Brexit - Time for Action
In ifac we’re very conscious that it’s a challenge for many SMEs to allocate time to an issue which, up to now, many believed might go away. Nobody can rely on this ‘hope’ anymore and it’s time for action. The first step is appointing a Brexit team leader – that could be the CEO in a small organisation or the financial controller in a bigger organisation. It’s not this person’s job to do the work, but they are responsible for bringing together the cross-functional team to work out the Brexit to-do list. This list of actions that the team come up with must be monitored monthly at a minimum. Some of the items that should be top of the to-do list:
- Conducting a supply-chain audit and working out where you are vulnerable to transport delays, tariffs, or VAT at point of entry
- Bridging skillset challenges in your organisation, around tariffs for example
- Engaging a good customs agent who is well connected internationally
- Applying for the Be Prepared grant if you are an Enterprise Ireland client to cover the cost of bringing in a consultant who can help deal with the implications of Brexit for your business
- It’s late in the day to start diversifying but, nonetheless, it is better to start this process now. As we all know, market diversification takes time and significant effort.
- Review your currency exposure – if you deal in significant amounts of sterling, now is the time to review your hedging policy and hedging know-how
- Review upcoming contracts in the UK and ask whether you should enter them and take on extra headcount, for example, given the risks that Brexit brings
- Spend time with your financial controller or professional services partner modelling a range of financial scenarios – particularly the increased costs the business will incur from Brexit (eg. weakened sterling, transport costs, product development costs to lengthen shelf-life etc.)
- In addition, make sure you are well capitalised going into 2019 and review the range of loans available from the Strategic Banking Corporation of Ireland (SBCI). Speak to your bank now if you are interested in the future growth scheme announced in the 2018 budget where loans up to 10 years will be available
- Start work on obtaining Authorised Economic Operator (AEO) status. This will help Irish food businesses streamline their export processes in a post-Brexit environment. Companies that obtain AEO status or Trusted Trader status are regarded worldwide as reputable traders due to their high levels of safety, security and compliance. There are many benefits to this, among them: lower inspection costs, fewer delayed shipments and priority treatment if selected for checks. The first step is to register with Revenue and its Economic Operators’ Registration and Identification (EORI) system
- Finally, tariffs are complex – get help to ensure you are putting the right tariff on your product. Here’s just some of the various tariffs on a range of foodstuffs (see Tariff Checked on intertradeireland.com). The increase in cost will be borne by the importer, which will severely challenge the competitiveness of many businesses. See Table 1 for a selection of tariffs and the various rates that relate to them.
In summary, ensure someone is responsible for making sure the organisation is focused on Brexit mitigation actions; strengthen skillsets where you acknowledge gaps; and, finally, make sure you are well capitalised going into 2019 so you can react to changing circumstances.