Questions to ask your accountant about Brexit

 In Small Businesses & Startups

Last month’s EU referendum result has instigated some of the broadest political changes in living memory. It is too early to tell whether Brexit will be a positive or negative change, but action must be taken now to ensure success in the future.

Many SME owners and freelancers are now concerned about how the decision to leave might impact their business.

A recent poll from advanced accountancy software provider FreeAgent asked freelancers and SME owners how they believed Brexit would affect their business. The results stated:

  • 49% said it would have a negative impact
  • 5% said it would have a positive impact
  • 33% said it would have no impact

As the process of us leaving the EU begins, these are the questions to ask your accountant to ensure your business has the best possible chance to succeed.

What immediate action can I take to stabilise my cash flow?

The best thing freelancers and small business owners can do to ride out the market turbulence is to carry out a cost auditing exercise.

To do this, create an itemised list of all business income and outgoings. Look for any expenditure that could be considered unnecessary, and for any services that could be reduced in price. Think about renegotiating with suppliers, raising your prices or working in collaboration with other freelancers.

This can be a time-consuming exercise when carried out the traditional way. But, with advanced accountancy software like FreeAgent and Xero, you can use the ‘profit and loss’ feature to get a real-time overview of all your costs.

How might Brexit affect my profitability in the short and long term?

Profitability is likely to be affected in two stages. In the short term, there is likely to be an aversion towards the UK’s goods and services as companies overseas expect some form of trade tariff to be enacted two years after Article 50 is invoked.

The long-term impact will depend on how favourable these trade deals are. It may mean a shift if the type of goods and services in demand as other nations become more significant trading partners. Major EU players are also likely to push for more advantageous terms with industries that that have proved to be profitable trading partners (such as the German car industry), meaning different sectors could be affected to a variable extent.

How would removing the free movement of people affect my business?

Free movement of people enables access to the single market, and allows people to live and work abroad.

Removing this right would reduce opportunities for freelancers to find lucrative work overseas. But, demand for a mobile freelance workforce is likely to be high in times of economic uncertainty, and the removal of the EU’s Agency Workers Regulations would make freelancers more competitive.

For SME owners, the cost of labour is likely to be a major consideration. At one end of the spectrum, it will become more difficult to recruit a low-cost workforce. At the other, it will be harder to bring in highly qualified staff to meet the needs of advanced industries.

 

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