thing is clear:
Businesses need to adapt if they want to keep succeeding.
No one can say for sure exactly what will happen.
But we can give you some ideas of what to expect: the potential problems and opportunities ahead, and what smart businesses are doing now to help them stay better informed and plan for the unknown.
What does Brexit mean for product-based businesses?
Most of the businesses that will be heavily affected by Brexit are product-based – such as the manufacturers and wholesalers who rely on the EU for their day-to-day operations.
And here at BlueHub, the majority of our own clients trade directly with Europe in some way.
Everyone’s a little uncertain about the post-Brexit future – and no one can blame them. In particular, most businesses are worried about:
- A drop in the value of the pound, leading to higher costs for goods and services
- Higher international tariffs, causing increased operating costs
- And a shift in import regulations, causing delays and increased lead time that could ruin deadlines and production schedules.
But it’s not all doom and gloom.
Just like any other change in circumstances, new challenges come with new opportunities. And the difficulties that could follow Brexit are a chance to reorganise and improve your supply chains and operations – especially with the right technology on your side.
What are businesses doing now to prepare?
Every business has their own way of anticipating and preventing disaster.
Some of our own clients are buying in extra stock as a buffer to get them through a difficult transition.
Some are working double-time through their biggest or longest ongoing orders – so they’re left with a smaller workload when things hit the fan.
And many of them are playing it extra safe: sitting on their money and limiting their new business so they can wait and see just how difficult things might get.
But the one thing that we’re recommending to all of our clients – whether they trade directly with the EU or not – is to get a grip on their accounting and inventory management now.
And with the right software giving them full control and useful reports, they’ll be as prepared for Brexit as they can be.
How can inventory software help businesses get through Brexit?
We’re not going to pretend that inventory and accounting software can solve the Brexit problem for everyone.
But it really can help.
By giving you more control, data, and reports, you’ll find it easier to stay on top of your changing circumstances.
In particular, you’ll be able to:
1. Manage both fixed and live exchange rates
One of the biggest worries for UK businesses, as we head towards Brexit, is the devaluation of the pound.
This could lead to relatively higher costs when you’re importing goods and parts from the EU – but it could also make your own exports more attractive from the perspective of EU countries.
A cloud accounting package like Xero (which we absolutely recommend) gives you live updates on exchange rates, integrated into your invoices, quotes, purchase orders, and other transactions.
That means you can see exactly what your foreign transactions mean to your business in real terms on that particular day.
And crucially, there’s even a built-in feature that compares the value of an older unpaid transaction or invoice with the value it would be if it were paid today – which shows you exactly how much you’re losing or gaining from the shift in exchange rates.
2. Track stock in multiple locations
With so much uncertainty about post-Brexit tariffs and trade regulations, the cost of imported stock (and the potential delays in lead times) are a serious worry for UK businesses.
You need to know you’ll be able to consistently match demand – and you need to know you’re getting the best price for everything you buy.
Lots of businesses are buying up stock now at prices they’re used to, investing larger amounts of their cash into their inventory.
But the bigger your stockpile, the more stock you have at risk. And that means you need better visibility and control over your products – especially when you’ve got a large number of them spread across different locations and different stages of delivery.
An advanced inventory tool like Cin7 gives you exactly that. As well as the usual locations (like different warehouses, and different areas within each warehouse), you can assign your stock to as many virtual warehouses as you like for free.
These fictional locations – such as ‘on the boat’ or ‘at the docks’ – can help you to break down your supply chains into every possible location your imports go through. Which means you’ll have a deeper understanding of where every piece of stock is at any given time – helping you to plan your production schedules down to the hour.
And if you’ve got a good relationship with your suppliers, you might be receiving stock on consignment – and Cin7 can help you to manage it.
As well as avoiding uncertainty by buying that stock at a previously agreed price, you’ll also be able to keep your consignment stock (which you don’t own) in separate virtual warehouses.
That makes it much easier to keep your consignment stock away from your accounts – and away from any scrutiny from the tax office.
3. Manage multiple suppliers for parts and products
At the time of writing, we still don’t know exactly what kind of trade deal (if any) the UK will end up with.
And if we end up with a different set of rules and regulations for every EU country that we trade with, it’ll be important to keep as many options open as possible.
Cin7 is perfect for this:
For any particular item you buy, you can have different prices for every supplier (and different currencies, which are automatically converted for you).
You’ll also get access to useful reports and data about each purchase you’ve made in the past: such as how much you paid, and how long it took them to deliver.
So if one of your suppliers is in a country that gets a higher tariff, you’ll be able to easily see the costs and timescales involved in continuing to buy from them – and you’ll be able to weigh them up against your other suppliers in other countries to decide which is the best option for the future.
4. Integrate your software with logistics companies abroad
If you outsource your fulfilment to a company in another country, it can be difficult to keep their actions up to date on your own system.
You might sell a large volume of goods into Germany, for example – enough that it becomes worthwhile to hire a warehouse there to hold your stock.
That company in Germany is in control of the warehouse, and they’ve got their own particular software and systems for managing their operations.
Normally, you’d have to manually update your own software every time your third-party logistics company sends out an order from Germany.
It’s double-entry, and it’s inefficient.
Inventory apps like Cin7 and DEAR have open APIs, which would allow integration with the 3PL’s inventory system. This means changes and updates will happen automatically as things change in the German warehouse – saving time and avoid unnecessary human errors.
5. Report to the EU more easily
Under the current EU agreement, businesses trading with the EU have to use EC (European Commission) Sales Lists to report their VAT through Intrastat (the system for collecting data on the trade in goods between EU members).
Currently, software like Cin7 has custom fields to help automate this process. By entering a commodity code onto your orders and invoices, you can pull the data from these custom fields into an automatically generated report to send to the EU.
But we don’t know exactly how VAT reporting will pan out in the post-Brexit world.
It could be that we need different codes for different countries – and that could mean that our VAT reporting becomes confusing and messy.
Luckily, with Cin7, you have the option to add more custom fields as you need them.
Which means that, hopefully, by switching to an advanced inventory tool, you’re helping to futureproof your business against changes to how we report our VAT.
So what’s next?
If you’re a UK business that regularly trades with the EU, you’ve got a lot to think about – and the Brexit deadline is fast approaching.
But it’s never too late to get a better grip on your products and your supply chains.
At BlueHub, we’ve helped countless businesses move their operations onto advanced accounting and inventory management software – and we’ve seen exactly how fast those businesses start to see results.
So if you need a bit of help deciding which software is the best fit for your business (or you just have a few questions about your inventory), leave a comment below or book a call with us.
We’re always happy to chat about software and stock – and we’ll be more than happy to set up a free consultation for you.