It is still not clear how or even whether the UK will leave the EU on March 29th. In this period of uncertainty, many businesses will feel paralysed and also powerless about what they can do. Nevertheless, there are some essential steps that businesses should take to prepare for the myriad of potential outcomes that await.
Map out the risks
Now should be the time that businesses perform a supply chain review to understand how their suppliers are feeling about Brexit and consider changing high-risk suppliers who will be unable to honour contractual agreements in this period of uncertainty. It is important to know in detail where your suppliers are based and how they buy and sell products themselves. As a team, try to develop a clear picture of inbound and outbound flows and know the economic origin of all the parts and raw materials you use.
Additionally, consider how changes in lead and transit times may impact the flow of your inbound supply chain and increase costs due to the need for additional inventory and warehousing. It is important that supply chain transparency is created and that businesses engage in supply-chain scenarios so that they can model out their vulnerabilities in each situation.
It is crucial to have a diverse network of suppliers so you are not wholly reliant on one particular source. It’s important businesses engage in the discipline of ‘Know Your Supplier’ (KYS) through effective supplier management tools like Mastercard Track. For instance, you can regularly check the trading status of a supplier and be certain they are compliant and registered with all the appropriate authorities, while also performing checks on their credit score. You can obtain comprehensive company details, bank account data and information about registered signatories to help build a clearer picture of your suppliers. Through conducting KYS checks regularly, particularly in the current political and economic climate, warning signs can be flagged up.
Communicate, communicate, communicate
No matter what happens post-March 29th, prioritising supply chain management will mean that relationships are in good order and everyone is ready to collaborate and react to the changing situation.
In particular, good communication channels which promote transparency and accountability should lead to faster responses in a crisis, for example, if there are queues and delays at the border. In this instance, businesses are going to need regular and up-to-the-minute information from their suppliers so they are able to rearrange things in the UK and prepare customers for changes. If supply chain relationships are healthy and based on trust, UK businesses will know that their suppliers are doing their best and everyone can adapt accordingly. In the next couple of weeks as the Brexit deadline looms, why not create a habit and expectation of communicating with suppliers every week?
Staying on top of legal and VAT compliance
Will compliance regulations change in a post-Brexit era? An important factor for businesses to consider will be that in a no-deal Brexit scenario, the UK will no longer have full access to the Single Market and good and services coming into UK from EU or delivered from UK to EU will hit a ‘hard border’. Furthermore, businesses could be affected by having import and export taxation imposed, while also facing additional logistical impediments.
Movements of goods and services between the UK and EU will be treated as a cross border transaction rather than intra-community transaction. Also, the UK will no longer be bound by the European VAT Directive (EVD) and will be able to set its own specific VAT rates on certain goods and services. Crucially, this could cause further confusion when it comes to both tax compliance and reclamation. As a result, businesses operating across Europe will need to consider how they can ensure the P2P process remains as efficient and frictionless as possible.
Another consideration UK businesses will have to make post-Brexit is the prospect of disappearing EU mechanisms. For example, businesses can currently avoid the need to establish local VAT registration by using reverse charging, meaning that businesses are able to let customer settle the supplier VAT. These mechanisms make it easy for UK companies to operate in countries within the single market, thereby making it harder for businesses to operate in Europe after a no-deal exit. This be particularly detrimental to UK SMEs selling to consumers in the EU.
While individual countries are responsible for determining specific invoicing requirements themselves, it’s difficult to tell whether further changes will happen in the future. Operating across a global digital network and adopting electronic invoicing throughout your supply chain will ensure legally compliant invoices are created and enriched with required tax reclaim information, whatever comes the UK’s way after Brexit.
Make efficiency savings
One straightforward way to streamline processes and save money is to automate the payment process or increase the proportion of your suppliers adopting e-invoicing. Paper-based teams can experience many inefficiencies such as duplications, errors, responding to supplier enquiries to name just a few. In contrast, automating the payment process is proven to remove friction and reduces the costs of handling invoices by more than 50 per cent. Payment professionals can then be freed up to focus on more added value tasks which support business growth, rather than frustrating and time-consuming administration.
With future as yet unclear, there is comfort in knowing there are concrete steps teams can take now to prepare for March 29th. By nurturing supply chain relationships, taking the payment process digital and using sophisticated tools to monitor suppliers, companies can be the best position possible to navigate any future trading challenges and prosper in 2019.